Surrozen, Inc. — Q1 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2023; balance-sheet comparisons are to December 31, 2022. Surrozen is a clinical-stage biotechnology company developing antibody-based candidates that modulate the Wnt pathway. It has no approved products and has not generated product-sales revenue.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 or prior balance date |
|---|---|---|
| Revenue | No revenue reported | No revenue reported in Q1 2022 |
| Research and development expense | $8.1 million | $9.4 million |
| General and administrative expense | $5.3 million | $5.1 million |
| Restructuring expense | $1.2 million | None |
| Total operating expenses / operating loss | $14.6 million | $14.5 million |
| Interest income | $0.5 million | $0.05 million |
| Other income (expense), net | $(0.3) million | $6.5 million |
| Net loss | $14.3 million | $7.9 million |
| Net loss per share, basic and diluted | $0.48 | $0.23 |
| Cash used in operating activities | $14.2 million | $18.4 million |
| Cash, cash equivalents and marketable securities | $61.7 million | $75.8 million at December 31, 2022 |
At March 31, 2023, current assets were $67.0 million and current liabilities were $7.8 million. Total liabilities were $11.2 million, including $5.1 million of operating lease liabilities and $0.6 million of warrant liabilities; the filing reports no borrowings. Stockholders’ equity was $63.0 million and accumulated deficit was $193.0 million. Gross margin is not meaningful because the company reported no Q1 revenue.
Material changes and cash flows
- Net loss rose $6.4 million year over year despite operating expenses increasing only $0.1 million. The main comparison was other income: Q1 2022 included a $6.5 million warrant fair-value gain, while Q1 2023 had a $0.3 million expense. The Q1 2023 warrant remeasurement added $0.3 million to the liability.
- R&D declined 14%: SZN-043 spending increased 19% to $3.6 million, partly due to a contract manufacturing study cancellation fee; SZN-1326 spending declined 28% to $1.6 million following completion of drug-substance manufacturing; discovery and preclinical spending fell 30% to $2.9 million.
- Operating cash use improved by $4.2 million year over year. Investing activities provided $17.3 million, principally from $25.5 million in marketable-security maturities, offset by $7.9 million of purchases. Financing used $0.04 million for repurchased early-exercised options. Cash, cash equivalents and restricted cash increased $3.1 million during the quarter.
- The company implemented a workforce reduction of approximately 25% in Q1 and recorded $1.2 million of one-time severance and benefit charges; $0.5 million remained accrued at quarter-end.
Outlook, risks and unusual items
- Management expects existing cash, cash equivalents and marketable securities to fund operations for at least 12 months from the financial statements’ issuance date. It expects ongoing losses and increasing clinical and development costs and says additional capital will be needed over the longer term. Actual runway may be shorter if spending exceeds expectations; future financing could dilute shareholders or require program cuts or licensing.
- SZN-043 Phase 1 enrollment was ongoing. The company reported Grade 1–2 treatment-related, asymptomatic transaminase elevations in several subjects; these resolved spontaneously, with no serious adverse events reported. Management anticipated safety data by year-end 2023, a Phase 1b study in alcoholic hepatitis in 2024, and proof-of-concept data in the second half of 2024.
- SZN-1326 Phase 1a enrollment, voluntarily paused in Q4 2022 after transaminase elevations, resumed in April 2023. Management anticipated additional safety data by year-end 2023, a Phase 1b ulcerative-colitis study in 2024, and proof-of-concept data in the second half of 2024.
- Under its BI collaboration for Fzd4 bispecific antibodies including SZN-413, Surrozen received a $12.5 million upfront payment in 2022 and may receive up to $587 million in success-based milestones plus royalties. BI assumes subsequent development and commercialization responsibilities after the initial joint-research period. Future milestones and royalties are contingent, not assured.
- Surrozen had not used its $50 million Lincoln Park equity purchase agreement or its $23 million at-the-market facility as of March 31, 2023. It also reported a January 2023 Nasdaq notice for falling below the $1 minimum bid-price requirement; the initial compliance period ended July 3, 2023, subject to possible extension.
- SVB’s failure affected the bank that issued a $0.4 million landlord letter of credit. The filing says Surrozen was working to replace it with a letter of credit from another financial institution.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Subsequent SZN-043 and SZN-1326 safety findings, enrollment progress, and whether the stated clinical timelines remain achievable.
- Actual cash burn and updated cash runway, including whether financing is required and on what terms.
- Nasdaq bid-price compliance status and any effects on listing or liquidity.
- Progress and economics of the BI collaboration, including milestone conditions and any changes to the development arrangement.
- Replacement of the SVB-issued letter of credit and any effects on the company’s lease obligations.