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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2020

OR

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

For the transition period from                      to                     

Commission File Number: 001-38360

 

Solid Biosciences Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

90-0943402

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

141 Portland Street, Fifth Floor

Cambridge, MA

 

02139

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 337-4680

 

 

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

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock $0.001 par value per share

SLDB

The Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of August 1, 2020, the registrant had 46,101,794 shares of common stock, $0.001 par value per share, outstanding.

  

 

 

 


 

Table of Contents

 

 

 

Page

PART  I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019

2

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

3

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

7

 

Notes to the Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

71

Item 6.

Exhibits

72

 

Signatures

73

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

SOLID BIOSCIENCES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,441

 

 

$

76,043

 

Available-for-sale-securities

 

 

 

 

 

7,481

 

Prepaid expenses and other current assets

 

 

3,094

 

 

 

2,778

 

Total current assets

 

 

43,535

 

 

 

86,302

 

Property and equipment, net

 

 

9,582

 

 

 

11,645

 

Operating lease, right-of-use assets

 

 

4,310

 

 

 

4,988

 

Other non-current assets

 

 

209

 

 

 

209

 

Restricted cash

 

 

327

 

 

 

327

 

Total assets

 

$

57,963

 

 

$

103,471

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,793

 

 

$

7,124

 

Accrued expenses

 

 

8,315

 

 

 

9,178

 

Operating lease liabilities

 

 

1,863

 

 

 

1,736

 

Finance lease liabilities

 

 

197

 

 

 

186

 

Other current liabilities

 

 

 

 

 

52

 

Total current liabilities

 

 

13,168

 

 

 

18,276

 

Operating lease liabilities, excluding current portion

 

 

3,450

 

 

 

4,414

 

Finance lease liabilities, excluding current portion

 

 

632

 

 

 

733

 

Total liabilities

 

 

17,250

 

 

 

23,423

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized

  at June 30, 2020 and December 31, 2019; no shares issued and

  outstanding at June 30, 2020 and December 31, 2019

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized at

   June 30, 2020 and December 31, 2019; 46,068,393 shares issued and

   outstanding at June 30, 2020 and 45,987,571 shares issued and

   outstanding at December 31, 2019; 2,295,699 pre-funded warrants outstanding at

   June 30, 2020 and December 31, 2019

 

 

48

 

 

 

48

 

Additional paid-in capital

 

 

402,625

 

 

 

396,278

 

Accumulated other comprehensive income

 

 

 

 

 

1

 

Accumulated deficit

 

 

(361,960

)

 

 

(316,279

)

Total stockholders’ equity

 

 

40,713

 

 

 

80,048

 

Total liabilities and stockholders’ equity

 

$

57,963

 

 

$

103,471

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,448

 

 

 

21,610

 

 

 

33,113

 

 

 

44,879

 

General and administrative

 

 

5,526

 

 

 

5,359

 

 

 

10,776

 

 

 

12,392

 

Restructuring charges

 

 

 

 

 

 

 

 

1,944

 

 

 

 

Total operating expenses

 

 

18,974

 

 

 

26,969

 

 

 

45,833

 

 

 

57,271

 

Loss from operations

 

 

(18,974

)

 

 

(26,969

)

 

 

(45,833

)

 

 

(57,271

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income

 

 

(13

)

 

 

367

 

 

 

151

 

 

 

875

 

Other income

 

 

 

 

 

77

 

 

 

1

 

 

 

289

 

Total other income (expense), net

 

 

(13

)

 

 

444

 

 

 

152

 

 

 

1,164

 

Net loss

 

$

(18,987

)

 

$

(26,525

)

 

$

(45,681

)

 

$

(56,107

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.39

)

 

$

(0.76

)

 

$

(0.95

)

 

$

(1.61

)

Weighted average shares of common stock outstanding,

   basic and diluted

 

 

48,163,094

 

 

 

34,843,344

 

 

 

48,111,186

 

 

 

34,810,101

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(18,987

)

 

$

(26,525

)

 

$

(45,681

)

 

$

(56,107

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

 

1

 

 

 

(4

)

 

 

(1

)

 

8

 

Comprehensive loss

 

$

(18,986

)

 

$

(26,529

)

 

$

(45,682

)

 

$

(56,099

)

 

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 / unit data)

 

 

 

For the Three Months Ended June 30, 2020

 

 

 

Common

Stock

 

 

Amount

 

 

Additional

paid

in capital

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance at March 31, 2020

 

 

48,366,423

 

 

$

48

 

 

$

399,382

 

 

$

(1

)

 

$

(342,973

)

 

$

56,456

 

Equity-based compensation

 

 

 

 

 

 

 

 

3,243

 

 

 

 

 

 

 

 

 

3,243

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,987

)

 

 

(18,987

)

Forfeiture of restricted stock awards

 

 

(2,331

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale

   securities

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Balance at June 30, 2020

 

 

48,364,092

 

 

$

48

 

 

$

402,625

 

 

$

 

 

$

(361,960

)

 

$

40,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 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

 

 

 

 

 

 

 

 

6,347

 

 

 

 

 

 

 

 

 

6,347

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,681

)

 

 

(45,681

)

Vesting of restricted stock units

 

 

121,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of restricted stock awards

 

 

(41,153

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available for sale

   securities

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at June 30, 2020

 

 

48,364,092

 

 

$

48

 

 

$

402,625

 

 

$

 

 

$

(361,960

)

 

$

40,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

Common

Stock

 

 

Amount

 

 

Additional

paid

in capital

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance at March 31, 2019

 

 

35,414,914

 

 

$

35

 

 

$

327,709

 

 

$

7

 

 

$

(228,638

)

 

$

99,113

 

Equity-based compensation

 

 

 

 

 

 

 

 

3,911

 

 

 

 

 

 

 

 

 

3,911

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,525

)

 

 

(26,525

)

Forfeiture of restricted stock awards

 

 

(16,020

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available for sale

   securities

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Balance at June 30, 2019

 

 

35,398,894

 

 

$

35

 

 

$

331,620

 

 

$

3

 

 

$

(255,163

)

 

$

76,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

Common

Stock

 

 

Amount

 

 

Additional

paid

in capital

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance at December 31, 2018

 

 

35,432,460

 

 

$

35

 

 

$

324,209

 

 

$

(5

)

 

$

(199,056

)

 

$

125,183

 

Equity-based compensation

 

 

 

 

 

 

 

 

7,411

 

 

 

 

 

 

 

 

 

7,411

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56,107

)

 

 

(56,107

)

Forfeiture of restricted stock awards

 

 

(33,566

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale

   securities

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Balance at June 30, 2019

 

 

35,398,894

 

 

$

35

 

 

$

331,620

 

 

$

3

 

 

$

(255,163

)

 

$

76,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(45,681

)

 

$

(56,107

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Amortization of (discount)/premium on available-for-sale securities

 

 

(20

)

 

 

(235

)

Equity-based compensation expense

 

 

6,347

 

 

 

7,411

 

Depreciation expense

 

 

2,360

 

 

 

1,254

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current and non-current assets

 

 

362

 

 

 

(4,301

)

Accounts payable

 

 

(3,892

)

 

 

2,437

 

Accrued expenses and other current and non-current liabilities

 

 

(1,818

)

 

 

(2,687

)

Net cash used in operating activities

 

 

(42,342

)

 

 

(52,228

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(759

)

 

 

(3,092

)

Proceeds from sale and maturities of available-for-sale securities

 

 

7,900

 

 

 

43,349

 

Purchases of available-for-sale securities

 

 

(401

)

 

 

(22,559

)

Net cash provided by investing activities

 

 

6,740

 

 

 

17,698

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(35,602

)

 

 

(34,530

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

76,370

 

 

 

86,693

 

Cash, cash equivalents, and restricted cash at end of period

 

$

40,768

 

 

$

52,163

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Operating lease liabilities arising from obtaining right-of-use asset

 

$

 

 

$

1,629

 

Property and equipment included in accounts payable and accruals

 

$

27

 

 

$

395

 

 

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 / unit and per share / unit 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. In October 2013, the company changed its name to Solid Ventures, LLC and in June 2015, the company changed its name to Solid Biosciences, LLC. The company operated as a Delaware limited liability company under the name Solid Biosciences, LLC 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 (the “Corporate Conversion”) and changed its name to Solid Biosciences Inc. (the “Company”). In addition, entities formed solely for the purpose of holding membership interests in the Company’s limited liability company were merged with and into the Company. As a result of the Corporate Conversion, all of the Series 1 and 2 Senior Preferred, Junior Preferred Units, Series A, B, C and D Common Units of Solid Biosciences, LLC converted into shares of common stock of Solid Biosciences Inc. on a one for 0.8485 basis and all of the unit holders of Solid Biosciences, LLC became holders of common stock of Solid Biosciences Inc.  

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 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 April 2020, the Company 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 its manufacturing process. The FDA responded by maintaining the clinical hold and requesting further data and analyses relating to this manufacturing process. In June 2020, the Company submitted a response to the FDA that provided data related to manufacturing process improvements. In July 2020, the Company 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. The Company is evaluating next steps and plans to continue its dialogue with the FDA to determine the appropriate path for SGT-001.

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 pre-clinical 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 June 30, 2020, the Company has funded its operations primarily with the proceeds from the sale of redeemable preferred units and member units as well as the sale of common stock and prefunded warrants to purchase shares of its common stock in private placements and the sale of common stock in its initial public offering.

 

 

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 June 30, 2020, the Company had an accumulated deficit of $361,960. During the three and six months ended June 30, 2020, the Company incurred a net loss of $18,987 and $45,681, respectively, and the Company used $42,342 of cash in operations for the six months ended June 30, 2020. 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 and cash equivalents of $40,441 as of June 30, 2020 will be sufficient to fund its operating expenses and capital requirements into the first quarter of 2021. 

In accordance with the requirements of ASC 205-40, the Company determined that there is substantial doubt about the Company’s ability to continue as a going concern within twelve months of the issuance date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all, nor is it considered probable under the accounting standards. As such, under the requirements of ASC 205-40, management may not consider the potential for future capital raises or management plans to reduce costs that are not considered probable in its assessment of the Company’s ability to meet its obligations for the next twelve months. 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, pre-clinical 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, 2019. 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 six months ended June 30, 2020 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, 2019 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, 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. 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 $327 in separate restricted bank accounts as security deposits for leases of the Company’s facilities as of June 30, 2020 and December 31, 2019. The Company has included restricted cash of $327 as a non-current asset as of June 30, 2020 and December 31, 2019. 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:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Cash and cash equivalents as presented on balance sheet

 

$

40,441

 

 

$

76,043

 

Restricted cash, non-current, as presented on balance sheet

 

 

327

 

 

 

327

 

Cash and cash equivalents and restricted cash as presented on

   cash flow statement

 

$

40,768

 

 

$

76,370

 

 

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.

Recently Adopted Accounting Pronouncements

 

In August 2018, the Financial Accounting Standards Board issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This new standard modifies certain disclosure requirements on fair value measurements. This new standard became effective for the Company on January 1, 2020. The adoption of this new standard did not have a material impact on the Company’s disclosures.

Recently Issued Accounting Pronouncements  

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. This standard will be 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. 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 June 30, 2020

Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

 

 

$

14,462

 

 

$

 

 

$

14,462

 

 

 

$

 

 

$

14,462

 

 

$

 

 

$

14,462

 

10


 

 

 

 

Fair Value Measurements as of December 31, 2019

Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

 

 

$

50,037

 

 

$

 

 

$

50,037

 

Available-for-sale securities

 

 

 

 

 

7,481

 

 

 

 

 

 

7,481

 

 

 

$

 

 

$

57,518

 

 

$

 

 

$

57,518

 

 

As of June 30, 2020, there were no available-for-sale securities. As of December 31, 2019, the fair values of the Company’s available-for-sale debt securities were determined using Level 2 inputs. At December 31, 2019, the Company’s portfolio of available-for-sale securities consisted of corporate bond securities and commercial paper. During the six months ended June 30, 2020 and the year ended December 31, 2019, there were no transfers between Level 1, Level 2 and Level 3.

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.

4. Available-for-Sale Securities

As of June 30, 2020, there were no available-for-sale securities. As of December 31, 2019, the fair value of available-for-sale securities by type of security was as follows:

 

 

 

December 31, 2019

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gain

 

 

Gross

Unrealized

Loss

 

 

Fair

Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bond securities

 

 

1,502

 

 

 

1

 

 

 

 

 

 

1,503

 

Commercial paper

 

 

5,978

 

 

 

 

 

 

 

 

 

5,978

 

 

 

$

7,480

 

 

$

1

 

 

$

 

 

$

7,481

 

 

 

The estimated fair value and amortized cost of the Company’s available-for-sale securities by contractual maturity are summarized as follows: