What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-07 · 87 added, 48 removed, 236 unchanged (36% of the section changed)

34 unchanged sentences

In April 2020, we submitted a response to the FDA that included changes to the clinical protocol designed to enhance patient safety, as well as information related to improvements to our manufacturing process.

The FDA has responded by maintaining the clinical hold and requesting further data and analyses relating to this manufacturing process.

We are in the process of generating these data and expect to submit this information to the FDA before the end of the third quarter of 2020.

The FDA responded by maintaining the clinical hold and requesting further data and analyses relating to this manufacturing process.

In June 2020, we submitted a response to the FDA that provided data related to manufacturing process improvements.

In July 2020, we announced that the FDA responded by maintaining the clinical hold and requesting further manufacturing information and updated safety and efficacy data for all patients dosed in the trial, as well as providing direction on the total viral load to be administered per patient.

We are evaluating next steps and plan to continue our dialogue with the FDA to determine the appropriate path for SGT-001.

In December 2019, we announced preliminary findings based on three-month biopsy data from the first two patients dosed with 2E14 vg/kg of SGT-001.

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We have never been profitable, and since our inception, we have incurred significant operating losses.

Our net losses were $26.7 million and $29.6 million for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, we had an accumulated deficit of $343.0 million.

We expect to incur significant expenses and increasing operating losses for the foreseeable future.

Our net losses were $45.7 million and $56.1 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we had an accumulated deficit of $362 million.

We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize SGT-001 and other product candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations.

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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 SGT-001 or other product candidates.

Because of the numerous risks and un certainties 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, w e may not become profitable.

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.

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We received $57.9 million of net proceeds from the private placement after deducting offering costs.

As of March 31, 2020, we had cash, cash equivalents and available-for-sale securities of $53.6 million.

We believe that our existing cash, cash equivalents and available-for-sale securities as of March 31, 2020, will enable us to fund our operating expenses and capital expenditure requirements into 2021.

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.

The ongoing novel coronavirus pandemic, commonly referred to as COVID-19, which began in December 2019, has spread worldwide, causing federal, state, and local governments to implement measure to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measure.

As of June 30, 2020, we had cash and cash equivalents of $40.4 million.

As a result, we will need to raise additional funds.

However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all.

In addition, 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.

Based upon our current and projected cash flow, we note there is substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued and we believe that our existing cash and cash equivalents as of June 30, 2020 will enable us to fund our operating expenses into the first quarter of 2021.

The financial statements for the quarter ended June 30, 2020 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern

The ongoing novel coronavirus pandemic, commonly referred to as COVID-19, which began in December 2019, has spread worldwide, causing federal, state, and local governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measures.

We are following, and will continue to follow, recommendations from the U.S.

Centers for Disease Control and Prevention (CDC) as well as federal, state, and local governments regarding working-from-home practices for non-essential employees.

As a result, we have modified our business practices, including implementing a work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be req uired or recommended by government authorities or as we determine are in the best interests of our employees, and other business partners in light of COVID-19.

As a result, we have modified our business practices, including implementing a work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, and other business partners in light of COVID-19.

The full extent of the impact of COVID-19 on our business, results of operations and financial condition will depend on future developments that are highly uncertain, including the length and severity of this pandemic, the actions taken to contain it or treat its impact and the impact on our clinical development, employees, vendors and suppliers, all of which are uncertain and cannot be predicted.

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salaries, benefits and other related costs, including equity-based compensation expense, for personnel engaged in research and development functions;

costs of outside consultants, engaged to assist in our researc h and development activities, including their fees, equity-based compensation and related travel expenses;

costs of outside consultants, engaged to assist in our research and development activities, including their fees, equity-based compensation and related travel expenses;

the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

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Three Months Ended

Six Months Ended

(In thousands)

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Our actual results may differ from these estimates under different assumptions or conditions.

During the three months ended March 31, 2020, 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, 2019 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.

During the three and six months ended June 30, 2020, there were no material changes to our critical accounting policies.

We believe that of our critical accounting policies, the following accounting policies involve the most judgment and complexity:

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Results of operations

Comparison of the three months ended March 31, 2020 and 2019

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

Comparison of the three months ended June 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:

Three Months Ended

3 unchanged sentences

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest (expense) income

Total other income (expense)

Research and development expenses

Three Months Ended

(in thousands)

Other product candidates

Unallocated research and development expenses

Personnel related expenses

External expenses

Total unallocated research and development expenses

Total research and development expenses

Research and development expenses for the three months ended June 30, 2020 were $13.4 million, compared to $21.6 million for the three months ended June 30, 2019.

The decrease of $8.2 million in research and development costs was due to a decrease in unallocated research and development costs of $3.4 million, primarily due to a reduction in personnel and facility related expenses as a result of the restructuring that occurred in January 2020, a $3.1 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $4.5 million partially offset by an increase in clinical costs of $1.4 million, primarily driven by clinical consulting costs.

The reduction in research and development was also driven by a $1.6 million decrease in costs related to other product candidates as we focus on advancing SGT-001.

General and administrative expenses

General and administrative expenses were $5.5 million for the three months ended June 30, 2020, compared to $5.4 million for the three months ended June 30, 2019.

The increase of $0.1 million was due to an increase in corporate expenses of $0.7 million offset by a decrease in personnel related expenses of $0.6 million as a result of the restructuring announced in January 2020.

Interest (expense) income

Interest expense was less than $0.1 million for the three months ended June 30, 2020 , compared to interest income of $0.4 million for the three months ended June 30, 2019 .

The decrease was primarily related to a reduction of available-for-sale securities included within our portfolio.

Other income for the three months ended June 30, 2020 was $0 million compared to $0.1 million for the three months ended June 30, 2019.

Other income relates to contributions from charitable organizations.

We do not expect these contributions to be significant in future periods.

Comparison of the six months ended June 30, 2020 and 2019

The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Restructuring charges

5 unchanged sentences

Research and development expenses

Three Months Ended

Six Months Ended June 30,

(in thousands)

5 unchanged sentences

Total research and development expenses

Research and development expenses for the three months ended March 31, 2020 were $19.7 million, compared to $23.3 million for the three months ended March 31, 2019.

The decrease of $3.6 million in research and development costs was due to a decrease in unallocated research and development costs of $1.3 million, primarily due to a reduction in personnel and facility related expenses as a result of the restructuring that occurred in January 2020, a $1.2 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $0.9 million and clinical trial activity of $0.3 million due to the clinical hold as well as a $1.2 million decrease in costs related to other product candidates as we focus on advancing SGT-001.

Research and development expenses for the six months ended June 30, 2020 were $33.1 million, compared to $44.9 million for the six months ended June 30, 2019.

The decrease of $11.8 million in research and development costs was due to a decrease in unallocated research and development costs of $4.7 million, primarily due to a reduction in personnel and facility related expenses as a result of the restructuring that occurred in January 2020, a $4.3 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $5.3 million partially offset by clinical costs of $1.0 million primarily driven by clinical consulting costs.

The reduction in research and development was also driven by a $2.8 million decrease in costs related to other product candidates as we focus on advancing SGT-001.

General and administrative expenses

General and administrative expenses were $5.3 million for the three months ended March 31, 2020, compared to $7.0 million for the three months ended March 31, 2019.

The decrease of $1.8 million was due to a decrease in personnel related expenses of $0.6 million and $1.2 million of other corporate expenses as a result of the restructuring announced in January 2020.

General and administrative expenses were $10.8 million for the six months ended June 30, 2020, compared to $12.4 million for the six months ended June 30, 2019.

The decrease of $1.6 million was due to a decrease in personnel related expenses of $1.0 million and a net decrease of $0.6 million related to other corporate expenses.

Restructuring Charges

During the three months ended March 31, 2020 we recorded charges of $1.9 million related to severance and other employee-related costs.

We paid $0.9 million during the three months ended March 31, 2020 and expect to pay approximately $1.0 million in the next 12 months.

During the six months ended June 30, 2020, we recorded charges of $1.9 million related to severance and other employee-related costs.

We paid $1.4 million during the six months ended June 30, 2020 and expect to pay approximately $0.5 million in the next nine months.

Interest income

Interest income was $0.2 million for the three months ended March 31, 2020 , compared to $0.5 million for the three months ended March 31, 2019 .

Interest income was $0.2 million for the six months ended June 30, 2020 , compared to $0.9 million for the six months ended June 30, 2019 .

The decrease was primarily related to a reduction of available-for-sale securities included within our portfolio.

Other income for the three months ended March 31, 2020 was $0.1 million compared to $0.2 million for the three months ended March 31, 2019.

Other income for the six months ended June 30, 2020 was less than $0.1 million compared to $0.3 million for the six months ended June 30, 2019.

Other income relates to contributions from charitable organizations.

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To date, we have financed our operations primarily through private placements of preferred units and our initial public offering as well as a private placement of shares of our common stock and pre-funded warrants to purchase shares of our common stock.

Through March 31, 2020, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, an aggregate of $129.1 million of net proceeds from the sale of our common stock after deducting underwriting discounts and commission and offering expenses in our initial public offering and an aggregate of $57.9 million of net proceeds, after deducting offering costs, from our July 2019 private placement.

Through June 30, 2020, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, an aggregate of $129.1 million of net proceeds from the sale of our common stock after deducting underwriting discounts and commission and offering expenses in our initial public offering and an aggregate of $57.9 million of net proceeds, after deducting offering costs, from our July 2019 private placement.

We completed our initial public offering on January 30, 2018, in which we sold 8,984,375 shares of common stock, including shares of common stock issued upon the exercise in full of the underwriters’ over-allotment option, at a public offering price of $16.00 per share, resulting in net proceeds of $129.1 million.

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We received $57.9 million of net proceeds from the private placement after deducting offering costs .

As of March 31, 2020, we had cash, cash equivalents and available-for-sale securities of $53.6 million and had no debt outstanding.

As of June 30, 2020, we had cash, cash equivalents and available-for-sale securities of $40.4 million and had no debt outstanding.

The following table summarizes our sources and uses of cash for each of the periods presented:

Three Months Ended

Six Months Ended

(in thousands)

Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by investing activities

Cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Operating activities

During the three months ended March 31, 2020, operating activities used $29.3 million of cash, primarily resulting from our net loss of $26.7 million and cash used in changes in our operating assets and liabilities of $6.7 million offset by non-cash charges of $4.1 million due primarily to equity-based compensation of $3.1 million and depreciation expense of $1.0 million.

Net cash used in changes in our operating assets and liabilities during the three months ended March 31, 2020 consisted primarily of a reduction in accrued expenses and other liabilities of $1.2 million and a decrease in accounts payable of $4.3 million as well as an increase in prepaid expenses and other assets of $1.2 million.

These changes were due to the timing of payments.

During the three months ended March 31, 2019, operating activities used $25.9 million of cash, primarily resulting from our net loss of $29.6 million and cash used in changes in our operating assets and liabiliti es of $0.3 million offset by non-cash charges of $3.9 million due primarily to equity-based compensation of $3.5 million and depreciation expense of $0.6 million.

Net cash used in changes in our operating assets and liabilities during the three months ende d March 31, 2019 consisted primarily of an increase in prepaid expenses and other assets of $0.7 million, which was primarily due to up-front research and development expenses as well as a decrease in accrued expenses and other liabilities of $1.3 million partially offset by an increase in accounts payable of $1.7 million due to the timing of payments.

During the six months ended June 30, 2020, operating activities used $42.3 million of cash, primarily resulting from our net loss of $45.7 million and cash used in changes in our operating assets and liabilities of $5.3 million offset by non-cash charges of $8.7 million due primarily to equity-based compensation of $6.3 million and depreciation expense of $2.4 million.

Net cash used in changes in our operating assets and liabilities during the six months ended June 30, 2020 consisted primarily of a reduction in accrued expenses and other liabilities of $1.8 million and a decrease in accounts payable of $3.9 million partially offset by a net decrease in prepaid expenses and other assets of $0.4 million.

These changes were primarily due to the timing of payments.

During the six months ended June 30, 2019, operating activities used $52.2 million of cash, primarily resulting from our net loss of $56.1 million and cash used in changes in our operating assets and liabilities of $4.6 million offset by non-cash charges of $8.4 million due primarily to equity-based compensation of $7.4 million and depreciation expense of $1.3 million.

Net cash used in changes in our operating assets and liabilities during the six months ended June 30, 2019 consisted primarily of an increase in prepaid expenses and other assets of $4.3 million, which was primarily due to up-front research and development expenses as well as an decrease in accrued expenses and other liabilities of $2.7 million which was partially offset by a increase in accounts payable of $2.4 million due to the timing of payments.

Investing activities

During the three months ended March 31, 2020, investing activities generated $6.4 million of cash, consisting primarily of proceeds from maturities of available-for-sale securities partially offset by purchases of property and equipment, and available-for-sale securities.

During the three months ended March 31, 2019, investing activities used $6.4 million of cash, consisting primarily of purchases of available-for-sale securities and property and equipment, partially offset by proceeds on the sale and maturity of available-for-sale securities.

During the six months ended June 30, 2020, investing activities provided $6.7 million of cash, consisting primarily of proceeds from maturities of available-for-sale securities partially offset by purchases of property and equipment, and available-for-sale securities.

During the six months ended June 30, 2019, investing activities provided $17.7 million of cash, consisting primarily of proceeds from maturities of available-for-sale securities offset by purchases of property and equipment, and available-for-sale securities.

Financing activities

During the three months ended March 31, 2020 and 2019, there were no financing activities.

During the six months ended June 30, 2020 and 2019, there were no financing activities.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to SGT-001.

In addition, we expect to incur additional costs associated with operating as a public company.

We expect that our expenses will increase substantially if and as we:

seek to resolve the clinical hold on IGNITE DMD and, if and when lifted, continue to enroll patients in IGNITE DMD and continue clinical development of SGT-001;

seek to resolve the clinical hold on and determine next steps for IGNITE DMD and, if and when possible, resume our clinical development of SGT-001;

move other product candidates into clinical trials;

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We received $57.9 million of net proceeds from the private placement after deducting offering costs .

As of March 31, 2020 , we had cash, cash equivalents and available-for-sale securities of $ 53.6 million.

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.

As of June 30, 2020, we had cash and cash equivalents of $40.4 million.

We believe that our existing cash and cash equivalents as of June 30, 2020, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2021.

As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds.

However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all.

In addition, 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.

Because of the numerous risks and uncertainties associated with the development of SGT-001 and other product candidates and programs and because the extent to which we may enter collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our future capital requirements will depend on many factors, including:

if and when we are able to favorably resolve the clinical hold on and resume IGNITE DMD;

if, when and how we are able to favorably resolve the clinical hold on and resume IGNITE DMD;

the progress and results of IGNITE DMD and future clinical trials of SGT-001 and other product candidates;

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if and as we need to adapt our business in response to the COVID-19 pandemic and its collateral consequences.

We intend to supply our clinical development program for SGT-001 with drug product produced at a current good manufacturing practices, or cGMP, compliant facility located at one of our Contract Development Manufacturing Organizations partners.

We intend to supply our clinical development program for SGT-001 with drug product produced at a current good manufacturing practices, or cGMP, compliant facility located at our Contract Development Manufacturing Organization partner.

We intend to establish the capability and capacity to supply SGT-001 at commercial scale from multiple sources.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis