Solid Biosciences Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts below are in millions of dollars unless otherwise noted. Solid is a clinical-stage life sciences company developing gene therapies for neuromuscular and cardiac diseases; it has no product sales and remains dependent on external financing.
Key financial results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $6.2 | $0 | $8.1 |
| Research and development expense | $19.8 | $23.2 | $44.4 | $43.1 |
| General and administrative expense | $7.1 | $6.9 | $14.5 | $14.2 |
| Total operating expenses | $26.8 | $31.6 | $58.9 | $58.8 |
| Operating loss | $(26.8) | $(25.4) | $(58.9) | $(50.8) |
| Net loss | $(24.6) | $(25.1) | $(54.7) | $(50.4) |
| Basic and diluted loss per share | $(1.25) | $(3.33) | $(2.79) | $(6.71) |
- Q2 research and development spending shifted toward SGT-003 and other development programs: SGT-001 costs declined substantially as Solid prioritized SGT-003. Six-month R&D increased modestly, largely reflecting higher SGT-003, other-program and external costs, partly offset by lower SGT-001 costs.
- Q2 net loss narrowed slightly despite a higher operating loss, as interest and other income rose to $2.2 million from $0.3 million. For the first half, net loss widened by $4.3 million; higher interest income did not offset the increased operating loss and absence of prior-year collaboration revenue.
- No product revenue or meaningful product gross margin was reported. The company expects no product sales revenue for the foreseeable future, if ever.
Financial position, liquidity and cash flow
- At June 30, 2023, cash and cash equivalents were $91.6 million and available-for-sale securities were $68.6 million, totaling $160.2 million; restricted cash was an additional $1.8 million. Total current assets were $167.5 million and total current liabilities were $15.9 million.
- Total liabilities were $41.0 million, including operating lease liabilities and finance liabilities/leases. The company reported no debt outstanding; its substantial lease obligations should not be confused with funded debt.
- For the six months, operating cash use was $55.5 million, investing cash use was $11.0 million, and financing provided $2.6 million. Cash, cash equivalents and restricted cash decreased $63.8 million to $93.4 million. Operating cash use was higher than the $43.1 million used in the comparable 2022 period.
- Stockholders’ equity was $163.7 million, down from $211.7 million at December 31, 2022. Accumulated deficit reached $617.4 million. The company sold 420,000 shares through its at-the-market program during Q2 for $2.5 million net proceeds.
Business developments and outlook
- Pipeline programs include SGT-003 for Duchenne muscular dystrophy, AVB-202-TT for Friedreich’s ataxia, and AVB-401 for BAG3-mediated dilated cardiomyopathy, plus other cardiac assets acquired with AavantiBio in December 2022.
- Management planned to submit an IND for SGT-003 in the second half of 2023, with the aim of initiating clinical development, and planned preclinical proof-of-concept dose-ranging studies for AVB-401 in the second half of 2023. These are forward-looking plans, not reported achievements.
- On June 29, 2023, Solid entered a license agreement with ICS Maugeri for cardiac-related products. It recorded a €1.5 million upfront fee as Q2 R&D expense; the agreement remained subject to regulatory review in Italy. It also provides for potential development, regulatory and sales milestones and tiered royalties.
- Solid said its June 30 cash and securities were expected to fund operations and capital requirements into 2025, but emphasized that the estimate depends on assumptions and resources could run out sooner. The financial-statement note separately says resources were expected to be sufficient for at least 12 months from issuance. The company expects ongoing losses and says additional financing will be needed to continue beyond its projected runway.
- Management reported effective disclosure controls as of June 30, 2023, and no material change in internal control over financial reporting during the quarter. The filing reports no material legal proceedings.
Material changes, risks and unusual items
- Ultragenyx collaboration revenue ceased after the contemplated research services were completed in Q2 2022; no additional research and development had commenced under the agreement by this filing. Potential future milestones, royalties or profit sharing are contingent and not assured.
- The year-over-year loss-per-share comparison is affected by a materially higher weighted-average share count in 2023. The company also completed a 1-for-15 reverse stock split in October 2022; historical share and per-share figures are retrospectively adjusted.
- The company remains preclinical for its current pipeline programs and has not completed a clinical trial. Development, regulatory approval, patient enrollment, AAV-related safety, manufacturing scale-up and third-party manufacturer performance are significant uncertainties. Its prior SGT-001 clinical hold and serious adverse events are disclosed as risks; SGT-001 is no longer being developed.
- Additional financing may dilute shareholders or require debt, licensing or collaboration terms that constrain operations or surrender rights. Other identified risks include AavantiBio integration, competition, reliance on in-licensed intellectual property, uninsured bank deposits, market volatility and Nasdaq listing compliance.
- Q2 restructuring expense was a $63,000 credit, while the company had $1.0 million of remaining accrued severance from the November 2022 workforce reduction, expected to be paid by Q1 2024.
Important facts for investors to verify
- Whether the planned SGT-003 IND submission and AVB-401 preclinical studies occurred on schedule, and what regulators or study results disclosed subsequently showed.
- How the company’s cash runway should be interpreted: management’s “into 2025” estimate versus the financial-statement note’s “at least twelve months” statement; review later filings for updated cash, burn and financing plans.
- Whether SGT-003 manufacturing is reproducible and sufficient for clinical supply, and whether any safety, regulatory or supply-chain developments affect timelines.
- The status and economic terms of the Maugeri license after Italian regulatory review, and any progress, funding or contingent payments under the Ultragenyx collaboration.
- Subsequent share issuance, ATM usage, dilution, remaining financing capacity, lease commitments and any changes in Nasdaq compliance or other material risk disclosures.