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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 September 30, 2021

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 November 1, 2021, the registrant had 110,295,600 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 September 30, 2021 and December 31, 2020

2

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

3

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

5

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

7

 

Notes to the Condensed Consolidated Financial Statements

8

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

79

Item 6.

Exhibits

80

 

Signatures

81

 

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)

 

 

 

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.