Solid Biosciences Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; filed May 13, 2019. Solid Biosciences is a clinical-stage biotechnology company developing treatments for Duchenne muscular dystrophy (DMD). Its lead candidate, SGT-001, is an investigational gene transfer in the Phase I/II IGNITE DMD trial. The company has no approved products and has generated no product revenue. Financial amounts below are in U.S. dollars; statement amounts are in millions unless otherwise noted.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $23.3 | $11.9 | Up $11.3 |
| General and administrative expense | $7.0 | $4.0 | Up $3.0 |
| Total operating expenses | $30.3 | $16.0 | Up $14.3 |
| Net loss | $29.6 | $15.9 | Loss increased $13.7 |
| Net loss per share, basic and diluted | $0.85 | $0.54 | Loss per share increased |
| Cash used in operating activities | $25.9 | $17.2 | Use increased $8.8 |
- R&D spending on SGT-001 was $11.3 million, versus $7.1 million; the filing attributes the increase primarily to $3.8 million of higher manufacturing costs and $0.5 million of additional clinical-trial costs. Other R&D increases reflected personnel and facility costs, including lab operations.
- G&A increased mainly due to personnel-related expenses and other corporate costs. Equity-based compensation was $3.5 million, compared with $0.8 million.
- Interest and other income totaled $0.7 million, up from $0.1 million, partly offsetting operating losses. The company recorded no income-tax benefit because deferred tax assets were fully valuation-allowanced.
- At March 31, cash and cash equivalents were $54.0 million and available-for-sale securities were $40.8 million, totaling $94.7 million. Including $0.3 million of restricted cash, cash and restricted cash were $54.3 million. Total assets were $120.2 million; stockholders’ equity was $99.1 million.
- Cash used in investing activities was $6.4 million, including property and equipment purchases; there was no financing cash flow in Q1 2019. The comparable 2018 period included $131.7 million of net IPO financing proceeds.
- The company reported no debt outstanding. Balance-sheet lease liabilities totaled approximately $8.0 million, comprising $7.0 million operating and $1.0 million finance lease liabilities.
- Operating expenses substantially exceeded revenue, so conventional operating margins are not meaningful for this pre-revenue business.
Clinical progress, outlook, and risks
- In February 2019, the company reported preliminary three-month biopsy findings for the first three patients dosed at the lowest IGNITE DMD dose, 5E13 vg/kg. One patient had microdystrophin below the assay’s 5% western-blot quantification level and in about 10% of fibers by immunofluorescence; the other two had very low immunofluorescence findings and no detectable western-blot result. These are preliminary findings, not evidence of clinical benefit.
- Two patients were randomized in the second cohort: one received 2E14 vg/kg and one entered the control group. The treated patient experienced a serious adverse event involving transient transaminase elevation and bilirubin above twice the upper limit of normal, reported as related to study drug; it resolved after increased oral glucocorticoids. A gastrointestinal infection was classified as unrelated, and a transient platelet decline was considered a non-serious drug-related event. The filing says these events had resolved and the patient had resumed normal activities.
- The company continued trial enrollment and anticipated additional data later in 2019. Further development plans, including additional trials or patient populations, would depend on clinical data; no specific development timetable beyond this was provided.
- Management estimated that $94.7 million of cash, cash equivalents, and securities would fund operating expenses and capital needs through the first quarter of 2020. However, the filing expressly concludes that substantial doubt exists about the company’s ability to continue as a going concern within twelve months after issuance. It expects continued operating losses and says additional financing is needed, with no committed external funding source.
- The company may need to delay, reduce, or stop programs if it cannot raise capital. A potential commercial-scale manufacturing facility could require $60–$75 million of capital expenditures; building one remained a possibility, not a commitment.
- Key risks include clinical safety and efficacy uncertainty, prior FDA clinical hold history, gene-therapy risks, trial enrollment and regulatory delays, manufacturing supply and yield variability, reliance on third-party manufacturers, financing needs, and intellectual-property exposure.
- Two securities class-action matters concerned alleged nondisclosure of toxicity risks. The federal action was voluntarily dismissed without prejudice; the Massachusetts state action remained stayed, with a status conference scheduled for June 24, 2019. The company said it could not estimate potential losses.
- Disclosure controls and procedures were assessed as ineffective because previously identified material weaknesses in financial reporting controls had not yet been fully remediated. Remediation work was underway, but the company said the weaknesses would remain until controls operated effectively for a sufficient period and were tested.
Most important facts for investors to verify
- Whether subsequent IGNITE DMD data support SGT-001’s safety and biological activity, particularly at the higher dose, and whether further adverse events occur.
- Whether the company secures financing before its projected early-2020 runway ends, and the resulting dilution, financing terms, or program changes.
- Whether clinical enrollment, manufacturing supply and yields, and regulatory interactions stay on track, including any decision on a $60–$75 million manufacturing investment.
- Whether internal-control material weaknesses are fully remediated and disclosure controls become effective.
- Developments in the stayed state securities litigation and any resulting costs or liabilities.