What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-16 · 72 added, 80 removed, 273 unchanged (36% of the section changed)

28 unchanged sentences

Activities are underway to advance IGNITE DMD with the next patient dosing anticipated in the fourth quarter of 2021.

No new drug-related safety findings have been identified in patients 1 through 8 in post-dosing periods of 90 days to more than 3 years.

No new drug-related safety findings have been identified in patients one through eight in post-dosing periods of 90 days to more than 3.5 years.

We continue to follow dosed patients and collect data to support the potential benefit from dosing with SGT-001.

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The long-term muscle biopsy results were analyzed by two methods, western blot and immunofluorescence.

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 patients 5 and 6.

As reflected in the table below, the Western Blot data indicate that expression was maintained in patient four and increased compared to the day 90 biopsies in patients five and six.

Immunofluorescence 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.

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

In September 2021, we reported 1.5-year functional data and patient-reported outcome measures for patients four through six in IGNITE DMD, who were dosed at the 2E14 vg/kg dose level.

Also in September 2021, we reported additional pulmonary function data from the first six patients in IGNITE DMD, three who were dosed at the 5E13 vg/kg dose level and three who were dosed at the 2E14 vg/kg dose level.

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

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We are currently targeting an IND submission for SGT-003 in early-2023.

In November 2021, in collaboration with REGENXBIO, we formally launched the Pathway Development Consortium (PDC), a multistakeholder initiative which aims to identify, develop, expand and maintain pathways to effective therapies for patients diagnosed early in life with rare diseases.

The PDC seeks to achieve these goals by bringing together a broad and diverse group of stakeholders from the rare disease and AAV gene therapy communities, including patients, industry, regulators, academia and payers, among others, for meaningful scientific and policy discussions.

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.

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We do not have any products approved for sale.

To date, we have not generated any revenue.

To date, we have not generated any revenue from product sales.

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, SGT-003 and our other product candidates.

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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 $35.6 million for the six months ended June 30, 2021 and $45.7 million for the six months ended June 30, 2020.

As of June 30, 2021, we had an accumulated deficit of $440.2 million.

Our net losses were $53.6 million for the nine months ended September 30, 2021 and $66.9 million for the nine months ended September 30, 2020.

As of September 30, 2021, we had an accumulated deficit of $458.1 million.

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

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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.

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.

5 unchanged sentences

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

As of June 30, 2021, we had cash, cash equivalents, and available-for-sale securities of $249.0 million.

We believe that our cash, cash equivalents, and available-for-sale securities as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022.

As of September 30, 2021, we had cash, cash equivalents, and available-for-sale securities of $229.8 million.

We believe that our cash, cash equivalents, and available-for-sale securities as of September 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023.

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.

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Collaboration revenue

Collaboration revenue was $3.6 million and $6.9 million for the three and six months ended June 30, 2021, respectively .

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

Collaboration revenue was $3.

5 million and $ 10 .

5 million for the three and nine months ended September 30, 2021 , respectively.

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

We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever.

If our development efforts for 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.

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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 expense research and development costs as incurred.

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.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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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 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.

We expect that our research and development expenses will 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

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In January 2020, we implemented changes to our organizational structure to create a leaner company focused on advancing SGT-001.

In connection with the restructuring, we made changes to our management team and reduced headcount by approximately 30 percent.

Other income (expense)

Interest income

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 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.

In connection with the restructuring, we made changes to our management team and reduced headcount by approximately 30%.

Other income (expense), net

Other income (expense), net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, funding from charitable organizations, and financing leases interest expense.

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.

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Our actual results may differ from these estimates.

During the six months ended June 30, 2021, there were no material changes to our critical accounting policies.

During the nine months ended September 30, 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.

6 unchanged sentences

Results of operations

Comparison of the three months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

Three Months Ended

September 30,

(in thousands)

6 unchanged sentences

Loss from operations

Other income (expense):

Interest (expense) income

Total other income (expense)

Other income (expense), net

Collaboration revenue

Collaboration revenue for the three months ended June 30, 2021 was $3.6 million, compared to no collaboration revenue for the three months ended June 30, 2020.

Collaboration revenue for the three months ended September 30, 2021 was $3.5 million, compared to no collaboration revenue for the three months ended September 30, 2020.

The increase in collaboration revenue was related to research services and cost reimbursement received under the Collaboration Agreement with Ultragenyx, which we entered into in the fourth quarter of 2020.

1 unchanged sentence

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 June 30, 2021 were $15.5 million, compared to $13.4 million for the three months ended June 30, 2020.

The increase of $2.1 million in research and development expenses was primarily due to a $1.1 million increase in costs related to our lead product candidate SGT-001, driven by an increase in manufacturing costs of $1.0 million and in clinical costs of $0.1 million, and an increase in unallocated research and development costs of $0.7 million, primarily due to an increase in personnel related expenses of $0.4 million and an increase in other R&D expenses of $0.3 million as we focus on advancing SGT-001.

The increase in research and development was also driven by a $0.2 million increase in costs related to SGT-003 and other product candidates.

Research and development expenses for the three months ended September 30, 2021 were $14.4 million, compared to $16.0 million for the three months ended September 30, 2020.

The decrease of $1.6 million in research and development expenses was primarily due to a $4.3 million decrease in manufacturing costs for our lead product candidate SGT-001, offset by an increase in unallocated research and development costs of $1.9 million, primarily due to an increase in personnel related expenses of $1.1 million and an increase in other R&D expenses of $0.8 million, and an increase in clinical and non-clinical costs of $0.8 million.

General and administrative expenses

General and administrative expenses were $6.8 million for the three months ended June 30, 2021, compared to $5.5 million for the three months ended June 30, 2020.

The increase of $1.2 million was due to an increase in personnel related expenses of $0.7 million and an increase in corporate expenses of $0.5 million.

Interest (expense) income

Interest expense was less than $0.1 million for each of the three months ended June 30, 2021 and 2020.

The activity was primarily related to the increase in available-for-sale securities included within our portfolio.

Other income was less than $0.1 million for the three months ended June 30, 2021 compared to no other income for the three months ended June 30, 2020.

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, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

General and administrative expenses were $7.1 million for the three months ended September 30, 2021, compared to $5.2 million for the three months ended September 30, 2020.

The increase of $2.0 million was due to an increase in corporate expenses of $1.1 million primarily related to consulting and professional services and an increase in personnel related expenses of $0.9 million.

Other income (expense), net

Other income (expense), net was less than $0.1 million for the three months ended September 30, 2021, compared to other expense of less than $0.1 million for the three months ended September 30, 2020.

The activity was primarily related to the increase in interest income on available-for-sale securities included within our portfolio.

Comparison of the nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

(in thousands)

6 unchanged sentences

Loss from operations

Other income (expense):

Interest income

Total other income (expense)

Other income (expense), net

Collaboration revenue

Collaboration revenue for the six months ended June 30, 2021 was $6.9 million, compared to no collaboration revenue for the six months ended June 30, 2020.

Collaboration revenue for the nine months ended September 30, 2021 was $10.5 million, compared to no collaboration revenue for the nine months ended September 30, 2020.

Research and development expenses

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Total research and development expenses

Research and development expenses for six months ended June 30, 2021 were $29.7 million, compared to $33.1 million for the six months ended June 30, 2020.

The decrease of $3.4 million in research and development expenses was primarily due to a $2.9 million decrease in costs related to our lead product candidate SGT-001, driven by lower manufacturing costs of $3.0 million offset by an increase in clinical costs of $0.1 million, and a decrease in unallocated research and development costs of $0.6 million, primarily due to a reduction in personnel related expenses of $0.1 million and a decrease in other R&D expenses of $0.5 million.

Research and development expenses for the nine months ended September 30, 2021 were $44.1 million, compared to $49.1 million for the nine months ended September 30, 2020.

The decrease of $5.0 million in research and development expenses was primarily due to a $6.4 million decrease in costs related to our lead product candidate SGT-001, driven by lower manufacturing costs of $7.4 million offset by an increase in clinical and non-clinical costs of $1.0 million.

The decrease in research and development expenses was also offset by a $1.1 million increase in personnel related expenses.

The decrease in research and development was offset by a $0.3 million increase in costs related to SGT-003 and other product candidates.

General and administrative expenses

General and administrative expenses were $12.8 million for the six months ended June 30, 2021, compared to $10.8 million for the six months ended June 30, 2020.

The increase of $2.0 million was due to an increase in personnel related expenses of $1.6 million and an increase in corporate expenses of $0.4 million.

Interest (expense) income

Interest expense was less than $0.1 million for the six months ended June 30, 2021, compared to interest income of $0.2 million for the six months ended June 30, 2020.

General and administrative expenses were $19.9 million for the nine months ended September 30, 2021, compared to $16.0 million for the nine months ended September 30, 2020.

The increase of $3.9 million was due to an increase in corporate expenses of $2.2 million primarily related to consulting and professional services and an increase in personnel related expenses of $1.7 million.

Other income (expense), net

Interest expense was less than $0.1 million for the nine months ended September 30, 2021, compared to interest income of $0.1 million for the nine months ended September 30, 2020.

The decrease was primarily related to less interest income earned on the available-for-sale securities in our portfolio.

Other income was less than $0.1 million for the six months ended June 30, 2021 compared to less than $0.1 million of other income for the six months ended June 30, 2020.

Other income relates to contributions from charitable organizations.

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

Liquidity and capital resources

Sources of liquidity

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 June 30, 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.

our initial public offering and a follow-on public offering .

Through September 30, 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 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 six months ended June 30, 2021 , we did not sell any shares pursuant to the ATM Sales Agreement.

During the nine months ended September 30, 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.

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

As of June 30, 2021, we had cash, cash equivalents and available-for-sale securities of $249.0 million and had no debt outstanding.

As of September 30, 2021, we had cash, cash equivalents and available-for-sale securities of $229.8 million and had no debt outstanding.

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

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Cash provided by financing activities

Net (decrease)/increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Operating activities

During the six months ended June 30, 2021, operating activities used $38.5 million of cash, primarily resulting from our net loss of $35.6 million and cash used in changes in our operating assets and liabilities of $10.9 million offset by non-cash charges of $8.0 million due to equity-based compensation of $6.5 million and depreciation expense of $1.5 million.

Net cash used in changes in our operating assets and liabilities during the six months ended June 30, 2021 consisted primarily of a reduction in accrued expenses and other liabilities of $4.8 million, a decrease in deferred revenue of $6.4 million, and an increase in accounts receivable of $0.3 million, offset by a net decrease in prepaid expenses and other assets of $0.6 million.

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.

During the nine months ended September 30, 2021, operating activities used $56.9 million of cash, primarily resulting from our net loss of $53.6 million and cash used in changes in our operating assets and liabilities of 16.0 million offset by non-cash charges of $12.7 million due to equity-based compensation of $10.0 million, depreciation expense of $2.2 million and amortization on available for sale securities of $0.5 million.

Net cash used in changes in our operating assets and liabilities during the nine months ended September 30, 2021 consisted primarily of a decrease in accrued expenses and other liabilities of $4.8 million, a decrease in deferred revenue of $9.6 million, an increase in accounts receivable of $0.6 million and an increase prepaid expenses and other assets of $1.6 million, offset by an increase in accounts payable of $0.6 million.

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 decrease in accrued expenses and other liabilities of $2.0 million and a decrease in accounts payable of $2.6 million partially offset by a net decrease in prepaid expenses and other assets of $1.5 million.

These changes were primarily due to the timing of payments.

Investing activities

During the six months ended June 30, 2021, investing activities used $48.8 million of cash, resulting from purchases of available-for-sale securities and property and equipment.

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 nine months ended September 30, 2021, investing activities used $121.2 million of cash, resulting from purchases of available-for-sale securities and property and equipment.

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.

Financing activities

During the six months ended June 30, 2021, financing activities provided $134.9 million of cash resulting from the March 2021 Offering.

During the six months ended June 30, 2020, we received no cash from financing activities.

During the nine months ended September 30, 2021, financing activities provided $134.9 million of cash resulting from the March 2021 Offering.

During the nine months ended September 30, 2020, we received no cash from financing activities.

Funding requirements

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add operational, financial and management information systems and personnel.

As of June 30, 2021, we had cash, cash equivalents and available-for-sale securities of $249.0 million.

We believe that our cash, cash equivalents and available-for-sale securities as of June 30, 2021 will be sufficient to fund our operating expenses and capital requirements into the fourth quarter of 2022.

As of September 30, 2021, we had cash, cash equivalents and available-for-sale securities of $229.8 million.

We believe that our cash, cash equivalents and available-for-sale securities as of September 30, 2021 will be sufficient to fund our operating expenses and capital requirements into the second quarter of 2023.

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

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 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 manufacturing organizations.

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 June 30, 2021, our cash equivalents consisted of money market accounts that have contractual maturities of less than 90 days from the date of acquisition.

As of June 30, 2021, our investments consisted of corporate bond securities that have contractual maturities of less than one year.

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