Surrozen, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 31, 2023. This is an annual report, not a standalone fourth-quarter report. Surrozen is a clinical-stage biotechnology company developing antibody-based therapies that modulate the Wnt pathway. It had no product sales.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Collaboration and license revenue | $12.5 million | None |
| Research and development expense | $37.0 million | $40.2 million |
| General and administrative expense | $19.8 million | $14.2 million |
| Total operating expenses | $56.8 million | $54.4 million |
| Loss from operations | $44.3 million | $54.4 million |
| Net loss | $36.0 million | $54.6 million |
| Basic and diluted loss per share | $1.04 | $2.21 |
| Net cash used in operating activities | $44.1 million | $48.8 million |
Revenue was the $12.5 million non-refundable upfront payment under the Boehringer Ingelheim (BI) collaboration; $10.5 million was received in 2022, with a $2.0 million withholding-tax refund receivable expected in 2023. No product revenue or royalties were reported. Net loss narrowed year over year, partly reflecting a $7.9 million gain from the decrease in fair value of warrant liabilities and higher interest income; these items are not evidence of product-level profitability. Margins are not meaningful given the company’s development-stage operations and collaboration revenue.
At year-end, cash, cash equivalents and marketable securities totaled $75.8 million; current assets were $81.3 million and current liabilities $9.7 million. Total liabilities were $13.4 million, including lease liabilities and warrant liabilities; the filing reports no borrowings. Operating cash use was $44.1 million. Management stated that existing cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months from the filing date, while noting continued losses and a need for additional capital longer term. Lease payments totaled approximately $6.2 million through 2025.
Material changes and business developments
- R&D expense fell 8% to $37.0 million: SZN-1326 costs declined 39% to $8.8 million, primarily after drug-substance manufacturing was completed; SZN-043 spending rose 4% to $11.7 million; discovery and preclinical spending rose 14% to $16.5 million.
- G&A expense increased 39% to $19.8 million, primarily due to personnel, facilities and public-company costs.
- In October 2022, Surrozen licensed Fzd4 bispecific antibody programs, including SZN-413, to BI. BI paid a $12.5 million upfront fee and assumed later development and commercialization costs. Surrozen may receive up to $587 million in success-based milestones and mid-single-digit to low-double-digit royalties if products reach commercialization; these future amounts are contingent, not guaranteed.
- In December 2022, Surrozen repurchased and cancelled 5.4 million common shares and 1.3 million warrants from Consonance-affiliated entities for approximately $2.7 million.
Pipeline, outlook and key risks
- SZN-1326: Phase 1 enrollment in healthy volunteers was voluntarily paused in November 2022. The company planned to restart Phase 1a by mid-2023 using a minimum anticipated biologically effective level approach, with safety data expected by year-end 2023; it anticipated a Phase 1b ulcerative-colitis trial in 2024 and possible proof-of-concept data in the second half of 2024.
- SZN-043: Phase 1a enrollment in healthy volunteers’ second cohort was completed in 2022. Several subjects had Grade 1 or 2 asymptomatic, treatment-related transaminase elevations that resolved spontaneously; no serious adverse events were reported in the study. The company opened a Phase 1a chronic-liver-disease study, enrolled its first patient in Q1 2023, and expected data in the second half of 2023. A severe alcoholic-hepatitis Phase 1b trial was anticipated in 2024.
- SZN-413 / BI collaboration: Partnership research was planned for one year, with BI able to extend by up to six months. Identification of a lead Fzd4-targeted candidate by year-end 2023 could trigger a $10 million milestone payment. BI has broad licensed rights in eye diseases, while Surrozen agreed to a five-year restriction on its own development or commercialization of Fzd4 bispecific antibodies for eye diseases.
- In January 2023, Surrozen announced a workforce reduction of approximately 25%, expecting about $1.2 million in one-time restructuring charges. In February 2023, it cancelled certain manufacturing studies and incurred a cancellation fee; the filing does not provide a clear total amount for that fee.
- Funding remains a central risk: the company reported substantial recurring losses and expects additional capital will be needed. It had not sold shares under either its up-to-$50 million Lincoln Park purchase agreement or its up-to-$23 million at-the-market facility by year-end 2022.
- Other material risks include clinical uncertainty and adverse events, manufacturing and third-party reliance, competition, and potential dilution. Nasdaq notified the company in January 2023 that its 30-day average closing bid price was below $1.00; the initial compliance period was scheduled to end July 3, 2023.
- After Silicon Valley Bank’s March 2023 closure, the company said it had access to its full deposits there and did not anticipate operational disruption; it was working to replace a lease letter of credit and transfer substantially all SVB cash deposits.
Investor facts to verify
- Subsequent clinical updates for the SZN-1326 pause and restart, and the safety, pharmacokinetic and other results for SZN-043.
- Actual cash burn, remaining runway, and the timing and terms of any future financing or equity issuance.
- BI’s progress in selecting a lead Fzd4 candidate, satisfaction of milestone conditions, and any subsequent milestone or royalty receipts.
- Completion and costs of the workforce reduction and cancelled manufacturing studies.
- Nasdaq listing compliance and the status of the company’s deposits and replacement letter of credit following the SVB events.
The consolidated financial statements received an unqualified audit opinion from Ernst & Young LLP. The auditor did not attest to internal control over financial reporting; management reported that controls were effective and that a previously identified material weakness had been remediated.