Scholar Rock Holding Corporation — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; it does not provide standalone fourth-quarter results. Scholar Rock is a clinical-stage biopharmaceutical company and reported no product-sales revenue.
Business context and pipeline
- Apitegromab: Investigational inhibitor of latent myostatin activation for spinal muscular atrophy (SMA). The TOPAZ Phase 2 trial enrolled 58 patients with Type 2 or Type 3 SMA; six-month interim results were reported in October 2020.
- SRK-181: Investigational selective inhibitor of latent TGFβ1 activation for solid tumors resistant to anti-PD-(L)1 checkpoint inhibitors. The DRAGON Phase 1 trial began dosing in 2020.
- Gilead collaboration: Scholar Rock is conducting discovery and preclinical work on TGFβ inhibitors for fibrotic disease; Gilead holds options to license candidates from three programs.
Financial results and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $15.4 million | $20.5 million | Down $5.1 million (24.8%) |
| Research and development expense | $74.1 million | $54.2 million | Up $19.8 million (36.6%) |
| General and administrative expense | $28.2 million | $20.8 million | Up $7.4 million (35.6%) |
| Operating loss | $86.9 million | $54.5 million | Loss increased |
| Net loss | $86.5 million | $51.0 million | Loss increased 69.6% |
| Net loss per share, basic and diluted | $2.81 | $1.85 | Loss per share increased |
| Net cash used in operating activities | $60.3 million | $63.1 million | Cash use decreased |
Revenue was entirely collaboration-related, principally under the Gilead agreement; there was no product revenue. The filing does not provide a meaningful product gross margin. Lower Gilead-related revenue reflected program progress and reduced internal resource utilization, partly due to COVID-19 laboratory restrictions. R&D growth was driven mainly by TOPAZ clinical and manufacturing costs, DRAGON trial costs, and higher staffing and facility expenses. G&A increased with headcount, separation-related costs and professional services. Other income, net, fell to $0.4 million from $3.5 million, reflecting lower investment income and interest expense on new debt.
- At year-end, cash and cash equivalents were $160.4 million and marketable securities were $180.7 million, totaling $341.0 million. Current assets were $344.4 million and current liabilities were $42.6 million.
- Management estimated existing cash, cash equivalents and marketable securities would fund operating expenses and capital needs into 2023, but stated additional capital would be required to complete clinical development of current programs. This runway estimate depends on assumptions and could be shorter.
- Financing cash flow was $247.8 million, primarily including $215.9 million net proceeds from the November 2020 offering and $25.0 million drawn under a new debt facility. Investing cash outflow was $63.5 million, primarily related to marketable securities and capital expenditures.
- Debt carrying value was $24.7 million at year-end after a $25.0 million borrowing. The facility provides up to $50.0 million; the additional $25.0 million was conditional on specified apitegromab and SRK-181 trial milestones. It matures May 2025, has interest-only payments for two years, and bears interest at the greater of prime plus 4.60% or 7.85%, with a 4% final payment.
Material changes and outlook
- TOPAZ’s six-month interim analysis reported improvements on Hammersmith motor-function measures across all three cohorts and no identified safety signal. In randomized, double-blind Cohort 3, mean HFMSE change was +5.6 points at 20 mg/kg versus +2.4 at 2 mg/kg. Other cohorts were open-label; reported changes included +1.4 HFMSE points in Cohort 2 and +0.5 RHS points in Cohort 1. These were interim Phase 2 findings, not confirmatory results.
- COVID-19-related site restrictions meant three TOPAZ participants missed three doses and the six-month assessment; their timepoints were excluded from the interim analysis. Management also reported slower DRAGON enrollment and reduced laboratory operations.
- Management expected TOPAZ 12-month top-line data in Q2 2021, planned to advance DRAGON to its expansion portion in Q2 2021, and anticipated initial SRK-181 response and safety data in the second half of 2021. It also planned to identify another apitegromab indication in 2021. These are forward-looking expectations, not guarantees.
- Under the Gilead collaboration, the company received $80 million in upfront cash and equity consideration and achieved a $25 million preclinical milestone in 2019, paid in January 2020. It may receive up to $1.425 billion in potential aggregate milestones across three programs, plus tiered royalties; these amounts are contingent and not assured. Gilead’s option exercise window extends after the research term, with timing dependent on each program.
- The company reported net losses in every year since inception and expects significant losses and expenses to continue. It has no approved products and depends on external financing, collaborations and eventual clinical and regulatory success.
Risks, contingencies and unusual items
- Clinical-stage assets carry substantial efficacy, safety, regulatory and trial-execution risk. Early and interim results may change as data are finalized; open-label TOPAZ cohorts are also subject to potential bias.
- COVID-19 disrupted trial-site access, dosing, enrollment and laboratory work, and could further affect data timing and quality.
- The company relies on third parties for clinical manufacturing and identified a single-source drug-substance supplier for apitegromab and SRK-181. COVID-19 vaccine manufacturing priorities could constrain supply.
- Gilead may decline to exercise program options or discontinue development; milestone and royalty opportunities depend on future achievements. The company also relies on licensed and third-party intellectual property and services.
- Regulatory approval, commercialization, reimbursement and pricing are uncertain. The company also faces competition, patent challenges, potential dilution from future financing, and the possibility that its cash runway differs from management’s estimate.
- No material legal proceedings were reported. Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2020; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Final TOPAZ 12-month results, including cohort-level efficacy, safety, missing-data treatment and whether findings support a registrational program.
- DRAGON enrollment, dose-escalation and expansion progress, and the timing and quality of human response and safety data.
- Current cash burn and runway against the stated “into 2023” estimate, including the cost and funding plan for later-stage trials.
- Debt terms, covenant compliance and whether the conditional second $25 million tranche becomes available.
- Gilead program candidate selections, option decisions, and any milestones actually achieved or royalties earned.
- Manufacturing capacity and supply continuity, particularly the single-source dependency and potential competing demand.