What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-14 compared with 2020-11-05 · 151 added, 182 removed, 166 unchanged (67% of the section changed)

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Our efforts are focused on our lead product candidate, SGT-001, a gene transfer candidate under investigation for its ability to drive functional dystrophin protein expression in patients’ muscles and improve the course of the disease.

Based on our preclinical program that included multiple animal species of different phenotypes and genetic variations, as well as preliminary biomarker results, we believe that SGT-001, has the potential to slow or even halt the progression of Duchenne, regardless of the type of genetic mutation or stage of the disease.

SGT-001 has been granted Rare Pediatric Disease Designation and Fast Track Designation in the United States and Orphan Drug Designations in both the United States and European Union.

Based on our preclinical program that included multiple animal species of different phenotypes and genetic variations, as well as preliminary clinical trial biomarker results, we believe that SGT-001, has the potential to slow or even halt the progression of Duchenne, regardless of the type of genetic mutation or stage of the disease.

SGT-001 has been granted Rare Pediatric Disease Designation, or RPDD, and Fast Track Designation, in the United States and Orphan Drug Designations in both the United States and European Union.

The safety and efficacy of SGT-001 are currently being evaluated in a Phase I/II clinical trial called IGNITE DMD.

I n the fourth quarter of 2017, we initiated IGNITE DMD, a randomized, controlled, open-label, single-ascending dose Phase I/II clinical trial, to evaluate SGT-001 in ambulatory and non-ambulatory males with Duchenne aged four to 17 years.

The primary objectives of IGNITE DMD are to assess the safety and tolerability of SGT-001, as well as efficacy as defined by SGT-001 microdystrophin protein expression.

The clinical trial is also designed to assess other parameters of muscle function and mass, respiratory and cardiovascular function, serum and muscle biomarkers associated with SGT-001 microdystrophin production, SGT-001 microdystrophin associated biochemical properties (e.g., neuronal nitric oxide synthase, or nNOS, binding) and patient and parent reported outcomes and quality of life measures, among other endpoints.

In February 2019, we announced preliminary findings based on three-month biopsy data from the first three patients dosed with 5E13 vg/kg of SGT-001, the lowest dose outlined in the IGNITE DMD protocol and our intention to dose escalate.

I n May 2019 , we announced that two patients were randomized in the second cohort of the IGNITE DMD study, including one patient dosed with 2E14 vg/kg of SGT-001 and another added to the control group.

In August 2019, we announced that we amended the IGNITE DMD clinical trial protocol.

The changes to the protocol included adding an upper weight limit of 25 kg for at least the next patient dosed in the second cohort and removing the matched patient control arm for the rest of the second cohort.

We also announced that a patient was dosed under this amended protocol.

In November 2019, we announced that the third patient in the 2E14 vg/kg cohort of IGNITE DMD, dosed in late October 2019, experienced a serious adverse event, or SAE, deemed related to the study drug and that IGNITE DMD was placed on clinical hold by the U.S.

Food and Drug Administration, or FDA, as a result of the SAE.

The SAE was characterized by complement activation, thrombocytopenia, a decrease in red blood cell count, acute kidney injury, and cardio-pulmonary insufficiency.

Neither cytokine- nor coagulopathy-related abnormalities were observed.

In December 2019, we reported that the SAE had fully resolved and the patient had resumed his normal activities.

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 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.

In October 2020, we announced that the FDA lifted the clinical hold placed on our IGNITE DMD Phase I/II clinical trial.

In connection with the lifting of the clinical hold, we are reducing the maximum weight of the next two patients dosed in IGNITE DMD to 18 kg per patient, with safety outcomes from these two patients driving potential weight increase of patients dosed subsequently.

This reduction, in conjunction with the delivery of fewer viral particles as a result of our manufacturing process improvements, will reduce patients’ total viral load while continuing dosing at the 2E14 vg/kg dose.

Additionally, to mitigate the risk of serious drug-related adverse events, we are amending the IGNITE DMD clinical protocol to include the prophylactic use of both anti-complement inhibitor eculizumab and C1 esterase inhibitor, and increasing the prednisone dose in the first month post dosing.

We are currently working to complete all activities necessary to resume dosing, which we expect to occur in the first quarter of 2021 .

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.

Using two independent immunofluorescence assays, 10% to 20% of microdystrophin positive muscle fibers were determined to express SGT-001 microdystrophin in the fourth patient and 50% to 70% of microdystrophin positive muscle fibers in the fifth patient.

Immunofluorescence also showed clear stabilization and co-localization of nNOS and beta-sarcoglycan with SGT-001 microdystrophin in both patients.

Using western blot, the expression levels for the fourth patient were detectable and estimated to be near the assay’s level of quantification which is 5% of non-dystrophic control samples, with one assay replicate at 5.5%.

Expression for the fifth patient was 17.5% of normal control samples.

The levels of serum creatine kinase, a highly variable biochemical marker of muscle damage, declined from baseline in both patients.

In March 2020, we announced data from the third patient dosed in the 2E14 vg/kg dose cohort of IGNITE DMD, including three-month biopsy data.

Using immunofluorescence assays, 50% to70% of the muscle fibers were determined to express SGT-001 microdystrophin.

Immunofluorescence also showed stabilization and co-localization of nNOS and beta-sarcoglycan with SGT-001 microdystrophin.

Using western blot, microdystrophin expression was 8% of normal control samples.

In addition, the level of serum creatine kinase decreased from baseline.

In January 2020, we announced a reduction in workforce by approximately one third as part of a strategic plan designed to create a leaner company focused on advancing SGT-001.

Since our inception, we have devoted substantial resources to identifying and developing SGT-001 and other product candidates, developing our manufacturing processes, organizing and staffing our company and providing general and administrative support for these operations.

In March 2021, we announced that the seventh patient, who was the fourth patient in the 2E14 vg/kg cohort, was treated with SGT-001, under an amended clinical protocol designed to enhance patient safety, incorporating the prophylactic use of both anti-complement inhibitor eculizumab and C1 esterase inhibitor, and increasing the prednisone dose in the first month post dosing.

This patient was safely dosed, with transient and manageable adverse events, none of which were serious.

In April 2021, an eighth patient, also in the 2E14 vg/kg cohort, was treated with SGT-001.

The patient experienced an inflammatory response which was classified as a serious adverse event and considered by the investigator to be drug related.

This type of event is described in our investigators brochure and is not considered unexpected.

As of the patient’s 30-day follow-up visit, laboratory values had either returned to normal or continue to trend towards normal.

As part of our clinical mitigation strategy, the status of both patients dosed under the amended protocol have been shared with the Data Safety Monitoring Board, or DSMB, as well as the Food and Drug Administration, or FDA.

We are carefully examining the full details of the clinical course of these patients and are continuing our discussions with the DSMB and FDA.

No new drug-related

safety findings have been identified in p atients 1-6 , who have post dosing period s of 1.5 years to more than 3 years following treatment.

In May 2021, we reported long-term biopsy data collected from patients 4-6, who were dosed at the 2E14 vg/kg dose level.

Analyses of the biopsies, taken 2 years, 1.5 years and 1 year post-dosing, respectively, demonstrate durable and widespread expression of the microdystrophin protein.

The long-term results are consistent with the day 90, interim data reported in March 2021 and continue to demonstrate the functionality of the SGT-001 microdystrophin, as highlighted by the recruitment of key dystrophin associated proteins:

beta-sarcoglycan and neuronal Nitric Oxide Synthase (nNOS).

The long-term muscle biopsy results were analyzed by two methods, Western Blot and Immunofluorescence (IF).

As reflected in the table below, the Western Blot data indicate that expression was maintained in Patient 4 and increased compared to the Day 90 biopsies in Patient 5 and 6.

IF data show microdystrophin function via continued localization to the muscle membrane, with the percent positive fibers remaining comparable to the Day 90 biopsies in all three patients.

Immunofluorescence (% Positive Fibers )

Last Timepoint

*Below the limit of quantification

Further morphological analysis of the muscle biopsies conducted by Solid indicate that sustained microdystrophin protein expression and function resulted in membrane stabilization, evidenced by minimal progression of muscle deterioration since the Day 90 timepoint.

These long-term pathophysiological improvements support the recently reported positive trends in the clinical biomarker and functional data.

In May 2021, we announced the advancement of a next-generation Duchenne microdystrophin gene transfer program, SGT-003.

We have developed a library of novel capsids that show increased muscle tropism, decreased liver biodistribution and drive improved efficiency compared with AAV9 in various in vitro and in vivo models.

SGT-003 is a preclinical candidate that combines a novel and rationally-designed capsid candidate from this library with Solid’s proprietary nNOS containing microdystrophin construct.

Since our inception, we have devoted substantial resources to identifying and developing SGT-001, SGT-003 and our other product candidates, developing our manufacturing processes, organizing and staffing our company and providing general and administrative support for these operations.

We have incurred significant losses every year since our inception.

We do not have any products approved for sale.

To date, we have not generated any revenue.

Our ability to eventually generate any product revenue sufficient to achieve profitability will depend on the successful development, approval and eventual commercialization of SGT-001 and other product candidates.

If successfully developed and approved, we intend to commercialize SGT-001 and we may enter into licensing agreements or strategic collaborations in select markets.

If successfully developed and approved, we intend to commercialize SGT-001, and SGT-003 in the United States and European Union and may enter into licensing agreements or strategic collaborations in other markets.

If we generate product sales or enter into licensing agreements or strategic collaborations, we expect that any revenue we generate will fluctuate from quarter to quarter and year to year as a result of the timing and amount of any product sales, license fees, milestone payments and other payments.

If we fail to complete the development of SGT-001 and other product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

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

Our net losses were $66.9 million and $85.4 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $383.2 million.

If we fail to complete the development of SGT-001, SGT-003 and our other product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

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 $88.3 million and $117.2 million for the years ended December 31, 2020 and 2019, respectively.

Our net losses were $16.9 million for the three months ended March 31, 2021 and $26.7 million for the three months ended March 31, 2020.

As of March 31, 2021, we had an accumulated deficit of $421.5 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.

In January 2020, we announced a reduction in workforce by approximately 30% as part of a strategic plan designed to create a leaner company focused on advancing SGT-001.

As we seek to develop and commercialize SGT-001, SGT-003 or any other product 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 SGT-001 or other product 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.

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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.

Since our initial public offering, which we completed on January 30, 2018, we have primarily financed our operations through the sale of common stock.

In our initial public offering we sold 8,984,375 shares of our 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, after deducting underwriting discounts and commissions and offering expenses.

On July 30, 2019, we issued and sold in a private placement (i) 10,607,525 shares of our common stock at a price per share of $4.65 and (ii) 2,295,699 pre-funded warrants to purchase shares of our common stock at a price per warrant of $4.64.

Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.01 and the pre-funded warrants have no expiration date.

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

In October 2020, we entered into a collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx, pursuant to which we granted Ultragenyx an exclusive worldwide license under certain intellectual property rights controlled by us to make, have made, use, distribute, offer for sale, sell, import and export, including to research, develop, modify, enhance, improve, register, distribute, commercialize, or otherwise dispose of AAV8 or other clade E AAV variant pharmaceutical products that express our MD5 nNOS binding domain form of microdystrophin protein for the diagnosis, treatment, cure, mitigation or prevention of Duchenne Muscular Dystrophy and other disease indications resulting from a lack of functional dystrophin, including Becker muscular dystrophy.

On January 30, 2018, we completed our initial public offering in which we sold 8,984,375 shares of our common stock, including shares of our 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, after deducting underwriting discounts and commissions and offering expenses.

In July 2019, we completed a private placement of shares of our common stock and pre-funded warrants to purchase shares of our common stock resulting in net proceeds to us of $57.9 million, after deducting offering costs.

In October 2020, we entered into a collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx, pursuant to which we granted Ultragenyx an exclusive worldwide license under certain intellectual property rights controlled by us to make, have made, use, distribute, offer for sale, sell, import and export, including to research, develop, modify, enhance, improve, register, distribute, commercialize, or otherwise dispose of AAV8 or other clade E AAV variant pharmaceutical products that express our MD5 nNOS binding domain form of microdystrophin protein for the diagnosis, treatment, cure, mitigation or prevention of Duchenne and other disease indications resulting from a lack of functional dystrophin, including Becker muscular dystrophy.

On a product-by-product basis, we have the option to fund 30% of the development costs in the United States and European Union and share 30% of the net income and net losses on net sales of such Licensed Product in the United States and European Union.

In connection with the execution of the Collaboration Agreement, we also entered into a stock purchase agreement with Ultragenyx, pursuant to which we issued and sold 7,825,797 shares of our common stock to Ultragenyx for an aggregate purchase price of approximately $40 million.

As of September 30, 2020, we had cash and cash equivalents of $24.8 million.

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.

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.

We believe that our existing cash and cash equivalents as of September 30, 2020, together with the proceeds of $40.0 million received in October 2020 from the sale of shares of our common stock to Ultragenyx as well as the net proceeds of $23.2 million received from the sale of shares of our common stock in October 2020 pursuant to a sales agreement, dated March 13, 2019, or the ATM Sales Agreement, by and between us and Jefferies LLC, or Jefferies, will enable us to fund our operating expenses into the second half of 2021.

The financial statements for the quarter ended September 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 measure s to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measure s .

During the year ended December 31, 2020, we sold 6,309,632 shares pursuant to the ATM Sales Agreement, resulting in net proceeds of $23.2 million.

In December 2020, we completed a private placement of shares of common stock resulting in net proceeds to us of $86.2 million, after deducting offering costs.

In March 2021, we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share to the public of $5.75, including the full exercise by the underwriters of an option to purchase additional shares of common stock, or (March 2021 Offering).

We received net proceeds of approximately $134.9 million after deducting underwriter discounts and commissions and offering expenses.

As of March 31, 2021, we had cash and cash equivalents of $268.5 million.

We believe that our cash and cash equivalents as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022.

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 COVID-19 pandemic has caused 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.

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We will continue to monitor the situation closely.

Corporate conversion

We operated as a Delaware limited liability company under the name Solid Biosciences, LLC until immediately prior to the effectiveness of our registration statement on Form S-1 on January 25, 2018, at which time we converted into a Delaware corporation pursuant to a statutory conversion and changed our name to Solid Biosciences Inc.

In addition, immediately following the statutory conversion, entities formed solely for the purpose of holding membership interests in our limited liability company were merged with and into us.

We refer to the corporate conversion and the mergers, collectively as the Corporate Conversion.

As a result of the

Corporate Conversion, the holders of the Series 1 and 2 Senior Preferred and Junior Preferred Units and Series A, B, C and D Common Units of Solid Biosciences, LLC became holders of common stock of Solid Biosciences Inc.

The consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are those of Solid Biosciences Inc.

and its subsidiaries.

Financial operations overview

We have not generated any revenue as we do not have any approved products and do not expect to generate any revenue from the sale of our products for the next few years, if ever.

If our development efforts for SGT-001 or other product candidates are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from those collaboration or license agreements.

Collaboration revenue

Collaboration revenue was $3.3 million for the three months ended March 31, 2021.

We recognized this revenue related to research services and cost reimbursement from the Ultragenyx Collaboration Agreement.

Product 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 next few years, if ever.

If our development efforts for SGT-001, SGT-003 or our other product candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.

Operating expenses

Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs.

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.

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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-001 and other product candidates and include:

expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical and clinical activities on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture SGT-001 and other product candidates for use in our preclinical studies and clinical trials;

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-001, SGT-003 and our other product candidates and include:

expenses incurred under agreements with third parties, including contract research organizations (“CROs”), that conduct research and preclinical activities on our behalf, as well as contract manufacturing organizations (“CMOs”), that manufacture SGT-001, SGT-003 and our other product 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;

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;

costs incurred in seeking regulatory approval of SGT-001 and other product candidates;

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

costs incurred in seeking regulatory approval of SGT-001, SGT-003 and our other product candidates;

expenses incurred under our intellectual property licenses;

facility-related research and development expenses, which include direct depreciation and rent costs as well as allocated expenses for rent and maintenance of facilities and other operating costs.

facility-related research and development expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development expenses as incurred.

We recognize costs for certain development activities, such as preclinical research and development, based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers.

Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as prepaid or accrued research and development expenses.

We recognize costs for certain development activities, such as preclinical research and development and clinical trial costs, based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers.

Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

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 and infrastructure costs, including facilities and lab operations to product candidates on a program-specific basis.

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.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Total research and development expenses

We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-001 and other product 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 cannot determine with certainty the duration, costs and timing of clinical trials of SGT-001, SGT-003 and our other product 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 product candidates will depend on a variety of factors, including:

the scope, rate of progress, expense and results of any clinical trials of SGT-001 or other product candidates and other research and development activities that we may conduct;

the scope, rate of progress, expense and results of any clinical trials of SGT-001, SGT-003 or other product 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;

the impact of the COVID-19 outbreak on our ability to conduct clinical trials of SGT-001 and other product candidates;

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 requested by regulatory agencies;

potential additional studies or clinical trials requested by regulatory agencies;

the timing and receipt of any marketing approvals;

the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

Research and development activities are central to our business model.

Product candidates in later stages of clinical development generally have higher development costs than those 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 decrease in calendar year 2020 as a result of the organizational changes we announced in January 2020, to create a leaner organization focused on advancing SGT-001.

We expect that our research and development expenses will continue to increase for the foreseeable future as we proceed with clinical trials for SGT-001, initiate clinical trials for SGT-003 or any future product candidates and continue to identify and develop additional product candidates.

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, which include depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs.

We expect that our general and administrative expenses will decrease in calendar year 2020 as a result of the organizational changes we announced in January 2020, to create a leaner organization focused on advancing SGT-001.

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, which include direct depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support our research and development activities and activities related to the clinical trials for and potential commercialization of SGT-001, SGT-003 and our other product candidates.

Restructuring charges

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Interest income consists of interest income earned on our cash, cash equivalents and available-for-sale securities.

We have received funding from charitable organizations, which are not considered to be an ongoing major or central part of our business.

The amounts received are recorded as other income as services are performed and research expenses are incurred in the condensed consolidated statements of operations.

We account for income taxes using an asset and liability approach.

Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We record valuation allowances to reduce deferred income tax assets to the amount that is more likely than not to be realized.

We determine whether it is more likely than not that a tax position will be sustained upon examination.

If it is not more likely than not that a position will be sustained, no amount of benefit attributable to the position is recognized.

The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency.

We have received funding from charitable organizations, which is not considered to be an ongoing major or central part of our business.

The amounts received are recorded as other income as services are performed and research expenses are incurred in the consolidated statements of operations.

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 financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our 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 financial statements.

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 under different assumptions or conditions.

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

Our actual results may differ from these estimates.

During the three months ended March 31, 2021, 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, 2020 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:

Revenue recognition;

Accrued research and development expenses;

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Results of operations

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

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

Comparison of the three months ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended

September 30,

(in thousands)

Collaboration revenue - related party

Operating expenses:

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General and administrative

Restructuring charges

Total operating expenses

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Total other income (expense)

Collaboration revenue

Collaboration revenue for the three months ended March 31, 2021 was $3.3 million, compared to no collaboration revenue for the three months ended March 31, 2020.

The increase in collaboration revenue was related to research services and cost reimbursement received under the Collaboration Agreement with Ultragenyx.

Research and development expenses

Three Months Ended

September 30,

(in thousands)

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Total research and development expenses

Research and development expenses for the three months ended September 30, 2020 were $16.0 million, compared to $22.8 million for the three months ended September 30, 2019.

The decrease of $6.8 million in research and development costs was due to a decrease in unallocated research and development costs of $5.6 million, primarily due to a reduction in personnel and facility related expenses as a result of the restructuring that occurred in January 2020, a $0.7 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $0.2 million, and a decrease in clinical costs of $0.5 million.

Research and development expenses for the three months ended March 31, 2021 were $14.2 million, compared to $19.7 million for the three months ended March 31, 2020.

The decrease of $5.5 million in research and development expenses was primarily due to a $4.0 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $3.8 million and in clinical costs of $0.2 million, and a decrease in unallocated research and development costs of $1.4 million, primarily due to a reduction in personnel related expenses of $0.4 million and a decrease in other R&D expenses of $0.9 million.

The reduction in research and development was also driven by a $0.1 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 $5.2 million for the three months ended September 30, 2020, compared to $6.9 million for the three months ended September 30, 2019.

The decrease of $1.7 million was due to a decrease in personnel related expenses of $1.5 million partially due to the restructuring that occurred in January 2020 and a net decrease in corporate expenses of $0.2 million.

General and administrative expenses were $6.0 million for the three months ended March 31, 2021, compared to $5.3 million for the three months ended March 31, 2020.

The increase of $0.7 million was due to an increase in corporate expenses of $0.6 million and an increase in personnel related expenses of $0.1 million.

Interest (expense) income

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

Interest expense was less than $0.1 million for the three months ended March 31, 2021, compared to interest income of $0.2 million for the three months ended March 31, 2020.

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

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

We had no other income for the three months ended March 31, 2021 compared to $0.1 million of other income for the three months ended March 31, 2020.

Other income relates to contributions from charitable organizations.

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

Comparison of the nine months ended September 30, 2020 and 2019

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

Nine Months Ended September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Restructuring charges

Total operating expenses

Loss from operations

Other income (expense):

Interest income

Total other income (expense)

Research and development expenses

Nine Months Ended September 30,

(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 nine months ended September 30, 2020 were $49.2 million, compared to $67.7 million for the nine months ended September 30, 2019.

The decrease of $18.5 million in research and development costs was due to a decrease in unallocated research and development costs of $10.3 million, primarily due to a reduction in personnel and facility related expenses as a result of the restructuring that occurred in January 2020, and a $5.0 million decrease in costs related to our lead product candidate SGT-001, driven by a reduction in manufacturing costs of $5.6 million partially offset by an increase in clinical costs of $0.6 million primarily driven by clinical consulting costs.

The reduction in research and development was also driven by a $3.2 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 $16.0 million for the nine months ended September 30, 2020, compared to $19.3 million for the nine months ended September 30, 2019.

The decrease of $3.3 million was due to a decrease in personnel related expenses of $2.8 million partially due to the restructuring that occurred in January 2020 and a net decrease in corporate expenses of $0.5 million.

Restructuring Charges

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

We paid approximately $1.7 million during the nine months ended September 30, 2020 and expect to pay approximately $0.3 million in the next three months.

Interest income

Interest income was $0.1 million for the nine months ended September 30, 2020, compared to $1.3 million for the nine months ended September 30, 2019.

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

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

Other income relates to contributions from charitable organizations.

We do not expect these contributions to significantly increase in future periods.

Liquidity and capital resources

Sources of liquidity

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

Through September 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.

To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of our common stock in private placements and the sale of common stock in our initial public offering and a follow-on public offering.

Through March 31, 2021, 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, and an aggregate of $471.3 million of net proceeds from the sale of our common stock through public offerings, including our IPO, private placements, our ATM Sales Agreement and pursuant to the stock purchase agreement with Ultragenyx, as detailed in the following paragraphs.

We completed our initial public offering on January 30, 2018, in which we sold 8,984,375 shares of common stock, including 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 September 30, 2020, we had cash and cash equivalents of $24.8 million and had no debt outstanding.

In October 2020, we entered into a collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx.

In October 2020, we entered into the Collaboration Agreement with Ultragenyx.

On December 15, 2020, we issued and sold in a private placement 24,324,320 shares of our common stock at a price per share of $3.70.

We received $86.2 million of net proceeds from the private placement after deducting offering costs.

In March 2019, we entered into the ATM Sales Agreement under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $50.0 million through Jefferies as sales agent.

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We will pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the ATM Sales Agreement.

During the nine months ended September 30, 2020, we did not sell any shares under the ATM Sales Agreement.

In October 2020, we sold 6,309,632 shares pursuant to the ATM Sales Agreement resulting in net proceeds of $23.2 million.

During the three months ended March 31, 2021, we did not sell any shares pursuant to the ATM Sales Agreement.

During the year ended December 31, 2020, we sold 6,309,632 shares pursuant to the ATM Sales Agreement resulting in net proceeds of $23.2 million.

In March 2021, we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share of $5.75, including the full exercise by the underwriters of an option to purchase additional shares of common stock, or the March 2021 Offering.

We received net proceeds of approximately $134.9 million after deducting underwriter discounts and commissions and offering expenses.

As of March 31, 2021, we had cash and cash equivalents of $268.5 million and had no debt outstanding.

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

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Operating activities

During the nine months ended September 30, 2020, operating activities used $57.9 million of cash, primarily resulting from our net loss of $66.9 million and cash used in changes in our operating assets and liabilities of $3.2 million offset by non-cash charges of $12.2 million due primarily to equity-based compensation of $9.1 million and depreciation expense of $3.1 million.

Net cash used in changes in our operating assets and liabilities during the nine months ended September 30, 2020 consisted primarily of a reduction in

accrued expenses and other liabilities of $ 2.

0 million and a decrease in accounts payable of $ 2.6 million partially offset by a n et de crease in prepaid expenses and other assets of $ 1.5 million .

These changes were primarily due to the tim ing of payments.

During the nine months ended September 30, 2019, operating activities used $71.5 million of cash, primarily resulting from our net loss of $85.4 million offset by non-cash charges of $12.6 million due primarily to equity-based compensation of $10.8 million and depreciation expense of $2.0 million as well as $1.3 million of cash provided by changes in our operating assets and liabilities.

Net cash provided by changes in our operating assets and liabilities during the nine months ended September 30, 2019 consisted primarily of an increase in accrued expenses and other liabilities of $2.4 million partially offset by an increase in prepaid expenses and other assets of $1.1 million, which was primarily due to up-front research and development expenses.

During the three months ended March 31, 2021, operating activities used $21.4 million of cash, primarily resulting from our net loss of $16.9 million and cash used in changes in our operating assets and liabilities of $8.1 million offset by non-cash charges of $3.6 million due to equity-based compensation of $2.9 million and depreciation expense of $0.7 million.

Net cash used in changes in our operating assets and liabilities during the three months ended March 31, 2021 consisted primarily of a reduction in accrued expenses and other liabilities of $3.9 million, a decrease in deferred revenue of $3.1 million, a net increase in prepaid expenses and other assets of $0.8 million and an increase in accounts receivable of $0.3 million.

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 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.

Investing activities

During the nine months ended September 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 nine months ended September 30, 2019, investing activities provided $21.7 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.

During the three months ended March 31, 2021, investing activities used $0.1 million of cash, resulting from purchases of property and equipment.

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.

Financing activities

During the nine months ended September 30, 2020, there were no financing activities.

During the nine months ended September 30, 2019, net cash provided by financing activities was $58.2 million, due to the proceeds from a private placement of shares of our common stock and pre-funded warrants to purchase shares of our common stock completed on July 30, 2019, partially offset by $1.8 million of payments made in connection with costs incurred for the private placement.

During the three months ended March 31, 2021, financing activities generated $135.1 million of cash resulting from the March 2021 Offering.

During the three months ended March 31, 2020, we received no cash from 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 enroll patients in IGNITE DMD and continue clinical development of SGT-001;

move other product candidates into clinical trials;

continue research and preclinical development of other product candidates;

continue to enroll patients in IGNITE DMD and continue clinical development of SGT-001 ;

move SGT-003 and other product candidates into clinical trials;

continue research and preclinical development of SGT-003 and our other product candidates;

seek to identify additional product candidates;

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acquire or in-license other drugs, technologies and intellectual property;

fund a portion of the development or commercialization of products in collaboration with Ultragenyx pursuant to our collaboration and license agreement with Ultragenyx;

fund a portion of the development or commercialization of products in collaboration with Ultragenyx pursuant to the Collaboration Agreement;

add operational, financial and management information systems and personnel.

On January 30, 2018, we completed our initial public offering 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, after deducting underwriting discounts and commissions and offering expenses.

Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.01 and the pre-funded warrants have no expiration date.

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

As of September 30, 2020, we had cash and cash equivalents of $24.8 million.

We believe that our existing cash and cash equivalents as of September 30, 2020, together with the proceeds of $40.0 million received in October 2020 from the sale of shares of common stock to Ultragenyx as well as the proceeds of $23.2 million received from the sale of shares of common stock in October 2020 pursuant to a sales agreement, dated March 13, 2019, between the Company and Jefferies LLC (the “ATM Sales Agreement”), will be sufficient to fund its operating expenses and capital requirements into the second half of 2021.

As of March 31, 2021, we had cash and cash equivalents of $268.5 million.

We believe that our cash and cash equivalents as of March 31, 2021 will be sufficient to fund our operating expenses and capital requirements into the fourth quarter of 2022.

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

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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.

Because of the numerous risks and uncertainties associated with the development of SGT-001, SGT-003 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:

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

the costs, timing and outcome of regulatory review of SGT-001 and other product candidates;

the scope, progress, results and costs of discovery, laboratory testing, manufacturing, preclinical development and clinical trials for other product candidates that we may pursue in the future, if any;

the progress and results of IGNITE DMD and future clinical trials of SGT-001, SGT-003 and our other product candidates;

the costs, timing and outcome of regulatory review of SGT-001, SGT-003 and our other product candidates;

the scope, progress, results and costs of discovery, laboratory testing, manufacturing, preclinical development and clinical trials for SGT-003 and our other product candidates that we may pursue in the future, if any;

the costs associated with our manufacturing process development and evaluation of third-party manufacturers;

whether we decide to construct and validate our own manufacturing facility and the associated costs;

revenue, if any, received from commercial sale of SGT-001 or other product candidates, should any of our product candidates receive marketing approval;

revenue, if any, received from commercial sale of SGT-001, SGT-003 or our other product candidates, should any of our product candidates receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights and defending intellectual property-related claims;

the outcome of any lawsuits filed against us;

the terms of our current and any future license agreements;

the terms of our current and any future license agreements and collaborations;

the success of our collaboration with Ultragenyx;

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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 our Contract Development Manufacturing Organization partner.

We are supplying, and expect to continue to supply, our clinical development program for SGT-001 with drug product produced at a cGMP compliant facility located at one of our Contract Development Manufacturing Organization partners.

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

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We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and Qualitati ve Disclosures About Market Risk.

We are exposed to market risk related changes in interest rates.

As of March 31, 2021, our cash equivalents consisted of money market accounts that have contractual maturities of less than 90 days from the date of acquisition.

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S.

interest rates.

However, because of the short-term nature of the investments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

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