10-Q 1 sldb-20240331.htm 10-Q 10-Q
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`

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number: 001-38360

Solid Biosciences Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

 

90-0943402

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

500 Rutherford Avenue, Third Floor

Charlestown, MA

 

02129

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 337-4680

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock $0.001 par value per share

SLDB

The Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of May 10, 2024 the registrant had 38,379,413 shares of common stock, $0.001 par value per share, outstanding.


Table of Contents

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023

2

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

3

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023

4

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 5.

Other Information

77

Item 6.

Exhibits

78

Signatures

79

 

1

 

 


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

117,574

 

 

$

74,015

 

Available-for-sale securities

 

 

88,492

 

 

 

49,625

 

Prepaid expenses and other current assets

 

 

8,126

 

 

 

6,094

 

Total current assets

 

 

214,192

 

 

 

129,734

 

Operating lease, right-of-use assets

 

 

26,098

 

 

 

26,539

 

Property and equipment, net

 

 

6,391

 

 

 

6,624

 

Other non-current assets

 

 

175

 

 

 

209

 

Restricted cash

 

 

1,833

 

 

 

1,833

 

Total assets

 

$

248,689

 

 

$

164,939

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,730

 

 

$

2,032

 

Accrued expenses

 

 

10,327

 

 

 

10,137

 

Operating lease liabilities

 

 

1,694

 

 

 

1,855

 

Finance lease liabilities

 

 

496

 

 

 

469

 

Other current liabilities

 

 

92

 

 

 

24

 

Total current liabilities

 

 

14,339

 

 

 

14,517

 

Operating lease liabilities, excluding current portion

 

 

22,526

 

 

 

22,707

 

Finance lease liabilities, excluding current portion

 

 

1,100

 

 

 

1,234

 

Total liabilities

 

 

37,965

 

 

 

38,458

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Preferred stock, $0.001 par value — 10,000,000 shares authorized; no shares issued and
   outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value — 60,000,000 shares authorized; 37,833,689 and
    
20,386,606 shares issued and outstanding at March 31, 2024 and December 31, 2023,
    respectively

 

 

38

 

 

 

20

 

Additional paid-in capital

 

 

893,746

 

 

 

785,199

 

Accumulated other comprehensive (loss) income

 

 

(4

)

 

 

15

 

Accumulated deficit

 

 

(683,056

)

 

 

(658,753

)

Total stockholders’ equity

 

 

210,724

 

 

 

126,481

 

Total liabilities and stockholders’ equity

 

$

248,689

 

 

$

164,939

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

 

 


SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share data)

 

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

18,873

 

 

$

24,631

 

General and administrative

 

 

7,989

 

 

 

7,399

 

Total operating expenses

 

 

26,862

 

 

 

32,030

 

Loss from operations

 

 

(26,862

)

 

 

(32,030

)

Other income, net:

 

 

 

 

 

 

Interest income

 

 

2,651

 

 

 

1,799

 

Interest expense

 

 

(95

)

 

 

(121

)

Other income, net

 

 

3

 

 

 

282

 

Total other income, net

 

 

2,559

 

 

 

1,960

 

Net loss

 

$

(24,303

)

 

$

(30,070

)

Net loss per share, basic and diluted

 

$

(0.64

)

 

$

(1.54

)

Weighted average shares of common stock outstanding,
   basic and diluted

 

 

38,155,373

 

 

 

19,567,635

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

 

 


SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(24,303

)

 

$

(30,070

)

Other comprehensive (loss) income:

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

 

(19

)

 

 

73

 

Comprehensive loss

 

$

(24,322

)

 

$

(29,997

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

 

 


 

SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data)

 

 

 

 

Three Months Ended
March 31, 2024

 

 

 

Common
Stock

 

 

Amount

 

 

Additional
Paid
in Capital

 

 

Accumulated
Other
Comprehensive Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2023

 

 

20,386,606

 

 

$

20

 

 

$

785,199

 

 

$

15

 

 

$

(658,753

)

 

$

126,481

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,611

 

 

 

 

 

 

 

 

 

1,611

 

Issuance of common stock in private placement, net of issuance costs of $4,407

 

 

16,973,103

 

 

 

17

 

 

 

89,437

 

 

 

 

 

 

 

 

 

89,454

 

Issuance of pre-funded warrants in private placement, net of issuance costs of $704

 

 

 

 

 

 

 

 

14,293

 

 

 

 

 

 

 

 

 

14,293

 

Issuance of common stock in public offering, net of sales commissions of $78

 

 

350,664

 

 

 

1

 

 

 

3,055

 

 

 

 

 

 

 

 

 

3,056

 

Vesting of restricted stock units

 

 

98,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of common stock options

 

 

24,639

 

 

 

 

 

 

151

 

 

 

 

 

 

 

 

 

151

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,303

)

 

 

(24,303

)

Balance at March 31, 2024

 

 

37,833,689

 

 

$

38

 

 

$

893,746

 

 

$

(4

)

 

$

(683,056

)

 

$

210,724

 

 

 

 

Three Months Ended
March 31, 2023

 

 

 

Common
Stock

 

 

Amount

 

 

Additional
Paid
In capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2022

 

 

19,556,732

 

 

$

20

 

 

$

774,452

 

 

$

(68

)

 

$

(562,738

)

 

$

211,666

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,118

 

 

 

 

 

 

 

 

 

2,118

 

Vesting of restricted stock units

 

 

16,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

73

 

 

 

 

 

 

73

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,070

)

 

 

(30,070

)

Balance at March 31, 2023

 

 

19,573,132

 

 

$

20

 

 

$

776,570

 

 

$

5

 

 

$

(592,808

)

 

$

183,787

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(24,303

)

 

$

(30,070

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Amortization of discount on available-for-sale securities

 

 

(540

)

 

 

(215

)

Equity-based compensation expense

 

 

1,611

 

 

 

2,118

 

Depreciation, impairment, and amortization expense

 

 

327

 

 

 

1,077

 

Gain on termination of lease

 

 

(89

)

 

 

 

Other

 

 

(5

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(1,337

)

 

 

1,261

 

Accounts payable

 

 

(596

)

 

 

2,745

 

Accrued expenses and other liabilities

 

 

(260

)

 

 

(4,911

)

Net cash used in operating activities

 

 

(25,192

)

 

 

(27,995

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(149

)

 

 

(506

)

Proceeds from maturities of available-for-sale securities

 

 

45,000

 

 

 

37,766

 

Purchases of available-for-sale securities

 

 

(83,346

)

 

 

 

Other

 

 

5

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(38,490

)

 

 

37,260

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrants in private placement

 

 

108,859

 

 

 

 

Payments of common stock issuance costs

 

 

(4,825

)

 

 

 

Proceeds from issuance of common stock in public offering, net of sales commissions

 

 

3,056

 

 

 

 

Proceeds from exercises of common stock options

 

 

151

 

 

 

 

Net cash provided by financing activities

 

 

107,241

 

 

 

 

Net increase in cash, cash equivalents, and restricted cash

 

 

43,559

 

 

 

9,265

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

75,848

 

 

 

157,217

 

Cash, cash equivalents, and restricted cash at end of period

 

$

119,407

 

 

$

166,482

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Right-of-use assets acquired through operating leases

 

$

417

 

 

$

 

Decrease in right-of-use assets due to lease termination

 

$

(197

)

 

$

 

Property and equipment purchases included in accounts payable and accrued expenses

 

$

20

 

 

$

 

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

117,574

 

 

$

164,649

 

Restricted cash, non-current

 

 

1,833

 

 

 

1,833

 

Cash and cash equivalents and restricted cash, as presented on
   the statement of cash flows

 

$

119,407

 

 

$

166,482

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

SOLID BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(amounts in thousands, except share and per share data and where otherwise noted)

1. Nature of the Business and Basis of Presentation

Nature of Business

Solid Biosciences Inc. was organized in March 2013 under the name SOLID Ventures Management, LLC and operated as a Delaware limited liability company until immediately prior to the effectiveness of its registration statement on Form S-1 on January 25, 2018, at which time it completed a statutory corporate conversion into a Delaware corporation and changed its name to Solid Biosciences Inc. (the “Company”). On December 2, 2022, the Company completed its acquisition of AavantiBio, Inc. (“AavantiBio”), a privately held gene therapy company focused on transforming the lives of patients with Friedreich’s ataxia (“FA”) and rare cardiomyopathies (the “Acquisition”). Upon the consummation of the Acquisition, the Company acquired AavantiBio’s gene therapy programs, AVB‑202‑TT for FA and AVB‑401 for BAG3 mediated dilated cardiomyopathy, as well as additional assets for the treatment of other cardiac diseases, platform technologies and know-how related thereto. AavantiBio is a wholly owned subsidiary of the Company.

The Company is a life sciences company focused on advancing a portfolio of current and future gene therapy candidates (collectively, “Candidates”), including SGT-003 for the treatment of Duchenne muscular dystrophy (“Duchenne”), SGT-501 for the treatment of catecholaminergic polymorphic ventricular tachycardia ("CPVT"), and additional assets for the treatment of cardiac and other diseases, at different stages of development with varying levels of investment. The Company is advancing its diverse pipeline across rare neuromuscular and cardiac diseases, bringing together experts in science, technology, disease management and care. Patient-focused and founded by those directly impacted by Duchenne, the Company’s mission is to improve the daily lives of patients living with these devastating diseases.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on licenses, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities.

The Company’s candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from, among others, other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, partners, and consultants.

Liquidity

The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Through March 31, 2024, the Company has funded its operations primarily with the proceeds from the sale of redeemable preferred units and member units as well as the sale of common stock and pre-funded warrants to purchase shares of its common stock in private placements and the sale of common stock in its initial public offering, follow-on public offering in March 2021 and under its at-the-market sales agreement.

7


 

On January 11, 2024, the Company issued and sold in a private placement 16,973,103 shares of the Company’s common stock at a price per share of $5.53 and, to one investor in lieu of shares of common stock, pre-funded warrants to purchase 2,712,478 shares of common stock at a price of $5.529 per pre-funded warrant (the “January 2024 Private Placement”). The Company received $103.7 million of net proceeds from the January 2024 Private Placement after deducting offering costs.

During the three months ended March 31, 2024, the Company issued and sold 350,664 shares of its common stock pursuant to the Company's “at-the-market-offering” sales agreement (the “ATM Sales Agreement”), between the Company and Jefferies LLC (“Jefferies”). During the three months ended March 31, 2024, the Company received net proceeds of $3.1 million,

In accordance with Accounting Standards Codification 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. As of March 31, 2024, the Company had an accumulated deficit of $683.1 million. During the three months ended March 31, 2024, the Company incurred a net loss of $24.3 million and used $25.2 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. Based upon its current operating plan, the Company expects that its cash, cash equivalents and available-for-sale securities of $206.1, million excluding restricted cash of $1.8 million, as of March 31, 2024, will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these financial statements. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. The Company expects to finance its future cash needs through a combination of equity offerings, debt financings, collaborations, strategic partnerships and alliances or licensing arrangements. If the Company is unable to obtain funding, the Company would be forced to delay, reduce or eliminate some or all of its research and development programs, preclinical and clinical testing or commercialization efforts, which could adversely affect its business prospects.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the Company’s financial statements for interim periods in accordance with GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Significant Judgments and Estimate

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to revenue recognition, the recognition of research and development expenses and equity-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates.

Summary of Significant Accounting Policies

The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in its Annual Report on Form 10-K for the year ended December 31, 2023 and updated, as necessary, in this report.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024 and is applicable to the Company’s fiscal

8


 

year beginning January 1, 2025, with early application permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

2. License and Research Agreements

On June 29, 2023, the Company entered into a license agreement (the “Agreement”) with ICS Maugeri S.p.A. SB (“Maugeri”) to focus on the development and commercialization of cardiac-related products by the Company based on Maugeri's inventions. Pursuant to the Agreement, Maugeri granted the Company an exclusive worldwide sublicensable license in certain Maugeri patent rights, including existing patent rights, and those in any improvements or know-how made in performance of the Agreement, and a non-exclusive worldwide sublicensable license in certain Maugeri know-how, including existing know-how, and on any improvement thereto, in each case, subject to certain conditions, that is necessary or reasonably useful to develop the licensed products under the terms of the Agreement. The Company will conduct certain activities agreed to by the parties with respect to the research and development of licensed products. A condition precedent to the effectiveness of the Agreement was regulatory review in Italy, which was completed in the third quarter of 2023 and, upon the completion of the condition precedent, the Agreement became effective.

The Company paid to Maugeri an upfront license fee of €1.5 million which was recorded as research and development expense during the second quarter of 2023. Additionally, the Company agreed to cumulative developmental, regulatory, and commercial milestone payments of up to €15.0 million, cumulative sales milestone payments of up to €15.0 million, upon achievement of specified milestone events, and tiered royalties on worldwide net sales in the low-to-mid-single-digits.

The Agreement continues until the latest expiry of (i) the last valid claim (as defined in the Agreement), (ii) regulatory exclusivity, and (iii) all payment obligations. Either party may terminate the agreement for the other party’s uncured material breach. The Company may also terminate the agreement in its sole discretion upon 60 days’ prior written notice to Maugeri and payment of a fee.

3. Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables present information about the Company’s financial assets that are measured at fair value on a recurring basis:

 

 

 

March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

 

 

$

61,371

 

 

$

 

 

$

61,371

 

Treasury bills

 

 

 

 

 

28,348

 

 

 

 

 

 

28,348

 

Certificates of deposit

 

 

 

 

 

260

 

 

 

 

 

 

260

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills

 

 

 

 

 

52,632

 

 

 

 

 

 

52,632

 

Government bonds

 

 

 

 

 

35,860

 

 

 

 

 

 

35,860

 

 

 

$

 

 

$

178,471

 

 

$

 

 

$

178,471

 

 

9


 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

 

 

$

62,141

 

 

$

 

 

$

62,141

 

Certificates of deposit

 

 

 

 

 

257

 

 

 

 

 

 

257

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills

 

 

 

 

 

49,625

 

 

 

 

 

 

49,625

 

 

 

$

 

 

$

112,023

 

 

$

 

 

$

112,023

 

 

As of March 31, 2024 and December 31, 2023, the fair values of the Company’s cash equivalents and available-for-sale securities were determined using Level 2 inputs. During the three months ended March 31, 2024 and the year ended December 31, 2023, there were no transfers between Level 1, Level 2 and Level 3.

At March 31, 2024 and December 31, 2023, the Company’s accounts payable, accrued expenses, and other current liabilities approximated their estimated fair values due to the short term nature of these financial instruments.

10


 

4. Available-for-Sale Securities

A summary of the Company's available-for-sale securities is presented below:

 

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gain

 

 

Gross
Unrealized
Loss

 

 

Fair
Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills

 

$

52,634

 

 

$

1

 

 

$

(3

)

 

$

52,632

 

Government bonds

 

 

35,862

 

 

 

 

 

 

(2

)

 

$

35,860

 

 

$

88,496

 

 

$

1

 

 

$

(5

)

 

$

88,492

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gain

 

 

Gross
Unrealized
Loss

 

 

Fair
Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills

 

$

49,610

 

 

$

15

 

 

$

 

 

$

49,625

 

 

$

49,610

 

 

$

15

 

 

$

 

 

$

49,625

 

 

The estimated fair value and amortized cost of the Company’s available-for-sale securities as of by contractual maturity are summarized as follows:

 

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

88,496

 

 

$

88,492

 

Total available-for-sale securities

 

$

88,496

 

 

$

88,492

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

49,610

 

 

$

49,625

 

Total available-for-sale securities

 

$

49,610

 

 

$

49,625

 

The weighted average contractual maturity of the Company’s available-for-sale securities was approximately 0.5 years and 0.4 years as of March 31, 2024 and December 31, 2023, respectively.

5. Property and Equipment, Net

Property and equipment, net, consists of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Laboratory equipment

 

$

16,051

 

 

$

16,137

 

Furniture and fixtures

 

 

936

 

 

 

936

 

Computer equipment

 

 

842

 

 

 

842

 

Computer software

 

 

553

 

 

 

553

 

Leasehold improvements

 

 

481

 

 

 

481

 

Construction in process

 

 

580

 

 

 

410

 

Property and equipment, at cost

 

 

19,443

 

 

 

19,359

 

Less accumulated depreciation and amortization

 

 

(13,052

)

 

 

(12,735

)

Property and equipment, net

 

$

6,391

 

 

$

6,624

 

 

Depreciation and amortization expense was $0.3 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2023 the Company recognized an impairment loss of $0.4 million. No impairment losses were recognized during the three months ended March 31, 2024.

11


 

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Prepaid research and development expenses

 

$

5,033

 

 

$

3,980

 

Prepaid expenses and other assets

 

 

3,093

 

 

 

2,114

 

Total

 

$

8,126

 

 

$

6,094

 

 

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Accrued research and development

 

$

5,099

 

 

$

2,614

 

Accrued compensation

 

 

3,194

 

 

 

5,948

 

Accrued other

 

 

2,034

 

 

 

1,575

 

Total

 

$

10,327

 

 

$

10,137

 

 

8. Stockholders’ Equity

On January 11, 2024, the Company issued and sold 16,973,103 shares of the Company’s common stock at a price per share of $5.53 and, to one investor in lieu of shares of common stock, pre-funded warrants to purchase 2,712,478 shares of common stock at a price of $5.529 per pre-funded warrant, in the January 2024 Private Placement. The Company received approximately $103.7 million of net proceeds from the January 2024 Private Placement after deducting offering costs.

No warrants were exercised during the three months ended March 31, 2024.

During the
three months ended March 31, 2024, the Company sold 350,664 shares of its common stock pursuant to the Company's "at-the-market offering" sales agreement, between the Company and Jefferies. During the three months ended March 31, 2024, the Company received net proceeds of $3.1 million.

9. Equity-Based Compensation

In connection with the closing of the Company’s initial public offering, the Board of Directors and stockholders approved the 2018 Omnibus Incentive Plan (the “2018 Plan”), which provides for the reservation of 333,400 shares of common stock for equity awards. On June 16, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan (as amended or restated, the “2020 Plan”) which consisted of, at the time of approval (i) 200,000 shares of common stock and (ii) additional shares of common stock (up to 325,268) as is equal to (i) the number of shares reserved under the 2018 Plan that remain available for grant under the 2018 Plan as of immediately prior to the date the 2020 Plan was approved by the Company’s stockholders and (ii) the number of shares subject to awards granted under the 2018 Plan which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. As of the effective date of the 2020 Plan, no further awards will be made under the 2018 Plan. Any options or awards outstanding under the 2018 Plan remain outstanding and effective and are governed by their existing terms. In June 2021, the Company’s stockholders approved an amendment to the 2020 Plan to reserve an additional 466,666 shares of common stock for issuance under the plan. On December 1, 2022, the Company's stockholders approved an amendment and restatement of the 2020 Plan to (i) increase the number of shares of common stock reserved for issuance under the plan by 866,666 shares to 1,533,333 shares, subject to adjustment in the event of stock splits and other similar events, (ii) provide for an annual increase, to be added on the first day of each fiscal year during the term of the plan, beginning with the fiscal year ending December 31, 2023, of 5% of the number of shares of common stock outstanding on the first day of such fiscal year or a lesser number of shares determined by the Board of Directors, (iii) provide that up to 1,858,601 shares of common stock may be granted as “incentive stock options” under the 2020 Plan, (iv) extend the term of the plan to December 1, 2032 and (v) revise certain provisions of the plan relating to the Board of Director’s ability to delegate authority to make awards under the plan. Under the 2020 Plan, stock options may not be granted at less than fair value on the date of grant. As of March 31, 2024, 322,909 shares remained available for future issuance under the 2020 Plan.

In June 2021, the Company's stockholders also approved the 2021 Employee Stock Purchase Plan (“ESPP”), which provides for 73,525 shares to be available for purchase by eligible employees according to its terms. The first offering period under the ESPP commenced on September 1, 2021. On June 6, 2023, the Company's stockholders approved an amendment and restatement of the

12


 

ESPP to (i) increase the number of shares of common stock reserved for issuance under the ESPP from 73,525 to 473,525 and (ii) provide for an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2024 and ending with the fiscal year ending December 31, 2033, equal to the least of (a) 293,597 shares of common stock, (b) one percent (1%) of the outstanding shares of common stock on such date and (c) the number of shares of common stock determined by the Board of Directors. The Company amended and restated the ESPP on November 12, 2023 to provide for 24-month offering periods. As of March 31, 2024, 601,402 shares remained available for future issuance under the ESPP.

In March 2024, the Board of Directors approved the 2024 Inducement Stock Incentive Plan (the "Inducement Plan"), which provides for the reservation of 1,000,000 shares of common stock for equity granted as an inducement material to the individual’s entering into employment with the Company and in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4). As of March 31, 2024, 1,000,000 shares remained available for future issuance under the Inducement Plan.

During the three months ended March 31, 2024, the Company granted options to purchase 844,322 shares of common stock under the 2020 Plan and no options to purchase shares of common stock as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4). During the three months ended March 31, 2023, the Company granted options to purchase 695,596 shares of common stock under the 2020 Plan and options to purchase 90,000 shares of common stock as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4). During the three months ended March 31, 2024, the Company granted 896,887 restricted stock units under the 2020 Plan and no restricted stock units as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4). During the three months ended March 31, 2023, the Company granted 347,997 restricted stock units under the 2020 Plan and 45,000 restricted stock units as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4).

The Company recorded equity-based compensation expense related to all of its share-based awards to employees and non-employees in the following captions within its condensed consolidated statements of operations:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

548

 

 

$

898

 

General and administrative

 

 

1,063

 

 

 

1,220

 

Total

 

$

1,611

 

 

$

2,118

 

 

10. Income Taxes

During the three months ended March 31, 2024 and 2023, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits and orphan drug credits generated in each year due to its uncertainty of realizing a benefit from those items. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at March 31, 2024 and December 31, 2023, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized.

As of March 31, 2024 and December 31, 2023, the Company had not recorded any amounts for unrecognized tax benefits. The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s C-Corporation tax years beginning with the year ended December 31, 2019 are open under statute. Any tax credit or net operating loss carryforward can be adjusted in future periods after the respective year of generation’s statute of limitation has closed.

11. Commitments and Contingencies

Letter of Credit

The Company had an outstanding letter of credit in the amount of $1.8 million at March 31, 2024 and December 31, 2023, which was required as a condition of the Company’s office and laboratory lease.

13


 

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its executive officers and members of its Board of Directors that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as executive officers or directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnification arrangements.

The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of March 31, 2024 and December 31, 2023.

Legal Proceedings

The Company may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which the Company is focused. The Company is not aware of any material legal proceedings or claims as of March 31, 2024.

12. Net Loss per Share

Basic and diluted net loss per share were calculated as follows:

The numerator for basic and diluted net loss per share is as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(24,303

)

 

$

(30,070

)

 

The denominator is as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Weighted average shares of common stock outstanding,
   basic and diluted

 

 

35,740,970

 

 

 

19,567,635

 

Weighted average shares of pre-funded warrants to
   purchase common stock

 

 

2,414,403

 

 

 

 

Total

 

 

38,155,373

 

 

 

19,567,635

 

 

Included within weighted average shares of common stock outstanding for the three months ended March 31, 2024 and 2023 are 2,712,478 and 0, respectively, shares of common stock issuable upon the exercise of the pre-funded warrants as the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share.

 

Net loss per share, basic and diluted is as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss per share, basic and diluted

 

$

(0.64

)

 

$

(1.54

)

 

14


 

 

The following potential common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Options to purchase common stock

 

 

2,864,672

 

 

 

2,113,510

 

Nonvested restricted stock units

 

 

1,576,230

 

 

 

841,570

 

Total

 

 

4,440,902

 

 

 

2,955,080

 

 

13. Restructuring

In November 2022, the Company’s Board of Directors approved a plan to reduce the Company’s workforce by approximately 18 percent. These reductions were completed by December 5, 2022. This plan was designed to streamline the Company’s operating structure following the Acquisition. The Company recorded a restructuring charge in the fourth quarter of 2022 of $5.7 million related to the reduction in force, consisting of severance and other employee termination benefits. The Company paid $0.1 million of this amount during the three months ended March 31, 2024 and $3.7 million during the year ended December 31, 2023. The Company expects that the remaining $0.1 million will be paid during the second quarter of 2024.

The following table provides a rollforward of activity associated with accrued restructuring charges for the periods indicated:

 

 

 

One-Time Employee
Termination Benefits

 

Accrued restructuring charges as of December 31, 2022

 

$

3,921

 

Accrual recorded as a result of restructuring charges

 

 

 

Amounts paid during the period

 

 

(3,669

)

Accrued restructuring charges as of December 31, 2023

 

$

252

 

Accrual recorded as a result of restructuring charges

 

 

 

Amounts paid during the period

 

 

(143

)

Accrued restructuring charges as of March 31, 2024

 

$

109

 

 

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this quarterly report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2023 included in our annual report filed on Form 10-K on March 13, 2024.

Some of the statements contained in this discussion and analysis or set forth elsewhere in this quarterly report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this quarterly report on Form 10-Q particularly including those risks identified in Part II, Item 1A “Risk Factors” and our other filings with the Securities and Exchange Commission, or the SEC.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this quarterly report on Form 10-Q. Statements made herein are made as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this quarterly report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.

Overview

We are a life sciences company focused on advancing a portfolio of current and future gene therapy candidates, which we refer to collectively as our Candidates, including SGT-003 for the treatment of Duchenne muscular dystrophy, or Duchenne, SGT-501 for the treatment of catecholaminergic polymorphic ventricular tachycardia, or CPVT, and additional assets for the treatment of cardiac and other diseases, at different stages of development, with varying levels of investment. We are advancing our diverse pipeline across rare neuromuscular and cardiac diseases, bringing together experts in science, technology, disease management and care. Patient-focused and founded by those directly impacted by Duchenne, our mission is to improve the daily lives of patients living with these devastating diseases.

Solid was purpose-built to advance the best science and accelerate the discovery and development of treatments that may benefit all patients with Duchenne. As Solid expands to bring meaningful treatments to patients living with other neuromuscular and cardiac diseases, the values and guiding principles that drive us continue. Our corporate vision is to build an innovation platform enabling the discovery and development of high-value genetic medicines for neuromuscular and cardiac diseases by integrating internal capabilities, including a vector core, use of validated animal models, optimized expression cassettes, novel capsids and regulatory expertise, and collaborations with leaders in related clinical and research fields. Our mission, which guides our operations, is to treat and change the course of neuromuscular and cardiac diseases at all stages. Underscoring this mission, our disease-focused business model is founded on the following fundamental principles:

identify and develop meaningful therapies for patients with neuromuscular and cardiac diseases;
bring together the leading experts in neuromuscular and cardiac diseases, science, technology, disease management and care; and
be guided by the needs of these patients.

On December 2, 2022, we completed our acquisition of AavantiBio, Inc., or AavantiBio, a privately held gene therapy company focused on transforming the lives of patients with Friedreich’s ataxia, or FA, and rare cardiomyopathies, or the Acquisition. Upon the consummation of the Acquisition, we acquired AavantiBio’s gene therapy programs, AVB-202-TT for the treatment of FA and AVB-401 for the treatment of BAG3-mediated dilated cardiomyopathy ("DCM"), additional assets for the treatment of cardiac diseases, platform technologies and know-how related thereto.

In January 2024, we sold to investors in a private placement, or the January 2024 Private Placement, an aggregate of 16,973,103 shares of our common stock at a price of $5.53 per share, and, to one investor in lieu of shares, pre-funded warrants to purchase 2,712,478 shares of our common stock, at a price of $5.529 per pre-funded warrant. We received $103.7 million of aggregate net proceeds, after deducting offering costs.

16


 

Our Operations

We are focused on developing transformative treatments to improve the lives of patients with rare neuromuscular and cardiac diseases. Our current programs are all designed to treat these diseases with gene transfer products. Gene transfer, a type of gene therapy, is designed to address diseases caused by mutated genes through the delivery of functional versions of genes, called transgenes. The transgenes are then utilized by the body to produce desired proteins to compensate for mutated genes, potentially offering long-lasting clinical benefit. In addition to a transgene, our gene transfer candidates include a viral capsid or vector (a protein shell utilized as a vehicle to deliver a transgene to cells in the body) and a promoter (a specialized DNA sequence that directs cells to produce the protein in specific tissues). The capsid is modified to no longer self-replicate yet still retain its ability to introduce new genetic material directly into patients’ cells. Adeno-associated virus, or AAV, capsids have been approved for use to deliver transgenes to patients, including via systemic delivery. The use of AAV capsids to deliver gene therapies has also been extensively studied by third parties in human clinical trials for multiple disease indications, and in certain of these trials AAV was delivered systemically to the patient.

Due to our significant research and development expenditure, licensing and patent investment, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were $24.3 million and $30.1 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $683.1 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize our Candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of our Candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of March 31, 2024, we had cash, cash equivalents, and available-for-sale securities of $206.1 million, excluding restricted cash of $1.8 million. We believe that our cash, cash equivalents, and available-for-sale securities as of March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements into 2026. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Financial operations overview

Revenue

We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever. If our development efforts for our Candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.

Operating expenses

We classify our operating expenses into two categories: research and development, and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses and equity-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-003 and other Candidates and include:

expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research and preclinical activities on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture SGT-003 and other Candidates for use in our preclinical studies and clinical trials;
salaries, benefits and other related costs, including equity-based compensation expense, for personnel engaged in research and development functions;

17


 

costs of outside consultants, engaged to assist in our research and development activities, including their fees, equity-based compensation and related travel expenses;
costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
costs incurred in seeking regulatory approval of SGT-003 and other Candidates;
expenses incurred under our intellectual property licenses; and
facility-related research and development expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Research and development activities are central to our business model. We are still in the early stages of development of our Candidates. Product candidates in later stages of clinical development generally have higher development costs than those in preclinical development or in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future if and as we conduct clinical trials for SGT-003, initiate clinical trials for our other Candidates and continue to identify and develop additional candidates.

We typically use our employee and infrastructure resources across our product candidates. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidates, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to product candidates on a program-specific basis. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by product candidates for the respective periods:

 

 

 

Three Months Ended
March 31,

 

 

(In thousands)

 

2024

 

 

2023

 

 

Allocated research and development expenses

 

 

 

 

 

 

 

SGT-001

 

$

257

 

 

$

2,519

 

 

SGT-003

 

 

1,906

 

 

 

9,148

 

 

SGT-501

 

 

3,807

 

 

 

 

 

Other development programs

 

 

2,254

 

 

 

2,004

 

 

Total allocated research and development expenses

 

 

8,224

 

 

 

13,671

 

 

Unallocated research and development expenses

 

 

 

 

 

 

 

Personnel related expenses

 

 

6,066

 

 

 

7,252

 

 

External expenses

 

 

4,583

 

 

 

3,708

 

 

Total unallocated research and development expenses

 

 

10,649

 

 

 

10,960

 

 

Total research and development expenses

 

$

18,873

 

 

$

24,631

 

 

 

We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-003 or other Candidates, or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our candidates will depend on a variety of factors, including:

the scope, rate of progress, expense and results of any clinical trials of our Candidates and other research and development activities that we may conduct;
the imposition of regulatory restrictions on clinical trials, including full and partial clinical holds and the time and activities required to lift any such holds;
uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;
significant and changing government regulation and regulatory guidance;
potential additional studies or clinical trials requested by regulatory agencies;
the timing and receipt of any marketing approvals; and
the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

18


 

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, and facility-related expenses.

We expect that our general and administrative expenses will increase in the future as we support our research and development activities and activities related to our INSPIRE Duchenne trial and any planned or future clinical trials for and potential commercialization of our Candidates.

Other income, net

Other income, net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, amortization of investment premium or accretion of investment discount, net of financing leases interest expense, and sub-lease income.

Income taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

During the three months ended March 31, 2024, there were no material changes to our critical accounting policies. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies and use of estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023 and the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements (unaudited),” of this quarterly report on Form 10-Q. We believe that of our critical accounting policies, the following accounting policies involve the most judgment and complexity:

Accrued research and development expenses; and
Equity-based compensation.

Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.

19


 

Results of operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

 

 

 

Three Months Ended
March 31,

 

 

Increase

 

 

%

 

(in thousands)

 

2024

 

 

2023

 

 

(decrease)

 

 

Change

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

18,873

 

 

$

24,631

 

 

$

(5,758

)

 

 

(23.4

)%

General and administrative

 

 

7,989

 

 

 

7,399

 

 

 

590

 

 

 

8.0

%

Total operating expenses

 

 

26,862

 

 

 

32,030

 

 

 

(5,168

)

 

 

(16.1

)%

Loss from operations

 

 

(26,862

)

 

 

(32,030

)

 

 

5,168

 

 

 

(16.1

)%

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,651

 

 

 

1,799

 

 

 

852

 

 

 

47.4

%

Interest expense

 

 

(95

)

 

 

(121

)

 

 

26

 

 

 

(21.5

)%

Other income, net

 

 

3

 

 

 

282

 

 

 

(279

)

 

 

(98.9

)%

Total other income, net

 

 

2,559

 

 

 

1,960

 

 

 

599

 

 

 

30.6

%

Net loss

 

$

(24,303

)

 

$

(30,070

)

 

$

5,767

 

 

 

(19.2

)%

 

Research and development expenses

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

 

 

 

Three Months Ended
March 31,

 

 

Increase

 

 

%

 

(in thousands)

 

2024

 

 

2023

 

 

(decrease)

 

 

Change

 

Allocated research and development expenses

 

 

 

 

 

 

 

 

 

 

 

 

SGT-001

 

$

257

 

 

$

2,519

 

 

$