Solid Biosciences Inc. — Q1 2020 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2020. Solid Biosciences is a clinical-stage biotechnology company developing treatments for Duchenne muscular dystrophy; it has no approved products and has generated no revenue. Its lead candidate, SGT-001, is being studied in the IGNITE DMD Phase I/II trial, which remained on FDA clinical hold.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $19.7 million | $23.3 million |
| General and administrative expense | $5.3 million | $7.0 million |
| Restructuring charges | $1.9 million | None |
| Total operating expenses | $26.9 million | $30.3 million |
| Net loss | $26.7 million | $29.6 million |
| Basic and diluted net loss per share | $0.56 | $0.85 |
| Cash used in operating activities | $29.3 million | $25.9 million |
- At March 31, 2020, cash and cash equivalents were $53.2 million and available-for-sale securities were $0.4 million, totaling $53.6 million in available cash and securities. Total current assets were $57.9 million; current liabilities were $12.9 million.
- Total liabilities were $17.5 million, including operating and finance lease liabilities. The company reported no debt outstanding.
- Accumulated deficit was $343.0 million. Profit margins are not meaningful because the company had no revenue and incurred operating losses.
- Operating cash use rose $3.3 million year over year, while net loss narrowed $2.9 million. Investing activities provided $6.4 million, mainly from securities maturities; there were no financing cash flows.
Material changes versus the prior comparable period
- R&D expense decreased $3.6 million, reflecting reduced SGT-001 manufacturing and trial activity during the clinical hold, lower spending on other candidates, and restructuring-related reductions in personnel and facility costs.
- G&A expense decreased $1.8 million, mainly due to lower personnel and other corporate costs following the restructuring.
- The January 2020 restructuring reduced headcount by approximately 30% and generated $1.9 million in charges. The company had paid $0.963 million by quarter-end and expected to pay the remaining $0.981 million within 12 months.
- Weighted-average shares increased to 48.1 million from 34.8 million; the reported per-share loss therefore also reflects a larger share denominator.
Outlook, commentary and principal risks
- Management expected cash, cash equivalents and available-for-sale securities at March 31 to fund operating expenses and capital requirements into 2021. The estimate depends on assumptions that may prove incorrect.
- Despite that projected runway, the company concluded that substantial doubt existed about its ability to continue as a going concern within 12 months of issuance. It expects continuing losses, has no committed external funding source, and may need to raise additional capital. The financial statements include no adjustments for the uncertainty.
- In April 2020, after quarter-end, the company submitted a response to the FDA with proposed protocol safety changes and manufacturing-process information. The FDA maintained the clinical hold and requested further manufacturing data and analyses. The company expected to submit the requested information before the end of Q3 2020; resumption of the trial was not assured.
- The hold followed a serious adverse event in a patient dosed in the higher-dose cohort, involving complement activation, thrombocytopenia, reduced red blood cell count, acute kidney injury and cardiopulmonary insufficiency. The event resolved, and the patient resumed normal activities.
- Management expected R&D expense to decrease in calendar 2020 following the organizational changes, while also noting that expenses could rise substantially with development progress. COVID-19 could disrupt trials, enrollment, suppliers, employees and access to research facilities; the overall effect was uncertain.
- Other key risks include manufacturing-process reliability and regulatory review, additional financing needs and potential dilution, clinical and gene-therapy safety risks, and dependence on third-party manufacturers and collaborators. The company reported no material legal claims as of March 31, 2020.
Important facts for investors to verify
- Whether and when the FDA will lift the SGT-001 clinical hold, and whether the requested manufacturing data satisfy the agency.
- Actual cash burn, future spending and financing plans relative to the stated runway into 2021 and the substantial-doubt going-concern disclosure.
- Progress and reproducibility of SGT-001 manufacturing, and whether trial enrollment and operations are affected by COVID-19.
- Whether restructuring delivers sustained cost savings without impairing development execution, and whether additional capital raises would dilute shareholders.