Scholar Rock Holding Corp [SRRK] Filings

10-Q 1 srrk-20230930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

FOR THE QUARTERLY PERIOD ENDED September 30, 2023


☐	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 001-38501

______________________________________________

SCHOLAR ROCK HOLDING CORPORATION

(Exact name of registrant as specified in its charter)


Delaware	82-3750435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

301 Binney Street, 3rd Floor Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip Code)

(857) 259 3860

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SRRK	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 ☒

The number of outstanding shares of the Registrant’s Common Stock as of November 2, 2023 was 72,143,258.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”), including the documents incorporated by reference, contains forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

●

the success, cost and timing of clinical trials for apitegromab and SRK-181, including the progress and completion of clinical trials, and the results, and the timing of results, from these trials;

●

our success in identifying and executing a development program for SRK-439, identifying and executing development programs for additional indications for apitegromab and SRK-181, and identifying product candidates from our preclinical programs;

●

the clinical utility of our product candidates and their potential advantages over other therapeutic options;

●

our ability to obtain, generally or on terms acceptable to us, funding for our operations, including funding necessary to complete further development and, upon successful development, if approved, commercialization of apitegromab, SRK-181, SRK-439 or any of our future product candidates;

●

risks associated with impact of global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflict in Ukraine, economic sanctions and economic slowdowns or recessions or public health pandemics, which may adversely impact our workforce, global supply chain, business, preclinical studies, clinical trials, our research and development efforts, the value of our common stock and our ability to access capital markets, and financial results;

●

the potential for our identified research priorities to advance our proprietary platform by identifying future product candidates;

●

the timing, scope, or likelihood of our ability to obtain and maintain regulatory approval from the U.S. Food and Drug Administration (“FDA”), the European Commission (“EC”) and other regulatory authorities for apitegromab, SRK-181, SRK-439 and any future product candidates, and any related restrictions, limitations or warnings in the label of any approved product candidate;

●

our ability to continue to grow our organization, including our personnel, systems and relationships with third parties;

●

our ability to retain our executives and highly skilled technical and managerial personnel, which could be affected due to any transition in management, or if we fail to recruit additional highly skilled personnel;

●

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and the duration of such protection and our ability to operate our business without infringing on the intellectual property rights of others;

●

our ability and the potential to successfully manufacture our product candidates for clinical trials and for commercial use, if approved;

●

our ability to successfully build a commercial infrastructure to market apitegromab, if approved;

Table of Contents

●

our ability to establish or maintain collaborations or strategic relationships;

●

our expectations relating to the potential of our proprietary platform technology;

●

our ability to obtain additional funding when necessary;

●

the size and growth potential of the markets for our product candidates, and our ability to serve those markets, either alone or in combination with others;

●

our expectations related to the use of our cash reserves;

●

the impact of new laws and regulations or amendments to existing laws and regulations in the United States and foreign countries;

●

developments and projections relating to our competitors and our industry;

●

our estimates and expectations regarding cash and expense levels, future revenues, capital requirements and needs for additional financing, including our expected use of proceeds from our public offerings, and liquidity sources;

●

our expectations regarding the period during which we qualify as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act or as a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934; and

●

other risks and uncertainties, including those listed under the caption Part II, Item 1A “Risk Factors”.

The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry data, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

Table of Contents

SCHOLAR ROCK HOLDING CORPORATION

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	5
Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	5
Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	6
Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2023 and 2022	7
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	9
Notes to Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3. Defaults Upon Senior Securities	84
Item 4. Mine Safety Disclosures	84
Item 5. Other Information	84
Item 6. Exhibits	85
SIGNATURES	86

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	67,598	$	103,275
Marketable securities		151,037		212,086
Prepaid expenses and other current assets		9,830		12,663
Total current assets		228,465		328,024
Property and equipment, net		5,283		7,384
Operating lease right-of-use asset		12,997		18,543
Restricted cash		2,612		2,498
Other long-term assets		1,332		1,719
Total assets	$	250,689	$	358,168
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,968	$	3,994
Accrued expenses		17,397		24,321
Operating lease liability		7,200		7,852
Other current liabilities		165		222
Total current liabilities		26,730		36,389
Long-term portion of operating lease liability		6,335		11,800
Long-term debt		49,959		49,744
Total liabilities		83,024		97,933
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022		—		—
Common stock, $0.001 par value; 150,000,000 shares authorized; 56,260,574 and 51,672,579 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		56		52
Additional paid-in capital		797,927		771,699
Accumulated other comprehensive loss		(23)		(884)
Accumulated deficit		(630,295)		(510,632)
Total stockholders’ equity		167,665		260,235
Total liabilities and stockholders’ equity	$	250,689	$	358,168

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

Table of Contents

SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	—	$	—	$	—	$	33,193
Operating expenses:
Research and development		30,337		33,392		86,939		94,831
General and administrative		13,335		10,470		36,324		32,304
Total operating expenses		43,672		43,862		123,263		127,135
Loss from operations		(43,672)		(43,862)		(123,263)		(93,942)
Other income (expense), net		1,313		565		3,600		(1,305)
Net loss	$	(42,359)	$	(43,297)	$	(119,663)	$	(95,247)
Net loss per share, basic and diluted	$	(0.53)	$	(0.55)	$	(1.49)	$	(1.80)
Weighted average common shares outstanding, basic and diluted		80,606,438		79,336,161		80,115,143		52,958,447

Comprehensive loss:
Net loss	$	(42,359)	$	(43,297)	$	(119,663)	$	(95,247)
Other comprehensive loss:
Unrealized gain (loss) on marketable securities		40		(857)		861		(901)
Total other comprehensive gain (loss)		40		(857)		861		(901)
Comprehensive loss	$	(42,319)	$	(44,154)	$	(118,802)	$	(96,148)

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

Table of Contents

SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance at December 31, 2022	51,672,579	$	52	$	771,699	$	(884)	$	(510,632)	$	260,235
Unrealized gain on marketable securities	—		—		—		555		—		555
Sale of common shares, net of issuance costs	68,696		—		827		—		—		827
Exercise of stock options	28,706		—		243		—		—		243
Issuance of common shares upon RSU vesting	219,378		—		—		—		—		—
Equity-based compensation expense	—		—		6,170		—		—		6,170
Other	—		—		2		—		—		2
Net loss	—		—		—		—		(39,379)		(39,379)
Balance at March 31, 2023	51,989,359	$	52	$	778,941	$	(329)	$	(550,011)	$	228,653
Unrealized gain on marketable securities	—		—		—		266		—		266
Sale of common shares, net of issuance costs	550,594		1		4,395		—		—		4,396
Exercise of stock options	53,333		—		292		—		—		292
Issuance of common shares upon RSU vesting	273,035		—		—		—		—		—
Exercise of pre-funded warrants	2,293,466		2		(2)		—		—		—
Equity-based compensation expense	—		—		6,818		—		—		6,818
Other	—		—		1		—		—		1
Net loss	—		—		—		—		(37,925)		(37,925)
Balance at June 30, 2023	55,159,787	$	55	$	790,445	$	(63)	$	(587,936)	$	202,501
Unrealized gain on marketable securities	—		—		—		40		—		40
Exercise of stock options	49,604		—		280		—		—		280
Issuance of common shares upon RSU vesting	24,290		—		—		—		—		—
Exercise of pre-funded warrants	1,026,893		1		(1)		—		—		—
Equity-based compensation expense	—		—		7,203		—		—		7,203
Net loss	—		—		—		—		(42,359)		(42,359)
Balance at September 30, 2023	56,260,574	$	56	$	797,927	$	(23)	$	(630,295)	$	167,665

Table of Contents


						Accumulated
				Additional		Other				Total
	Common Stock			Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance at December 31, 2021	35,209,099	$	35	$	548,204	$	(35)	$	(376,130)	$	172,074
Unrealized loss on marketable securities	—		—		—		(117)		—		(117)
Exercise of stock options	42,129		—		481		—		—		481
Issuance of common shares upon RSU vesting	49,595		—		—		—		—		—
Equity-based compensation expense	—		—		6,828		—		—		6,828
Net loss	—		—		—		—		(7,950)		(7,950)
Balance at March 31, 2022	35,300,823	$	35	$	555,513	$	(152)	$	(384,080)	$	171,316
Unrealized gain on marketable securities	—		—		—		73		—		73
Sale of common shares, pre-funded warrants and warrants to purchase common shares, net of issuance costs	16,326,530		16		195,309		—		—		195,325
Exercise of stock options	263		1		1		—		—		2
Issuance of common shares upon RSU vesting	10,631		—		—		—		—		—
Equity-based compensation expense	—		—		6,791		—		—		6,791
Net loss	—		—		—		—		(44,000)		(44,000)
Balance at June 30, 2022	51,638,247	$	52	$	757,614	$	(79)	$	(428,080)	$	329,507
Unrealized loss on marketable securities	—		—		—		(857)		—		(857)
Exercise of stock options	920		—		5		—		—		5
Issuance of common shares upon RSU vesting	21,687		—		—		—		—		—
Equity-based compensation expense	—		—		7,917		—		—		7,917
Other	—		—		(10)		—		—		(10)
Net loss	—		—		—		—		(43,297)		(43,297)
Balance at September 30, 2022	51,660,854	$	52	$	765,526	$	(936)	$	(471,377)	$	293,265

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

Table of Contents

SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(119,663)	$	(95,247)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,172		2,237
Amortization of debt discount and debt issuance costs		215		573
Loss on disposal of property and equipment		—		32
Equity-based compensation		20,191		21,536
Amortization/accretion of investment securities		(4,417)		(494)
Non-cash operating lease expense		5,546		5,122
Change in operating assets and liabilities:
Prepaid expenses and other current assets		2,817		(1,633)
Other assets		387		(110)
Accounts payable		(2,026)		(2,245)
Accrued expenses		(6,924)		5,322
Operating lease liabilities		(6,117)		(5,460)
Deferred revenue		—		(33,193)
Other liabilities		(58)		(227)
Net cash used in operating activities		(107,877)		(103,787)
Cash flows from investing activities:
Purchases of property and equipment		(71)		(947)
Proceeds from sale of property and equipment		13		—
Purchases of marketable securities		(186,673)		(290,828)
Maturities of marketable securities		253,000		120,000
Net cash provided by (used in) investing activities		66,269		(171,775)
Cash flows from financing activities:
Proceeds from sale of common shares, pre-funded warrants and warrants to purchase common shares, net of issuance costs		5,223		195,315
Proceeds from stock option exercises		819		487
Other		3		—
Net cash provided by financing activities		6,045		195,802
Net decrease in cash, cash equivalents and restricted cash		(35,563)		(79,760)
Cash, cash equivalents and restricted cash, beginning of period		105,773		215,333
Cash, cash equivalents and restricted cash, end of period	$	70,210	$	135,573
Supplemental disclosure of non-cash items:
Property and equipment purchases in accounts payable and accrued expenses	$	—	$	112
Supplemental cash flow information:
Cash paid for interest	$	4,743	$	3,032

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

Table of Contents

SCHOLAR ROCK HOLDING CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of the Business

Scholar Rock Holding Corporation (the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery and development of innovative medicines for the treatment of serious diseases in which signaling by protein growth factors plays a fundamental role. As a global leader in transforming growth factor beta (“TGFβ”) superfamily biology, the Company’s novel understanding of the molecular mechanisms of growth factor activation enabled the development of a proprietary platform for the discovery and development of monoclonal antibodies that locally and selectively target the precursor, or latent, forms of growth factors. The Company’s first product candidate, apitegromab, is a highly selective, fully human, monoclonal antibody, with a unique mechanism of action that results in inhibition of the activation of the growth factor, myostatin, in skeletal muscle. Apitegromab is being developed as a potential first muscle-targeted therapy for the treatment of spinal muscular atrophy (“SMA”). The Company is conducting SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of apitegromab in patients with nonambulatory Type 2 and Type 3 SMA. In September 2023, the Company announced completion of enrollment for the Phase 3 SAPPHIRE trial. In June 2023, the Company announced data from the Phase 2 TOPAZ trial extension period evaluating patient outcomes at 36 months of treatment with apitegromab. In parallel with these activities, the Company plans to initiate a Phase 2 proof-of-concept study with apitegromab in combination with a GLP-1-receptor agonist in obesity in 2024. The Company’s second product candidate, SRK-181, is being developed for the treatment of cancers that are resistant to checkpoint inhibitor (“CPI”) therapies, such as anti-PD-1 or anti-PD-L1 antibody therapies (referred together as anti-PD-(L)1 antibody therapies). SRK-181 is a highly selective inhibitor of the activation of latent transforming growth factor beta-1 (“TGFβ1”) that is being investigated in the Company’s Phase 1 DRAGON proof-of-concept clinical trial in patients with locally advanced or metastatic solid tumors that exhibit resistance to anti-PD-(L)1 antibodies. The DRAGON trial consists of two parts: Part A (dose escalation of SRK-181 as a single-agent or in combination with an approved anti-PD-(L)1 therapy) and Part B (dose expansion evaluating SRK-181 in combination with an approved anti-PD- (L)1 antibody therapy). Part B includes the following active cohorts: clear cell renal cell carcinoma, head and neck squamous cell carcinoma, urothelial carcinoma, cutaneous melanoma and non-small cell lung cancer. The Phase 1 DRAGON trial is expected to complete enrollment in December 2023. Safety, efficacy and biomarker data were presented in November 2023 at the Society for Immunotherapy of Cancer 38th Annual Meeting. In October 2023, the Company announced plans to expand into cardiometabolic disorders and advance its antimyostatin program with SRK-439, a novel, fully human antimyostatin monoclonal antibody candidate, for evaluation in cardiometabolic disorders, including obesity, towards a potential investigational new drug application (“IND”) submission in 2025. Additionally, the Company continues to create a pipeline of product candidates to deliver novel therapies to underserved patients suffering from a wide range of serious diseases, including neuromuscular disorders, cancer, cardiometabolic disorders, fibrosis, and iron-restricted anemia. The Company was originally formed in May 2012. Its principal offices are in Cambridge, Massachusetts.

Since its inception, the Company’s operations have focused on research and development of monoclonal antibodies that selectively inhibit activation of growth factors for therapeutic effect, as well as establishing the Company’s intellectual property portfolio and performing research and development activities. The Company has primarily financed its operations through various equity financings, including in October 2023 (Note 12), as well as research and development collaboration agreements and the Company’s debt facility (Note 9).

Revenue generation activities have been limited to two collaborations, both containing research services and the issuance of a license. The first agreement, executed in 2013, was with Janssen Biotech, Inc. (“Janssen”), a subsidiary of Johnson & Johnson and was terminated in July 2022. The second agreement, the Gilead Collaboration Agreement with Gilead Sciences, Inc. (“Gilead”), was in effect between December 2018 and January 2022. No revenues have been recorded from the sale of any commercial product.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, successful discovery and development of its drug candidates, raising additional capital, development by its competitors of new technological innovations, protection of proprietary technology and regulatory approval and market acceptance of the Company’s product candidates. The Company anticipates that it will continue to incur significant operating losses

Table of Contents

for the next several years as it continues to develop its product candidates. The Company believes that its existing cash, cash equivalents, and marketable securities at September 30, 2023 will be sufficient to allow the Company to fund its current operations through at least a period of one year after the date these financial statements are issued.

2. Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the unaudited consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash per the balance sheet to the statement of cash flows (in thousands):


	As of September 30,
	2023		2022
Cash and cash equivalents	$	67,598	$	133,075
Restricted cash		2,612		2,498
	$	70,210	$	135,573

Unaudited Interim Financial Information

The consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited consolidated financial statements include the accounts of Scholar Rock Holding Corporation and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard requires that a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. Under previous GAAP, a company only considered past events and current conditions in measuring an incurred loss. Under ASU 2016-13, the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment. In November 2019, the FASB deferred the effective date for smaller reporting

Table of Contents

companies to fiscal years beginning after December 15, 2022. Therefore, the new standard was effective for the Company on January 1, 2023. The Company established processes and internal controls to comply with the new credit loss standard and related disclosure requirements. The Company’s investment policy has primary objectives of preservation of capital and maintenance of liquidity. As a result, the Company typically invests in money market funds and U.S. government securities. The Company believes that such funds are subject to minimal credit risk. The Company has not experienced any credit losses and does not believe it is exposed to any significant credit risk on these investments. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.

Recently Issued Accounting Pronouncements

The Company has reviewed all recently issued accounting pronouncements and has determined that such standards do not currently apply to its operations.

3. Fair Value of Financial Assets and Liabilities

The following tables summarize the assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 (in thousands):


	Fair Value Measurements at September 30, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds, included in cash and cash equivalents	$	63,149	$	63,149	$	—	$	—
Marketable securities:
U.S. Treasury obligations		151,037		151,037		—		—
Total assets	$	214,186	$	214,186	$	—	$	—


	Fair Value Measurements at December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds, included in cash and cash equivalents	$	98,073	$	98,073	$	—	$	—
Marketable securities:
U.S. Treasury obligations		212,086		212,086		—		—
Total assets	$	310,159	$	310,159	$	—	$	—

Cash, cash equivalents and marketable securities are Level 1 assets and include investments in money market funds and U.S. government securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1 as of September 30, 2023 and December 31, 2022. There were no transfers of assets between fair value measurement levels during the three and nine months ended September 30, 2023 or 2022.

The carrying amounts reflected in the balance sheets for prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values at September 30, 2023 and December 31, 2022, due to their short-term nature.

The Company believes the terms of its debt reflect current market conditions for an instrument with similar terms and maturity, therefore the carrying value of the Company's debt approximates its fair value based on Level 3 of the fair value hierarchy.

Table of Contents

4. Marketable Securities

The following table summarizes the Company’s investments as of September 30, 2023 (in thousands):


			Gross
	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
Marketable securities available-for-sale:
U.S. Treasury obligations	$	151,060	$	4	$	(27)	$	151,037
Total available-for-sale securities	$	151,060	$	4	$	(27)	$	151,037

The following table summarizes the Company’s investments as of December 31, 2022 (in thousands):


			Gross
	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
Marketable securities available-for-sale:
U.S. Treasury obligations	$	212,970	$	—	$	(884)	$	212,086
Total available-for-sale securities	$	212,970	$	—	$	(884)	$	212,086

The aggregate fair value of marketable securities with unrealized losses was $98.2 million and $212.1 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023 and December 31, 2022, 27 investments and 23 investments, respectively, were in an unrealized loss position. All such investments have been in an unrealized loss position for less than a year and these losses are considered temporary. The Company has the ability and intent to hold these investments until a recovery of their amortized cost, which may not occur until maturity. The Company believes that U.S. Treasury obligations are subject to minimal credit risk. As a result, the Company did not record any charges for credit-related impairments for its available-for-sale securities for the three and nine months ended September 30, 2023.

5. Accrued Expenses

As of September 30, 2023 and December 31, 2022, accrued expenses consist of the following (in thousands):


	As of
	September 30,		December 31,
	2023		2022
Accrued payroll and related expenses	$	8,377	$	6,800
Accrued external research and development expense		6,167		15,178
Accrued professional and consulting expense		2,028		1,510
Accrued other		825		833
	$	17,397	$	24,321

6. Common Stock

The Company has had a sales agreement in place during various time periods with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) offering program. Under this program, the Company is able to offer and sell, from time to time at its sole discretion, shares of its common stock through Jefferies as its sales agent. In an ATM offering, exchange-listed companies incrementally sell newly issued shares into the secondary trading market through a designated broker-dealer at prevailing market prices. The current ATM agreement, established in November 2022, allows for the sale of shares of common stock having an aggregate offering price of up to $100 million. As of September 30, 2023, the Company has sold 619,290 shares, generating net proceeds of $5.2 million, under the ATM program.

The Company has issued pre-funded warrants, as well as warrants as part of its financing activities. Both the pre-funded warrants and warrants meet the conditions for equity classification and are recorded as a component of stockholders’ equity

Table of Contents

within additional paid-in capital. In June 2022 and November 2020, the Company issued 25,510,205 and 2,179,487 pre-funded warrants, respectively. During the three and nine months ending September 30, 2023, 1,026,893 and 3,320,359, respectively, of the Company’s pre-funded warrants were exercised. As of September 30, 2023, the Company has 24,369,333 pre-funded warrants outstanding. In June 2022, the Company also issued 10,459,181 warrants with an exercise price of $7.35 and as of September 30, 2023, all remain outstanding.

7. Equity-Based Compensation

The Company recorded equity-based compensation expense related to all equity-based awards, which was allocated as follows in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Research and development expense	$	2,858	$	4,144	$	8,341	$	10,667
General and administrative expense		4,345		3,773		11,850		10,869
	$	7,203	$	7,917	$	20,191	$	21,536

Equity-based compensation during the three and nine months ended September 30, 2022 includes $1.2 million and $1.3 million, respectively, related to the modification of certain equity awards.

The following table summarizes the Company’s unrecognized equity-based compensation expense as of September 30, 2023:



	As of September 30, 2023
		Unrecognized Expense (in thousands)	Weighted Average Remaining Period of Recognition (years)
Restricted Stock Units	$	20,192	2.8
Stock Options		35,201	2.5
	$	55,393

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity for the current year:


		Weighted
		Average Grant
	Number of Units	Date Fair Value
Restricted stock units as of December 31, 2022	1,667,522	$	14.17
Granted	1,204,437	$	9.41
Vested	(516,703)	$	14.18
Forfeited	(273,649)	$	10.36
Restricted stock units as of September 30, 2023	2,081,607	$	11.91

The total fair value of restricted stock units vested during the nine months ended September 30, 2023 was $5.0 million.

Table of Contents

Stock Options

The following table summarizes the Company’s stock option activity for the current year:


				Weighted
		Weighted		Average
	Number of	Average		Remaining	Aggregate
	Shares	Exercise Price		Contractual Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding as of December 31, 2022	6,242,784	$	17.12	7.74	$	5,835
Granted	2,183,202	$	9.38
Exercised	(131,643)	$	6.19
Cancelled	(871,931)	$	18.16
Outstanding as of September 30, 2023	7,422,412	$	14.91	8.08	$	2,329
Options exercisable as of September 30, 2023	3,175,533	$	18.07	6.91	$	1,472

Using the Black-Scholes option pricing model, the weighted average fair value of options granted during the nine months ended September 30, 2023 was $7.20.

The following weighted average assumptions were used in determining the fair value of options granted in the nine months ended September 30, 2023 and 2022:


	Nine Months Ended
	September 30,
	2023		2022
Risk-free interest rate	3.87	%	2.99	%
Expected dividend yield	0.0	%

Scholar Rock Holding Corp [SRRK] Filings
10-Q	[2023-11-07]
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-03-07]
10-Q	[2022-11-14]
10-Q	[2022-08-08]
10-Q	[2022-05-16]
10-K	[2022-03-07]
10-Q	[2021-11-09]
10-Q	[2021-08-10]
10-Q	[2021-05-13]
10-K	[2021-03-09]
10-Q	[2020-11-09]
10-Q	[2020-08-07]
10-Q	[2020-05-07]
10-K	[2020-03-12]
10-Q	[2019-11-12]
10-Q	[2019-08-14]
10-Q	[2019-05-15]
10-K	[2019-03-19]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
S-1	[2018-04-27]