SLDB

Solid Biosciences Inc. 10-K Summary (Fiscal Year Ended Dec 31, 2017)

Business Context and Reporting Period

Company: Solid Biosciences Inc. (formerly Solid Biosciences, LLC)

Reporting Period: Fiscal year ended December 31, 2017.

Business Overview: Solid Biosciences is a clinical-stage biotechnology company focused on developing therapies for Duchenne muscular dystrophy (DMD). Its lead product candidate, SGT-001, is a gene transfer therapy designed to restore functional dystrophin protein expression. The company operates as a Delaware corporation following a statutory conversion in January 2018, immediately prior to its Initial Public Offering (IPO).

Key Event: In March 2018 (post-fiscal year end), the FDA placed the company's Phase I/II clinical trial (IGNITE DMD) on a full clinical hold following a serious adverse event in the first patient dosed in February 2018. A partial clinical hold regarding manufacturing processes for higher doses was also in effect.

Key Financial Metrics

Liquidity: As of December 31, 2017, the company held $69.1 million in cash and investments. In January 2018, the company completed an IPO raising net proceeds of approximately $129.3 million. Management believes these funds will support operations through the end of 2019.

Debt: The company had no debt outstanding as of December 31, 2017.

Material Changes vs. Prior Period

• Increased Operating Losses: Net loss increased by approximately $29.4 million (124%) from 2016 to 2017, driven primarily by a $19.8 million increase in R&D expenses and a $9.5 million increase in G&A expenses.
• R&D Spend: R&D expenses nearly doubled to $39.9 million, reflecting accelerated clinical and preclinical development of SGT-001 and increased headcount.
• Capital Structure: The company raised $80 million in private equity financing during 2017 (Series 1 and Series 2 Senior Preferred Units) and completed its IPO in January 2018.
• Corporate Structure: Converted from a Delaware LLC to a Delaware Corporation in January 2018.

Guidance, Outlook, Risks, and Unusual Items

Outlook: The company expects to incur significant expenses and increasing operating losses for the foreseeable future as it advances SGT-001 and other candidates. No revenue is expected from product sales for several years.

Material Risks & Contingencies:

• Clinical Holds: The full clinical hold on the IGNITE DMD trial following a serious adverse event (SUSAR) involving complement activation and hematologic changes in the first patient poses a significant risk to the development timeline and commercial viability of SGT-001.
• Manufacturing Constraints: A partial clinical hold exists regarding the number of vials and manufacturing lots used per patient for higher doses, requiring process validation before dose escalation.
• Internal Controls: The company identified material weaknesses in its internal control over financial reporting related to the control environment, accounting policies, and complex transaction accounting. These resulted in a restatement of 2015 financials and adjustments to 2016 financials.
• Intellectual Property: The company relies heavily on in-licensed patents from universities (Washington, Missouri, Michigan) and has limited owned issued patents.

Unusual Items: The filing includes a putative class action lawsuit filed in March 2018 alleging failure to disclose risks associated with toxicity and adverse events related to SGT-001.

Investor Verification Checklist

• Clinical Hold Status: Verify the current status of the FDA full and partial clinical holds on the IGNITE DMD trial and the timeline for resolution.
• Adverse Event Details: Review the specific nature of the serious adverse event reported in the first patient and the FDA's requirements for lifting the hold.
• Capital Runway: Confirm the burn rate and updated cash runway given the potential delays in clinical development and the costs associated with resolving regulatory issues.
• Internal Control Remediation: Assess the progress made in remediating the material weaknesses in internal controls over financial reporting identified in the 2017 audit.
• Manufacturing Scalability: Evaluate the company's ability to scale manufacturing to meet clinical and potential commercial demand, particularly given the partial hold on higher-dose manufacturing processes.