Solid Biosciences Inc. 10-Q

Item 1. Financial Statements (unaudited) SOLID BIOSCIENCES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except share and per share data) September 30, December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 109,676 $ 154,744 Available-for-sale securities 120,084 — Prepaid expenses and other current assets 8,366 4,157 Restricted cash, current 90 — Accounts receivable - related party 594 — Total current assets 238,810 158,901 Property and equipment, net 6,886 8,153 Operating lease, right-of-use assets 1,218 3,579 Other non-current assets — 209 Restricted cash, excluding current portion 2,072 327 Total assets $ 248,986 $ 171,169 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 4,148 $ 3,274 Accrued expenses 8,003 8,640 Operating lease liabilities 1,227 1,999 Finance lease liabilities 226 208 Other current liabilities 73 — Deferred revenue - related party 8,865 10,359 Total current liabilities 22,542 24,480 Operating lease liabilities, excluding current portion 468 2,419 Finance lease liabilities, excluding current portion 353 525 Deferred revenue - related party, excluding current portion 2,260 10,359 Other non-current liabilities — 1,300 Total liabilities 25,623 39,083 Commitments and contingencies Preferred stock, $ 0.001 par value; 10,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding at September 30, 2021 and December 31, 2020 — — Common stock, $ 0.001 par value; 300,000,000 shares authorized at September 30, 2021 and December 31, 2020; 110,295,600 shares issued and outstanding at September 30, 2021 and 84,893,994 shares issued and outstanding at December 31, 2020; 2,158,329 pre-funded warrants outstanding at September 30, 2021 and December 31, 2020 112 87 Additional paid-in capital 681,420 536,568 Accumulated other comprehensive loss ( 22 ) — Accumulated deficit ( 458,147 ) ( 404,569 ) Total stockholders’ equity 223,363 132,086 Total liabilities and stockholders’ equity $ 248,986 $ 171,169 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 SOLID BIOSCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Collaboration revenue - related party $ 3,537 $ — $ 10,466 $ — Operating expenses: Research and development 14,425 16,045 44,144 49,158 General and administrative 7,143 5,181 19,924 15,957 Restructuring charges — — — 1,944 Total operating expenses 21,568 21,226 64,068 67,059 Loss from operations ( 18,031 ) ( 21,226 ) ( 53,602 ) ( 67,059 ) Other income (expense), net 48 ( 20 ) 24 132 Net loss $ ( 17,983 ) $ ( 21,246 ) $ ( 53,578 ) $ ( 66,927 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.16 ) $ ( 0.44 ) $ ( 0.51 ) $ ( 1.39 ) Weighted average shares of common stock outstanding, basic and diluted 112,312,970 48,295,468 104,706,800 48,172,686 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 SOLID BIOSCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited, in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss $ ( 17,983 ) $ ( 21,246 ) $ ( 53,578 ) $ ( 66,927 ) Other comprehensive loss: Unrealized loss on available-for-sale securities ( 11 ) 0 ( 22 ) ( 1 ) Comprehensive loss $ ( 17,994 ) $ ( 21,246 ) $ ( 53,600 ) $ ( 66,928 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 SOLID BIOSCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited, in thousands, except share data) For the Three Months Ended September 30, 2021 Common Stock Amount Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Balance at June 30, 2021 112,454,321 $ 112 $ 678,001 $ ( 11 ) $ ( 440,164 ) $ 237,938 Equity-based compensation — — 3,416 — — 3,416 Exercise of stock options 1,000 — 3 — — 3 Forfeiture of restricted stock awards ( 1,392 ) — — — — — Unrealized loss on available-for-sale securities — — — ( 11 ) — ( 11 ) Net loss — — — — ( 17,983 ) ( 17,983 ) Balance at September 30, 2021 112,453,929 $ 112 $ 681,420 $ ( 22 ) $ ( 458,147 ) $ 223,363 For the Nine Months Ended September 30, 2021 Common Stock Amount Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Balance at December 31, 2020 87,052,323 $ 87 $ 536,568 $ — $ ( 404,569 ) $ 132,086 Equity-based compensation — — 9,958 — — 9,958 Sale of common stock, net of issuance costs of $ 8,872 25,000,000 25 134,853 — — 134,878 Exercise of stock options 11,625 — 41 — — 41 Vesting of restricted stock units 419,193 — — — — — Forfeiture of restricted stock awards ( 29,212 ) — — — — — Unrealized loss on available-for-sale securities — — — ( 22 ) — ( 22 ) Net loss — — — — ( 53,578 ) ( 53,578 ) Balance at September 30, 2021 112,453,929 $ 112 $ 681,420 $ ( 22 ) $ ( 458,147 ) $ 223,363 5 For the Three Months Ended September 30, 2020 Common Stock Amount Additional Paid In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Balance at June 30, 2020 48,364,092 $ 48 $ 402,625 $ — $ ( 361,960 ) $ 40,713 Equity-based compensation — — 2,764 — — 2,764 Vesting of restricted stock units 162,725 — — — — — Forfeiture of restricted stock awards ( 52,599 ) — — — — — Net loss — — — — ( 21,246 ) ( 21,246 ) Balance at September 30, 2020 48,474,218 $ 48 $ 405,389 $ — $ ( 383,206 ) $ 22,231 For the Nine Months Ended September 30, 2020 Common Stock Amount Additional Paid In capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Balance at December 31, 2019 48,283,270 $ 48 $ 396,278 $ 1 $ ( 316,279 ) $ 80,048 Equity-based compensation — — 9,111 — — 9,111 Vesting of restricted stock units 284,700 — — — — — Forfeiture of restricted stock awards ( 93,752 ) Unrealized loss on available-for-sale securities — — — ( 1 ) — ( 1 ) Net loss — — — — ( 66,927 ) ( 66,927 ) Balance at September 30, 2020 48,474,218 $ 48 $ 405,389 $ — $ ( 383,206 ) $ 22,231 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 SOLID BIOSCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 53,578 ) $ ( 66,927 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of (discount)/premium on available-for-sale securities 535 ( 20 ) Equity-based compensation expense 9,958 9,111 Depreciation expense 2,204 3,126 Gain on disposal of property and equipment 9 — Changes in operating assets and liabilities: Prepaid expenses and other current and non-current assets ( 1,639 ) 1,450 Accounts receivable - related party ( 594 ) — Accounts payable 639 ( 2,602 ) Accrued expenses and other current and non-current liabilities ( 4,831 ) ( 2,044 ) Deferred revenue- related party, current and non-current ( 9,593 ) — Net cash used in operating activities ( 56,890 ) ( 57,906 ) Cash flows from investing activities: Purchases of property and equipment ( 621 ) ( 839 ) Proceeds from sale and maturities of available-for-sale securities 3,930 7,900 Purchases of available-for-sale securities ( 124,571 ) ( 401 ) Net cash (used in) provided by investing activities ( 121,262 ) 6,660 Cash flows from financing activities: Proceeds from issuance of common stock, net of issuance costs 134,878 — Proceeds from exercise of stock options 41 — Net cash provided by financing activities 134,919 — Net decrease in cash, cash equivalents and restricted cash ( 43,233 ) ( 51,246 ) Cash, cash equivalents, and restricted cash at beginning of period 155,071 76,370 Cash, cash equivalents, and restricted cash at end of period $ 111,838 $ 25,124 Supplemental disclosure of non-cash investing and financing activities: Change in unrealized loss $ ( 22 ) $ — Decrease in right of use asset due to lease termination $ ( 1,233 ) $ — Property and equipment included in accounts payable and accruals $ 345 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 SOLID BIOSCIENCES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, amounts in thousands, except share and per share data) 1. Nature of the Business and Basis of Presentation Nature of Business Solid Biosciences Inc. was organized in March 2013 under the name SOLID Ventures Management, LLC and operated as a Delaware limited liability company until immediately prior to the effectiveness of its registration statement on Form S-1 on January 25, 2018, at which time it completed a statutory corporate conversion into a Delaware corporation and changed its name to Solid Biosciences Inc. (the “Company”). The Company’s mission is to cure Duchenne muscular dystrophy (“Duchenne”), a genetic muscle-wasting disease predominantly affecting boys. It is caused by mutations in the dystrophin gene, which result in the absence or near-absence of dystrophin protein. Dystrophin protein works to strengthen muscle fibers and protect them from daily wear and tear. Without functioning dystrophin and certain associated proteins, muscles suffer excessive damage from normal daily activities and are unable to regenerate, leading to the build-up of fibrotic, or scar, and fat tissue. The Company’s lead product candidate, SGT-001, is 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. 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. The Company filed an Investigational New Drug application (“IND”) in September 2017 and initiated a Phase I/II clinical trial for SGT-001 in the United States during the fourth quarter of 2017 , which is called IGNITE DMD. In November 2019, IGNITE DMD was placed on clinical hold by the U.S. Food and Drug Administration (“FDA”). In October 2020, following changes to the clinical protocol designed to enhance patient safety, improvements to its manufacturing process, and the provision of additional efficacy and safety data to the FDA, the Company announced that the FDA lifted the clinical hold placed on the Company’s IGNITE DMD Phase I/II clinical trial. In February 2021, the Company resumed treatment of patients in the IGNITE DMD clinical trial. In May 2021, the Company announced the advancement of a next-generation Duchenne microdystrophin gene transfer program, SGT-003, a preclinical candidate that combines a novel and rationally-designed capsid candidate from this library with Solid’s proprietary nNOS containing microdystrophin construct. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on licenses, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities. The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from, among others, other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, partners and consultants. Liquidity The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Through September 30, 2021, the Company has funded its operations primarily with the proceeds from the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of its common stock in private placements, the sale of common stock in its initial public offering and follow-on public offering in March 2021 and sales under its at-the-market sales agreement. 8 In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. As of September 30, 2021, the Company had an accumulated deficit of $ 458,147 . During the three and nine months ended September 30, 2021, the Company incurred a net loss of $ 17,983 and $ 53,578 , respectively, and the Company used $ 56,890 of cash in operations for the nine months ended September 30, 2021. The Company expects to continue to generate operating losses in the foreseeable future. Based upon its current operating plan, the Company expects that its cash, cash equivalents and available-for-sale securities of $ 229,760 as of September 30, 2021, will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these financial statements. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. The Company expects to finance its future cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements. If the Company is unable to obtain funding, the Company would be forced to delay, reduce or eliminate some or all of its research and development programs, preclinical and clinical testing or commercialization efforts, which could adversely affect its business prospects. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements include the accounts of Solid Biosciences Inc. and its wholly owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the Company’s accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the Company’s financial statements for interim periods in accordance with GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period. 2. Summary of Significant Accounting Policies The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in its Annual Report on Form 10-K for the year ended December 31, 2020 and updated, as necessary, in this report. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to revenue recognition, the recognition of research and development expenses and equity-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including clinical trials and employee-related amounts, will depend on future developments that are highly uncertain, including new information that may emerge concerning COVID-19 and the actions taken to contain it or treat its impact. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods. Actual results could differ from the Company’s estimates. Cash Equivalents The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. 9 Restricted Cash The Company held restricted cash of $ 2,162 and $ 327 in separate restricted bank accounts as security deposits for leases of the Company’s facilities as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021 and December 31, 2020, the Company classified $ 90 and $ 0 as a current asset and $ 2,072 and $ 327 as a non-current asset respectively. A reconciliation of the amounts of cash and cash equivalents and restricted cash from the cash flow statement to the balance sheet is as follows: September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019 Cash and cash equivalents as presented on balance sheet $ 109,676 $ 154,744 $ 24,797 $ 76,043 Restricted cash, current, as presented on balance sheet 90 — — — Restricted cash, non-current, as presented on balance sheet 2,072 327 327 327 Cash and cash equivalents and restricted cash as presented on cash flow statement $ 111,838 $ 155,071 $ 25,124 $ 76,370 Leases At inception of a contract, the Company determines if a contract meets the definition of a lease. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company determines if the contract conveys the right to control the use of an identified asset for a period of time. The Company assesses throughout the period of use whether the Company has both of the following: (1) the right to obtain substantially all of the economic benefits from use of the identified asset and (2) the right to direct the use of the identified asset. This determination is reassessed if the terms of the contract are changed. Leases are classified as operating or finance leases based on the terms of the lease agreement and certain characteristics of the identified asset. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of the minimum future lease payments. The Company’s policy is to not record leases with an original term of twelve months or less on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Certain lease agreements include rental payments that are adjusted periodically for inflation or other variables. In addition to rent, the leases may require the Company to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. Such adjustments to rental payments and variable non-lease components are treated as variable lease payments and recognized in the period in which the obligation for these payments was incurred. Variable lease components and variable non-lease components are not measured as part of the right of use asset and liability. Only when lease components and their associated non-lease components are fixed are they accounted for as a single lease component and recognized as part of a right of use asset and liability. Total contract consideration is allocated to the combined fixed lease and non-lease components. In June 2021, the Company entered into a lease with Hood Park LLC (“Landlord”), pursuant to which the Company will lease approximately 49,869 square feet of office, laboratory, research and development and manufacturing space located in Charlestown, Massachusetts (“Premises”). The Company intends to relocate its corporate headquarters to the Premises in early 2022. The term of the lease commences on the later of (i) the date the Landlord delivers the Premises to the Company or (ii) the earlier of (a) the date the Company’s work on the Premises is substantially completed, (b) the date the Company commences business operations in the Premises, or (c) the one hundred twentieth (120th) day following the Landlord’s satisfaction of item (i) above. The lease commencement date is anticipated to be in the first half of 2022. The date on which the Company will become responsible for paying rent under the lease will be 61 days following the lease commencement date. The initial term of the lease will be for a ten-year period commencing on the lease commencement date, unless earlier terminated. The lease provides the Company with an option to extend the lease for an additional five-year term. The Company and the Landlord are each obligated to undertake certain improvements prior to the commencement of the lease. The Landlord delivered the Premises to the Company in September 2021. The Company plans to make certain improvements to the Premises prior to commencement of the lease, which will be partially paid for with a tenant improvement allowance. The Company was required to post a customary letter of credit in the amount of $ 1,833 , subject to decrease on a set schedule, as a security deposit pursuant to the lease. As of September 30, 2021, the lease had not commenced. For the three and nine months ended September 30, 2021, the Company incurred approximately $ 680 of tenant improvement allowance receivable. In June 2021, the Company determined that it no longer needed a floor of office space that it was renting and terminated its lease with another landlord. As a result of the termination, the Company wrote off $ 1,314 and $ 1,233 of the remaining lease liability and right-of-use asset, respectively, associated with the lease. 10 Segment Data The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on developing treatments through gene therapy and other means for patients with Duchenne. All of the Company’s tangible assets are held in the United States. Related Parties In October 2020, the Company entered into a collaboration and license agreement (the “Collaboration Agreement”) with Ultragenyx Pharmaceutical Inc. (“Ultragenyx”). In connection with the Collaboration Agreement, Ultragenyx also purchased 7,825,797 shares of the Company’s common stock, which resulted in Ultragenyx becoming a related party of the Company. In November 2020, the Company entered into a consulting agreement with Danforth Advisors, LLC, or Danforth, an affiliate of Stephen DiPalma, the Company’s interim chief financial officer. Pursuant to the consulting agreement, Danforth provides the Company with the chief financial officer services of Mr. DiPalma, and other services, including financial planning, offering support and accounting services, in exchange for fees payable to Danforth based on hourly rates. The Company has paid Danforth approximately $ 194 and $ 381 for the three and nine months ended September 30, 2021, respectively, and $ 0 for each of the three and nine months ended September 30, 2020. In accordance with the consulting agreement, in November 2020, the Company issued to Danforth a warrant to purchase 30,000 shares of the Company’s common stock at an exercise price per share of $ 3.29 . As of September 30, 2021, the shares had vested in full. The consulting agreement may be terminated by either party without cause upon 60 days’ prior written notice to the other party and with cause upon 30 days’ prior written notice to the other party. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and clarifies and amends existing guidance to improve consistent application. The standard became effective for the Company beginning January 1, 2021. The amendments that are related to changes in ownership of foreign equity method investments or foreign subsidiaries are to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments that are related to franchise taxes that are partially based on income are to be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments under this ASU are to be applied on a prospective basis. The Company adopted the guidance effective January 1, 2021 . The adoption of this new standard did not have a material impact on the Company’s financial statements. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was subsequently modified by several ASU’s issued in 2018 and 2019. The standard introduces a new current expected credit loss (“CECL”) model for measuring expected credit losses for certain types of financial instruments measured at amortized cost and replaces the incurred loss model. The CECL model requires an entity to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount the entity expects to collect over the instrument’s contractual life after consideration of historical experience, current conditions, and reasonable and supportable forecasts. The standard eliminates the concept of other-than-temporary impairment and requires an entity to determine whether any impairment is the result of a credit loss or other factors. ASU 2016-13 is effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that this standard may have on its financial statements and related disclosures. 3. Collaborations Ultragenyx Collaboration Collaboration Agreement On October 22, 2020 (the “Effective Date”), the Company entered into a collaboration and license agreement with Ultragenyx Pharmaceutical Inc. to focus on the development and commercialization of new gene therapies for Duchenne Muscular Dystrophy. The Company granted Ultragenyx an exclusive worldwide license for any pharmaceutical product that expresses the Company’s proprietary microdystrophin construct from AAV8 and variants thereof in clade E for the treatment of Duchenne Muscular Dystrophy and other diseases resulting from the lack of functional dystrophin (the “Licensed Products”). The Company retains exclusive rights to all other uses of its microdystrophin proteins, including under its existing SGT-001 program. 11 The Company will conduct certain research and development activities with respect to the development of the Licensed Products. Ultragenyx will reimburse the Company for personnel and out-of-pocket costs that the Company incurs in conducting such development activities. In addition, Ultragenyx granted to the Company an exclusive Development Option or Income Share Option (each as defined and described below) exercisable in the Company’s sole discretion one time per Licensed Product. After the date of first achievement of clinical proof of concept, Ultragenyx will provide to the Company a data package with respect to the relevant Licensed Product. The Company will use the data package to determine whether to exercise the corresponding Development Option or Income Share Option with respect to such Licensed Product. With respect to each Licensed Product for which the Company has not exercised the Development Option or Income Share Option the Company will be entitled to milestone payments of up to $ 25,000 in the aggregate for each such Licensed Product that achieves specified development milestones and $ 65,000 in the aggregate for each such Licensed Product that achieves specified regulatory milestones. With respect to each Licensed Product for which the Company has not exercised the Income Share Option, the Company will also be entitled to milestone payments of up to $ 165,000 in the aggregate for each Licensed Product that achieves specified annual worldwide net sales milestones. For Licensed Products for which the Company has not exercised the Development Option or Income Share Option, Ultragenyx will pay the Company tiered royalties on a Licensed Product-by-Licensed Product and country-by-country basis ranging from a low double digit percentage to a mid-teens percentage based on Ultragenyx’s annual worldwide net sales of such Licensed Products. For each Licensed Product for which Ultragenyx decides to initiate a registrational trial in humans, the Company will have the option to fund 30 % of the development costs in the United States and European Union for such Licensed Product and forgo the development and regulatory milestones (the “Development Option”) and receive tiered royalties on a Licensed Product-by-Licensed Product and country-by-country basis ranging from a mid-teens percentage to a low twenties percentage based on Ultragenyx’s annual worldwide net sales of each such Licensed Product. For each Licensed Product for which the Company exercises the Development Option, the Company may also elect to share 30 % of the net income and net losses on net sales of such Licensed Product in the United States and European Union (the “Income Share Option”). For Licensed Products for which the Company has exercised the Income Share Option, the Company will not be entitled to milestone payments and Ultragenyx will pay the Company tiered royalties on a Licensed Product-by-Licensed Product and country-by-country basis ranging from a mid-teens percentage to a low twenties percentage based on Ultragenyx’s annual net sales of each such Licensed Product outside of the United States and European Union. The Company may only exercise an Income Share Option if neither the Company nor any of its affiliates is then developing or commercializing a product that is competitive with the Licensed Product that is subject to such option. If the Company or any of its affiliates subsequently develops or commercializes a product that is competitive with a Licensed Product for which the Company has exercised an Income Share Option, then the Company and Ultragenyx will no longer share the net income and net losses on net sales of such Licensed Product and such Licensed Product will be treated as if the Company had exercised the Development Option with respect to such Licensed Product. Following the Company’s exercise of the Development Option or Income Share Option with respect to a Licensed Product, the Company also has the right to cease participation in the sharing of development costs and sharing in net income and net losses on net sales, as applicable, for such Licensed Product by written notice to Ultragenyx. Upon such notice, the Company will no longer share in the development costs and net income and net losses on net sales of such Licensed Product, as applicable, and will be eligible to receive payments on milestones achieved after the opt-out for such Licensed Product and royalties at the rates applicable to Licensed Products for which the Company has not exercised the Development Option or Income Share Option, as described above. The Collaboration Agreement continues on a country-by-country and Licensed Product-by-Licensed Product basis until the expiration of all payment obligations under the agreement. With respect to any Licensed Product for which the Company has exercised an Income Share Option, the Collaboration Agreement continues until there are no longer sales of such Licensed Product in the United States or Europe. Either party has the right to terminate the agreement if the other party has materially breached in the performance of its obligations under the agreement and such breach has not been cured within the applicable cure period. Ultragenyx may also terminate the Collaboration Agreement in its sole discretion upon 90 days’ prior written notice to the Company. Stock Purchase Agreement In connection with the execution of the Collaboration Agreement, Ultragenyx and the Company also entered into a stock purchase agreement (the “Stock Purchase Agreement”) on October 22, 2020 (the “Closing Date”), pursuant to which the Company issued and sold 7,825,797 shares of its common stock (the “Shares”) to Ultragenyx at a price of $ 5.1113 per share for an aggregate purchase price of approximately $ 40,000 . The Stock Purchase Agreement contains customary representations, warranties and covenants of each of the parties thereto. Following the sale of the Shares, Ultragenyx beneficially owned approximately 14.45 % of the Company’s outstanding common stock . As of September 30, 2021 , Ultragenyx beneficially owned less than 10 % of the Company’s outstanding common stock. 12 Investor Agreement In connection with the consummation of the transactions contemplated by the Stock Purchase Agreement, the Company and Ultragenyx entered into an Investor Agreement (the “Investor Agreement”) on the Effective Date. Pursuant to the terms of the Investor Agreement, Ultragenyx agreed that the Shares will be subject to a lock-up restriction, such that Ultragenyx will not, and will also cause its affiliates not to, without the prior approval of the Company and with certain exceptions, sell, transfer or otherwise dispose of the Shares until the earliest to occur of (i) 18 months after the Effective Date, (ii) the termination of the Collaboration Agreement or (iii) other specified events. Pursuant to the terms of the Investor Agreement, Ultragenyx agreed that, so long as it holds at least 10 % of the Company’s outstanding common stock, the Shares will be subject to a voting agreement, such that until the earliest to occur of certain specified events, and subject to specified conditions, Ultragenyx will, and will cause its permitted transferees to, vote in accordance with the recommendation of the Company’s Board of Directors with respect to specified matters. Accounting Treatment The Company concluded that the Collaboration Agreement and the Stock Purchase Agreement should be combined and treated as a single arrangement for accounting purposes as the agreements were entered into contemporaneously and in contemplation of one another. The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Ultragenyx, is a customer. The Company identified the following promises in the Collaboration Agreement that were evaluated under the scope of ASC 606: (1) an exclusive worldwide license to the Licensed Products; (2) an obligation to perform research and development services; and (iii) an obligation to participate in a joint steering committee. The Company assessed the promised goods and services to determine if they are distinct. Based on this assessment, the Company determined that Ultragenyx cannot benefit from the promised goods and services separately from the others as they are highly interrelated and therefore not distinct. Due to the early stage of the Licensed Products, the research and development services could not be performed by another party. The Company’s skill-set, knowledge and expertise are required to conduct the research and development services and the research and development services are expected to involve significant further development of the Licensed Products. Accordingly, the promised goods and services represent one combined performance obligation and the entire transaction price will be allocated to that single combined performance obligation. The Company determined the transaction price under ASC 606 at the inception of the Collaboration Agreement to be $ 22,513 , which represents the excess proceeds from the equity investment under the Stock Purchase Agreement, when measured at fair value after taking into consideration a discount for lack of marketability, plus the estimated reimbursement of research and development costs, which represents variable consideration. The Company included the estimated reimbursement of research and development costs in the transaction price at the inception of the arrangement because the Company is required to perform research and development services and the contract requires Ultragenyx to reimburse the Company for costs incurred. Also, since the related revenue would be recognized only as the costs are incurred, the Company determined it is not probable that a significant reversal of cumulative revenue would occur. The Company evaluated how much variable consideration related to development and regulatory milestones, and the Company’s potential exercise of its Development Option or Income Share Option per Licensed Product, to include in the transaction price using the most likely amount approach and concluded that no amount should be included in the transaction price due to the high degree of uncertainty and risk associated with these potential payments. The Company also determined that royalties and sales milestones relate solely to the license of intellectual property and are therefore excluded from the transaction price under the sales- or usage-based royalty exception of ASC 606. Revenue related to these royalties and sales milestones will only be recognized when the associated sales occur, and relevant thresholds are met. The Company determined that revenue under the Collaboration Agreement should be recognized over time as Ultragenyx simultaneously receives the benefit from the Company as the Company performs under the single performance obligation over time. The Company will recognize revenue for the single performance obligation using a cost-to-cost input method as the Company has concluded it best depicts the research and development and joint steering committee participation services performed. Under this method, the transaction price is recognized over the contract’s entire performance period, using costs incurred relative to total estimated costs to determine the extent of progress towards completion. During the three and nine months ended September 30, 2021, the Company recognized $ 3,537 and $ 10,466 , respectively, of related party collaboration revenue, associated with its collaboration with Ultragenyx related to research and development services performed during the period and the corresponding cost reimbursement receivable. 13 The following table presents changes in the balances of the Company’s related party collaboration receivables and contract liabilities during the three and nine months ended September 30, 2021: Balance as of June 30, 2021 Additions Deductions Balance as of September 30, 2021 Related party collaboration receivable $ 286 $ 308 $ — $ 594 Contract liabilities: Deferred revenue 14,354 — ( 3,229 ) 11,125 Balance as of December 31, 2020 Additions Deductions Balance as of September 30, 2021 Related party collaboration receivable $ — $ 874 $ ( 280 ) $ 594 Contract liabilities: Deferred revenue 20,718 — ( 9,593 ) 11,125 The change in receivables balance for the three and nine months ended September 30, 2021 is driven by amounts owed to the Company for research and development services provided, partially offset by $ 280 in collections received from Ultragenyx during the nine months ended September 30, 2021. As of September 30, 2021, there was $ 11,125 of deferred revenue related to the Collaboration Agreement, which is classified as either current or non-current in the accompanying condensed consolidated balance sheet based on the period the services are expected to be delivered. Additionally, as of September 30, 2021, there was $ 594 of related party collaboration receivables related to reimbursable costs expected to be received from Ultragenyx for research and development services performed. Costs incurred relating to the Collaboration Agreement consist of internal and external research and development costs, which primarily include salaries and benefits, lab supplies, preclinical research studies, clinical studies, consulting services, and commercial development. These costs are included in research and development expenses in the Company’s condensed consolidated statement of operations during the three and nine months ended September 30, 2021. 4. Fair Value of Financial Assets and Liabilities The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ — $ 83,719 $ — $ 83,719 Available-for-sale securities $ — $ 120,084 $ — $ 120,084 $ — $ 203,803 $ — $ 203,803 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ — $ 84,462 $ — $ 84,462 $ — $ 84,462 $ — $ 84,462 As of September 30, 2021 and December 31, 2020, the fair values of the Company’s available-for-sale debt securities, which consisted of treasury bills, commercial paper, and corporate bond securities, was determined using Level 2 inputs. During the nine months ended September 30, 2021 and the year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3. 14 The fair value of the Company’s cash, restricted cash, accounts payable, and accrued expenses and other current liabilities approximate their carrying value due to their short-term maturities. 5. Available-for-Sale Securities As of September 30, 2021, the fair value of available-for-sale securities by type of security was as follows: September 30, 2021 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Investments: Treasury bill $ 6,999 $ — $ — $ 6,999 Corporate bond securities $ 101,110 $ — $ ( 22 ) $ 101,088 Commercial paper $ 11,997 $ — $ — $ 11,997 $ 120,106 $ — $ ( 22 ) $ 120,084 As of December 31, 2020, there were no available-for-sale securities. The estimated fair value and amortized cost of the Company’s available-for-sale securities by contractual maturity are summarized as follows: September 30, 2021 Amortized Cost Fair Value Due in one year or less $ 120,106 $ 120,084 Total available-for-sale securities $ 120,106 $ 120,084 The weighted average maturity of the Company’s available-for-sale securities as of September 30, 2021 was approximately 0.6 years. 6. Property and Equipment Property and equipment consists of the following: September 30, 2021 December 31, 2020 Furniture and fixtures $ 213 $ 203 Laboratory equipment 10,315 9,631 Leasehold improvements 4,713 4,713 Computer equipment 436 436 Computer software 553 553 Construction in process 1,557 1,330 17,787 16,866 Less accumulated depreciation 10,901 8,713 $ 6,886 $ 8,153 Depreciation expense was $ 752 and $ 2,204 for the three and nine months ended September 30, 2021. 15 7. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: September 30, 2021 December 31, 2020 Prepaid research and development expenses $ 4,614 $ 2,674 Tenant improvement allowance receivable 680 - Prepaid expenses and other assets 3,072 1,483 $ 8,366 $ 4,157 8. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: September 30, 2021 December 31, 2020 Accrued research and development $ 2,136 $ 2,091 Accrued compensation 2,247 3,834 Accrued other 3,620 2,715 $ 8,003 $ 8,640 9. Stockholders’ Equity In July 2019, the Company issued and sold in a private placement (i) 10,607,525 shares of its common stock at a price per share of $ 4.65 and (ii) 2,295,699 pre-funded warrants to purchase shares of its 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. The Company received gross proceeds from the private placement of $ 59,977 , before deducting offering costs of $ 2,102 . In October 2020, 137,460 of these pre-funded warrants were exercised. No warrants were exercised during the three and nine months ended September 30, 2021 and 2020. In October 2020, in connection with the execution of the Collaboration Agreement, Ultragenyx and the Company also entered into the Stock Purchase Agreement, pursuant to which the Company issued and sold 7,825,797 shares of its common stock to Ultragenyx at a price of $ 5.1113 per share for an aggregate purchase price of approximately $ 40,000 . In October 2020, the Company sold 6,309,632 shares of common stock pursuant to a sales agreement (the “ATM Sales Agreement”), by and between the Company and Jefferies LLC (“Jefferies”), resulting in net proceeds to the Company of $ 23,209 . In December 2020, the Company issued and sold in a private placement 24,324,320 shares of its common stock at a price per share of $ 3.70 . The Company received net proceeds from the private placement of $ 86,210 after deducting placement agent fees and offering expenses of $ 3,790 . In March 2021, the Company issued and sold in a public offering 25,000,000 shares of its common stock at a price to the public of $ 5.575 per share. The Company received net proceeds of $ 134,878 after deducting underwriting discounts and commissions and offering expenses. 10. Equity-Based Compensation In connection with the closing of the Company’s initial public offering, the board of directors and stockholders approved the 2018 Omnibus Incentive Plan, which provides for the reservation of 5,001,000 shares of common stock for equity awards. On June 16, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan (“2020 Plan”) which consists of (i) 3,000,000 shares of common stock and (ii) additional shares of common stock (up to 4,879,025 ) as is equal to (i) the number of shares reserved under the Company’s 2018 Omnibus Incentive Plan (“2018 Plan”) that remain available for grant under the 2018 Plan as of immediately prior to the date the 2020 Plan was approved by the Company’s stockholders and (ii) the number of shares subject to awards granted under the 2018 Plan which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. In June 2021, the Company’s stockholders approved an amendment to the 2020 Plan to reserve an additional 7,000,000 shares of common stock for issuance under the plan. At September 30, 2021, 8,836,782 shares remained available for future issuance under the 2020 Plan. Under the 2020 Plan, stock options may not be granted at less than fair value on the date of grant. In June 2021, the Company’s stockholders also approved the 2021 Employee Stock Purchase Plan (“ESPP”), which provides for 1,102,885 shares to be available for purchase by eligible employees according to its 16 terms . The first offering period under the ESPP commenced on September 1, 2021. At September 30, 2021, 1,102,885 shares remained available for future issuance under the ESPP. During the three and nine months ended September 30, 2021, the Company granted options for the purchase of 458,350 and 3,460,245 , respectively, shares of common stock. During the three and nine months ended September 30, 2021, the Company granted 98,650 restricted stock units. The Company recorded equity-based compensation expense related to all of its share-based awards to employees and non-employees in the following captions within its condensed consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 1,601 $ 1,524 $ 5,083 $ 4,379 General and administrative 1,815 1,240 4,875 3,881 Restructuring — — — 851 Total $ 3,416 $ 2,764 $ 9,958 $ 9,111 11. Income Taxes During the three and nine months ended September 30, 2021 and 2020, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits and orphan drug credits generated in each year due to its uncertainty of realizing a benefit from those items. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at September 30, 2021 and December 31, 2020, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized. As of September 30, 2021 and December 31, 2020, the Company had no t recorded any amounts for unrecognized tax benefits. The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s C-Corporation tax years beginning with the year ended December 31, 2018 are open under statute. Any tax credit or net operating loss carryforward can be adjusted in future periods after the respective year of generation’s statute of limitation has closed. 12. Commitments and Contingencies Legal Proceedings The Company may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which the Company is focused. The Company is not aware of any material legal proceedings or claims as of September 30, 2021. 13. Net Loss per Share Basic and diluted net loss per share attributable to common stockholders were calculated as follows: The numerator for basic and diluted net loss per share attributable to common stockholders is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss attributable to common stockholders $ ( 17,983 ) $ ( 21,246 ) $ ( 53,578 ) $ ( 66,927 ) 17 The denominator is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Weighted average shares of common stock outstanding, basic and diluted 110,154,641 45,999,769 102,548,471 45,876,987 Weighted average shares of pre-funded warrants to purchase common stock 2,158,329 2,295,699 2,158,329 2,295,699 Total 112,312,970 48,295,468 104,706,800 48,172,686 Net loss per share attributable to common stockholders, basic and diluted is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss per share attributable to common stockholders $ ( 0.16 ) $ ( 0.44 ) $ ( 0.51 ) $ ( 1.39 ) The following potential common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect for the nine months ended September 30: 2021 2020 Options to purchase shares of common stock 5,851,431 3,324,885 Unvested shares of common stock 1,849 102,753 Unvested restricted stock units 391,269 1,254,545 6,244,549 4,682,183 18