Solid Biosciences Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. Although the request references 2018 Q4, this is an annual filing; fourth-quarter figures are included below where disclosed. The filing was signed March 13, 2019.
Business context
Solid Biosciences is a clinical-stage biotechnology company focused on Duchenne muscular dystrophy (DMD). Its lead candidate, SGT-001, is an investigational AAV gene-transfer therapy being evaluated in the Phase I/II IGNITE DMD trial. The company had no approved products and had not generated product revenue. Anti-LTBP4 remained in preclinical development.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $58.0 million | $39.9 million |
| General and administrative expense | $17.7 million | $15.0 million |
| Total operating expenses / operating loss | $75.7 million | $54.9 million |
| Net loss | $74.8 million | $53.2 million |
| Net loss per share, basic and diluted | $2.25 | $2.88 |
| Cash used in operating activities | $70.2 million | $43.2 million |
| Cash, cash equivalents and available-for-sale securities at year-end | $122.5 million | $69.1 million |
In Q4 2018, operating expenses were $22.4 million and net loss was $21.9 million, compared with $15.2 million and $14.5 million, respectively, in Q4 2017. Q4 net loss per share was $0.63; the prior-year figure was $0.84 per unit, so the measure is not directly comparable following the company’s conversion to a corporation and IPO.
FY 2018 R&D expense rose $18.1 million, reflecting increased clinical and manufacturing activity for SGT-001, spending on other candidates, and higher unallocated personnel and facility costs. G&A increased $2.8 million. Operating and net losses widened as the company expanded development activity. No operating margin is meaningful given the absence of revenue.
At year-end, total assets were $139.6 million, total liabilities $14.4 million, working capital $116.2 million, and accumulated deficit $199.1 million. The company reported no debt outstanding; it had $1.0 million of capital-lease obligations, including current and non-current portions. Operating and capital lease commitments totaled $8.6 million.
Net cash provided by financing was $131.5 million, primarily from the January 2018 IPO, which generated $129.1 million in net proceeds. Investing activities used $26.8 million, mainly for investment purchases and property and equipment.
Clinical developments, outlook and risks
- Management estimated year-end cash and investments would fund operating expenses and capital requirements through Q1 2020, based on assumptions that could prove incorrect. The auditor’s report and financial-statement notes state that losses and operating cash outflows raise substantial doubt about the company’s ability to continue as a going concern; additional financing was not assured.
- In March 2018, the FDA placed IGNITE DMD on full clinical hold after an unexpected serious adverse event; the hold was later lifted. The amended protocol included post-dose IV glucocorticoids and enhanced monitoring, with eculizumab available if complement activation is observed.
- In February 2019, after year-end, the company reported preliminary three-month biopsy results for the first three patients at the lowest dose, 5E13 vg/kg. One showed microdystrophin below the assay’s 5% western-blot quantification level and in about 10% of fibers by immunofluorescence; in the other two, levels were very low by immunofluorescence and undetectable by western blot. These early findings do not establish clinical benefit.
- The protocol was amended to begin dose escalation after three rather than four patients. The next cohort received approval to begin dosing at 2E14 vg/kg. Management planned to continue enrolling children and resume adolescent dosing in the future; further development decisions would depend on trial data.
- The company expected ongoing losses and substantial additional funding needs. It was considering, but had not committed to, building a commercial-scale GMP facility, with estimated capital expenditure of $60–$75 million. Manufacturing yield variability, scale-up, third-party supply, clinical and regulatory outcomes, and access to financing were material uncertainties.
- The filing discloses a Massachusetts state securities class action that remained stayed, with a status conference scheduled for June 24, 2019. The company said it could not estimate potential losses or determine whether the outcome could materially affect it.
- Management concluded disclosure controls and internal control over financial reporting were not effective at December 31, 2018 because of previously identified material weaknesses. Remediation was underway but not yet complete or demonstrated effective.
Most important facts for investors to verify
- Subsequent IGNITE DMD safety, dose-escalation, microdystrophin-expression and functional data, including any regulatory or protocol changes.
- Cash burn, updated cash runway, financing plans and whether additional capital is secured on acceptable terms.
- Manufacturing consistency, clinical supply adequacy, scale-up progress and the decision and funding plan for any GMP facility.
- Remediation and testing of internal controls, and whether the disclosed material weaknesses are resolved.
- Status and potential financial exposure of the securities litigation and other contingencies.