Solid Biosciences Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited; amounts below are in U.S. dollars. Solid is a clinical-stage biotechnology company developing gene therapies for Duchenne muscular dystrophy (Duchenne); it has no approved products and has not generated product sales.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Collaboration revenue, related party | $3.5 million | None | $10.5 million | None |
| Research and development expense | $14.4 million | $16.0 million | $44.1 million | $49.2 million |
| General and administrative expense | $7.1 million | $5.2 million | $19.9 million | $16.0 million |
| Net loss | $18.0 million | $21.2 million | $53.6 million | $66.9 million |
| Basic and diluted net loss per share | $0.16 | $0.44 | $0.51 | $1.39 |
| Net cash used in operating activities | — | $56.9 million | $57.9 million |
Revenue was collaboration reimbursement from Ultragenyx, not product sales. Product gross margin is not applicable; the filing does not present a meaningful product margin. The lower net loss chiefly reflects collaboration revenue, lower R&D expense and the absence of 2020 restructuring charges. Quarterly G&A rose, primarily from professional and consulting fees and personnel costs. Lower loss per share also reflects a substantially larger weighted-average share count.
At September 30, 2021, cash and cash equivalents were $109.7 million and available-for-sale securities were $120.1 million, or $229.8 million combined. Total assets were $249.0 million; total liabilities $25.6 million; stockholders’ equity $223.4 million; and accumulated deficit $458.1 million. The company reported no debt outstanding. Lease liabilities were $2.3 million in total, including operating and finance leases.
Operating cash use was $56.9 million for the nine-month period. Investing activities used $121.3 million, mainly for purchases of available-for-sale securities; financing activities provided $134.9 million, principally from the March 2021 stock offering. Cash, cash equivalents and restricted cash decreased by $43.2 million to $111.8 million. The company reported $11.1 million of deferred revenue related to Ultragenyx at quarter-end.
Material changes and business developments
- For the first nine months, R&D expense fell $5.0 million year over year, mainly because of lower SGT-001 manufacturing costs; clinical and non-clinical costs and personnel costs partly offset the decrease.
- G&A expense increased $4.0 million year over year. The prior-year period included $1.9 million of restructuring charges; none were reported in 2021.
- Common shares issued and outstanding increased from 84.9 million at December 31, 2020 to 110.3 million at September 30, 2021, primarily reflecting the 25.0 million-share March offering. Net proceeds were $134.9 million.
- Solid entered a lease for approximately 49,869 square feet of office, laboratory, R&D and manufacturing space, with relocation planned for early 2022. The lease had not commenced by quarter-end; commencement was anticipated in the first half of 2022.
Outlook, clinical updates and risks
- Management said the $229.8 million of cash, cash equivalents and available-for-sale securities at quarter-end was expected to fund operating and capital needs into the second quarter of 2023. This is an estimate based on assumptions that may prove incorrect; management expects ongoing losses and will need additional funding to continue beyond that period.
- SGT-001’s IGNITE DMD Phase I/II trial had resumed dosing after the FDA lifted its clinical hold in October 2020. A seventh patient was dosed in March 2021; an eighth patient dosed in April experienced a systemic inflammatory response classified as a serious adverse event and considered drug-related by the investigator. Solid strengthened its risk-mitigation plan and anticipated the next patient dosing in Q4 2021.
- Solid reported durable microdystrophin expression in long-term biopsies from patients four through six and reported 1.5-year functional and patient-reported outcome data in September. These are limited clinical data; the filing cautions that early or interim results may change and may not predict later trial outcomes.
- SGT-003 remained preclinical, with an IND submission targeted for early 2023. SGT-001 has U.S. Rare Pediatric Disease and Fast Track designations and U.S. and EU Orphan Drug designations; these do not assure approval or a faster review.
- Key risks include further serious adverse events or clinical holds, uncertain efficacy and regulatory requirements for gene therapy, trial enrollment and COVID-19 disruptions, manufacturing reliability and reliance on third parties, intellectual-property challenges, competition, and the need for additional capital. Equity financing could dilute shareholders; collaborations or licensing could require relinquishing rights.
- The Ultragenyx agreement provides cost reimbursement and potential future milestones and royalties; milestone, royalty and sales-based amounts were not included in recognized transaction price. Ultragenyx may terminate the collaboration on 90 days’ notice.
- Management stated disclosure controls were effective as of September 30, 2021, with no material change in internal control over financial reporting during the quarter. The filing reports no material legal proceedings known at quarter-end. The auditor’s prior-year going-concern explanatory paragraph is cited in the risk factors; management’s current liquidity estimate is described above.
Important facts for investors to verify
- Whether subsequent IGNITE DMD dosing occurred as planned, and the latest safety, efficacy and functional data, especially given the drug-related serious adverse event in patient eight.
- Whether the cash runway remains consistent with management’s second-quarter 2023 estimate as trial activity and development spending change, and what financing may be required.
- Progress toward the SGT-003 IND target and the milestones, cost-sharing options and termination provisions under the Ultragenyx collaboration.
- The March 2021 offering price is stated inconsistently in the filing: $5.575 in the equity statement and $5.75 in the narrative. Verify the correct price against the offering documents.