Scholar Rock(SRRK) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited Q1 2020 financial statements show increased revenue and positive operating cash flow, primarily from a Gilead milestone, alongside rising expenses and a larger net loss, with ongoing R&D funding needs Consolidated Balance Sheets The balance sheet as of March 31, 2020, shows a significant increase in cash and cash equivalents, offset by decreases in marketable securities and total assets, leading to a decline in stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2020 | December 31, 2019 | Change ($k) | Change (%) | | :-------------------------- | :------------- | :---------------- | :---------- | :--------- | | Cash and cash equivalents | $95,434 | $36,308 | $59,126 | 162.8% | | Marketable securities | $65,214 | $121,140 | $(55,926) | (46.2)% | | Accounts receivable | $— | $25,000 | $(25,000) | (100.0)% | | Total current assets | $164,173 | $185,167 | $(20,994) | (11.3)% | | Total assets | $175,702 | $196,381 | $(20,679) | (10.5)% | | Total current liabilities | $27,100 | $32,814 | $(5,714) | (17.4)% | | Total liabilities | $77,055 | $83,480 | $(6,425) | (7.7)% | | Total stockholders' equity | $98,647 | $112,901 | $(14,254) | (12.6)% | Consolidated Statements of Operations and Comprehensive Loss The statements of operations for Q1 2020 indicate a substantial increase in revenue and operating expenses, resulting in a larger net and comprehensive loss compared to the prior year Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Item | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | Change ($k) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :---------- | :--------- | | Revenue | $5,030 | $3,106 | $1,924 | 61.9% | | Research and development expenses | $16,902 | $10,739 | $6,163 | 57.4% | | General and administrative expenses | $5,822 | $4,070 | $1,752 | 43.0% | | Total operating expenses | $22,724 | $14,809 | $7,915 | 53.4% | | Loss from operations | $(17,694) | $(11,703) | $(5,991) | 51.2% | | Other income (expense), net | $624 | $948 | $(324) | (34.2)% | | Net loss | $(17,070) | $(10,755) | $(6,315) | 58.7% | | Net loss per share, basic and diluted | $(0.58) | $(0.42) | | | | Comprehensive loss | $(16,873) | $(10,731) | $(6,142) | 57.2% | Consolidated Statements of Stockholders' Equity Stockholders' equity decreased during Q1 2020, primarily due to the net loss, partially offset by equity-based compensation and stock option exercises Changes in Stockholders' Equity (in thousands) | Item | Balance at Dec 31, 2019 | 3 Months Ended Mar 31, 2020 | Balance at Mar 31, 2020 | | :-------------------------------- | :---------------------- | :-------------------------- | :---------------------- | | Total Stockholders' Equity | $112,901 | $(14,254) | $98,647 | | Net Loss | | $(17,070) | | | Equity-based compensation expense | | $2,214 | | | Exercise of stock options | | $405 | | Consolidated Statements of Cash Flows Cash flows for Q1 2020 show a significant net increase in cash, driven by positive operating and investing activities, largely due to a Gilead milestone payment Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | $2,636 | $(15,530) | | Net cash provided by (used in) investing activities | $56,091 | $(32,378) | | Net cash provided by (used in) financing activities | $399 | $(157) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $59,126 | $(48,065) | | Cash and cash equivalents and restricted cash, end of period | $97,932 | $67,209 | Notes to Consolidated Financial Statements These notes provide detailed explanations of the company's business, significant accounting policies, financial instrument fair values, and other financial commitments 1. Nature of the Business Scholar Rock is a biopharmaceutical company focused on developing innovative medicines by targeting protein growth factors, with key product candidates SRK-015 and SRK-181 - Scholar Rock Holding Corporation is a biopharmaceutical company focused on discovering and developing innovative medicines for serious diseases by targeting protein growth factors[26] - Key product candidates include SRK-015 for Spinal Muscular Atrophy (SMA), currently in TOPAZ Phase 2 trial, and SRK-181 for CPI-resistant cancers, which initiated DRAGON Phase 1 trial in Q1 2020[26] - Operations have been primarily financed through equity financings (IPO in May 2018, secondary offering in June 2019) and research and development collaboration agreements, notably with Gilead Sciences, Inc[27][28] - The company anticipates incurring significant operating losses for several years and believes existing cash and marketable securities will fund operations for at least one year from March 31, 2020[29] 2. Summary of Significant Accounting Policies The unaudited financial statements adhere to SEC rules and GAAP, with no material changes to significant accounting policies from the prior annual report - The unaudited consolidated financial statements are prepared in accordance with SEC rules and GAAP, requiring management to make estimates and judgments[33][34] - No material changes to significant accounting policies were made from the Company's Annual Report on Form 10-K for the year ended December 31, 2019[30] - ASU 2018-15, related to customer's accounting for implementation costs in cloud computing arrangements, was adopted on January 1, 2020, with no material impact on the Company's financial position or disclosures[35] 3. Fair Value of Financial Assets and Liabilities All financial assets measured at fair value, primarily money market funds and U.S. Treasury obligations, are categorized as Level 1 Fair Value Measurements of Assets (in thousands) | Asset Type | March 31, 2020 (Total) | March 31, 2020 (Level 1) | December 31, 2019 (Total) | December 31, 2019 (Level 1) | | :------------------------------------------------- | :--------------------- | :----------------------- | :------------------------ | :------------------------ | | Money market funds | $79,259 | $79,259 | $34,896 | $34,896 | | U.S. Treasury obligations (cash & cash equivalents) | $12,994 | $12,994 | $— | $— | | U.S. Treasury obligations (marketable securities) | $65,214 | $65,214 | $121,140 | $121,140 | | Total assets | $157,467 | $157,467 | $156,036 | $156,036 | - All financial assets measured at fair value on a recurring basis, primarily money market funds and U.S. Treasury obligations, are categorized as Level 1[37] 4. Marketable Securities Marketable securities, exclusively U.S. Treasury obligations, experienced a significant decrease in fair value during Q1 2020 Marketable Securities Available-for-Sale (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | U.S. Treasury obligations (Amortized Cost) | $64,980 | $121,103 | | U.S. Treasury obligations (Unrealized Gains) | $234 | $39 | | U.S. Treasury obligations (Unrealized Losses) | $— | $(2) | | Total Fair Value | $65,214 | $121,140 | - The company's marketable securities, consisting entirely of U.S. Treasury obligations, decreased by approximately 46% from December 31, 2019, to March 31, 2020[39] 5. Accrued Expenses Total accrued expenses decreased in Q1 2020, mainly due to a reduction in accrued payroll and related expenses Accrued Expenses (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------- | :---------------- | | Accrued external research and development expense | $4,125 | $4,088 | | Accrued payroll and related expenses | $2,204 | $4,380 | | Accrued professional and consulting expense | $920 | $929 | | Accrued other | $127 | $213 | | Total | $7,376 | $9,610 | - Total accrued expenses decreased by $2.234 million, primarily due to a reduction in accrued payroll and related expenses[40] 6. Equity-Based Compensation Equity-based compensation expense increased year-over-year, with substantial unrecognized expense remaining for restricted stock and stock options Equity-Based Compensation Expense (in thousands) | Category | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $815 | $579 | | General and administrative | $1,399 | $1,039 | | Total | $2,214 | $1,618 | - Total equity-based compensation expense increased by $0.596 million (36.8%) year-over-year[41] - As of March 31, 2020, unrecognized equity-based compensation expense was $1.0 million for restricted stock (over 1.1 years) and $22.9 million for employee stock options (over 2.9 years)[42][45] Stock Option Activity (as of March 31, 2020) | Metric | Value | | :------------------------------------ | :-------------------- | | Outstanding as of December 31, 2019 | 2,401,382 shares | | Granted during the period | 1,194,385 shares | | Exercised during the period | (40,252) shares | | Cancelled during the period | (44,550) shares | | Outstanding as of March 31, 2020 | 3,510,965 shares | | Weighted Average Exercise Price (Mar 31, 2020) | $12.99 | | Weighted Average Fair Value of Options Granted (3M Mar 2020) | $9.64 | 7. Commitments and Contingencies The company has various lease commitments for corporate headquarters and a library development agreement, with no material legal proceedings - The company has an amended facility lease for its corporate headquarters at 620 Memorial Drive, expiring in September 2023, with an option to extend for 5 years[46] - A new facility lease at 301 Binney Street for its new corporate headquarters was entered in November 2019, expiring in August 2025, with an option to extend by two years; the accounting commencement date was not reached as of March 31, 2020[49] Operating Lease Liabilities Maturity Analysis (in thousands, as of March 31, 2020) | Year Ending December 31, | Undiscounted Cash Flows | | :------------------------------------------ | :---------------------- | | 2020 (excluding 3M ended Mar 31, 2020) | $1,093 | | 2021 | $1,619 | | 2022 | $1,668 | | 2023 | $1,279 | | Total lease payments | $5,659 | | Less imputed interest | $(624) | | Total operating lease liabilities | $5,035 | - The company entered a Library Development and Transfer Agreement with Specifica Inc. in December 2019, incurring $3.7 million in fees through 2023 for a customized antibody display library[50] - No material legal proceedings were ongoing during the three months ended March 31, 2020, and 2019[51] 8. Loan Payable The equipment line of credit with Silicon Valley Bank was fully repaid in June 2019 - The loan payable with Silicon Valley Bank, providing an equipment line of credit up to $2.0 million, was fully repaid in June 2019[52] 9. Agreements (Collaboration with Gilead) The collaboration with Gilead Sciences focuses on TGFβ inhibitors, with a $25 million preclinical milestone achieved and revenue recognized in Q1 2020 - The Master Collaboration Agreement with Gilead Sciences, Inc., signed in December 2018, focuses on discovering and developing specific inhibitors of TGFβ activation for fibrotic diseases[53] - Gilead holds exclusive options to license worldwide rights to product candidates from three TGFβ programs, with Scholar Rock responsible for antibody discovery and preclinical research[53] - A $25 million preclinical milestone was achieved in December 2019 for successful efficacy demonstration in preclinical studies, with the payment received in January 2020[56][94] - The company recognized $5.0 million in revenue from the Gilead Collaboration Agreement for the three months ended March 31, 2020[57] - Deferred revenue related to the agreement was $62.4 million as of March 31, 2020, expected to be recognized over a maximum of 1.75 years[57] - The COVID-19 pandemic is expected to decrease activity under the Gilead Programs in the near term, impacting revenue recognition timing[57] 10. Net Loss per Share Basic and diluted net loss per share are identical due to the company's net losses, rendering potentially dilutive securities anti-dilutive - Basic and diluted net loss per share are the same for all periods presented due to the company incurring net losses, making potentially dilutive securities anti-dilutive[58] Weighted Average Common Shares Outstanding (Basic and Diluted) | Period | Shares Outstanding | | :-------------------------- | :----------------- | | 3 Months Ended Mar 31, 2020 | 29,527,349 | | 3 Months Ended Mar 31, 2019 | 25,592,659 | Anti-Dilutive Common Stock Equivalents (as of March 31) | Item | 2020 | 2019 | | :-------------------- | :--------- | :--------- | | Restricted common stock | 227,064 | 571,437 | | Warrant | 7,614 | 7,614 | | Stock options | 3,510,965 | 2,271,870 | | Total | 3,745,643 | 2,850,921 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 financial performance, highlighting increased revenue from the Gilead collaboration, higher operating expenses, and a larger net loss, with COVID-19 impacting clinical trial timelines and future capital needs Overview Scholar Rock, a biopharmaceutical company, is advancing SRK-015 and SRK-181, both facing COVID-19 related clinical trial delays, while incurring significant net losses - Scholar Rock is a biopharmaceutical company developing innovative medicines by targeting protein growth factors, utilizing a proprietary platform for selective monoclonal antibodies[64] - SRK-015 for SMA is in the TOPAZ Phase 2 trial; enrollment completed in January 2020, with interim efficacy, safety, and PK/PD data now planned for Q4 2020, and top-line 12-month data for H1 2021, both delayed by approximately one quarter due to COVID-19[65] - SRK-181 for CPI-resistant cancers initiated the DRAGON Phase 1 trial in Q1 2020, with patient dosing commencing in April 2020; an update on dose escalation is anticipated in Q4 2020, with clinical response and safety data in 2021, also impacted by COVID-19[66][68] - The company continues to expand its pipeline, including a collaboration with Gilead for TGFβ inhibitors and plans to nominate a product candidate for iron-restricted anemias in 2020[69] - Scholar Rock incurred a net loss of $17.1 million for the three months ended March 31, 2020, and expects significant operating losses to continue due to ongoing R&D activities and public company costs[70] - The COVID-19 pandemic poses risks of material adverse effects on the business, preclinical studies, clinical trials (e.g., enrollment delays, missed assessments), and financial results, with the ultimate impact being highly uncertain[71][72] Financial Operations Overview Revenue is solely from the Gilead collaboration, with R&D and G&A expenses expected to rise as product candidates advance, and other income from investments - Revenue is currently recognized solely from the Gilead Collaboration Agreement, using a cost input method based on research and development services provided[73][74] - Research and development expenses, comprising employee costs, third-party services, manufacturing, and facility costs, are expected to increase as product candidates advance, though COVID-19 may temporarily decrease activity[75][78] - General and administrative expenses are anticipated to rise with business expansion, increased headcount, and costs associated with operating as a public company[83] - Other income (expense), net, primarily consists of interest income from cash and marketable securities[84] Results of Operations Q1 2020 saw revenue growth from the Gilead collaboration, but a larger increase in operating expenses led to a higher net loss Revenue Comparison (in thousands) | Period | 2020 | 2019 | Change ($k) | Change (%) | | :-------------------------- | :--- | :--- | :---------- | :--------- | | 3 Months Ended March 31 | $5,030 | $3,106 | $1,924 | 61.9% | Note: Increase primarily due to the Gilead Collaboration Agreement and a $25 million preclinical milestone achieved in December 2019 Operating Expenses Comparison (in thousands) | Expense Type | 2020 | 2019 | Change ($k) | Change (%) | | :------------------------ | :--- | :--- | :---------- | :--------- | | Research and development | $16,902 | $10,739 | $6,163 | 57.4% | | General and administrative | $5,822 | $4,070 | $1,752 | 43.0% | | Total Operating Expenses | $22,724 | $14,809 | $7,915 | 53.4% | Research and Development Expense Breakdown (in thousands) | Category | 2020 | 2019 | Change ($k) | Change (%) | | :-------------------------------- | :--- | :--- | :---------- | :--------- | | SRK-015 external costs | $4,200 | $1,743 | $2,457 | 141.0% | | SRK-181 external costs | $3,994 | $1,736 | $2,258 | 130.1% | | Other early programs and unallocated costs | $1,196 | $1,994 | $(798) | (40.0)% | | Employee compensation and benefits | $5,424 | $3,439 | $1,985 | 57.7% | | Facility and other | $2,088 | $1,827 | $261 | 14.3% | | Total Research and Development Expense | $16,902 | $10,739 | $6,163 | 57.4% | - Net loss increased by $6.315 million (58.7%) to $(17.070) million for the three months ended March 31, 2020[85] - Other income (expense), net, decreased due to lower income earned on the investment portfolio, reflecting lower cash balances and interest rates[92] Liquidity and Capital Resources The company's liquidity is supported by equity financings and the Gilead collaboration, with existing capital expected to fund operations into Q4 2021, but additional capital is required for full development - The company has historically funded operations through equity financings (IPO, secondary offerings) and research collaborations (Gilead)[93][95][96][97] Cash, Cash Equivalents and Marketable Securities (in thousands) | Date | Amount | | :-------------------- | :------- | | March 31, 2020 | $160,648 | | December 31, 2019 | $157,448 | Note: An increase of approximately $3.2 million, primarily due to a $25 million preclinical milestone payment from Gilead received in January 2020 Cash Flows Summary (in thousands) | Activity | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | $2,636 | $(15,530) | | Net cash provided by (used in) investing activities | $56,091 | $(32,378) | | Net cash provided by (used in) financing activities | $399 | $(157) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $59,126 | $(48,065) | - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements into the fourth quarter of 2021[104] - Additional capital will be required to complete clinical development for current programs, with future funding needs dependent on development costs, regulatory outcomes, and collaboration terms[104] Critical Accounting Policies and Use of Estimates Financial statement preparation involves management judgments and estimates, with no material changes to critical accounting policies from the prior annual report - The preparation of consolidated financial statements requires management to make judgments and estimates based on historical experience, known trends, and various assumptions[109] - There have been no material changes to the critical accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2019[110] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the reporting periods - The company did not have any off-balance sheet arrangements during the periods presented[111] Recent Accounting Pronouncements Recently issued accounting pronouncements are not expected to materially impact the company's financial statements or operations - The company has reviewed all recently issued accounting pronouncements and determined that they will not have a material impact on its financial statements or operations[112] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Scholar Rock is exempt from providing quantitative and qualitative disclosures about market risk - The registrant is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[113] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2020[115] - No change in internal control over financial reporting occurred during the three months ended March 31, 2020, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[116] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings or claims that are expected to have a material adverse effect on its business - The company was not subject to any material legal proceedings during the three months ended March 31, 2020, and 2019[117] Item 1A. Risk Factors The company faces significant risks including ongoing net losses, substantial capital needs for unproven product development, COVID-19 related clinical trial delays, intense competition, and complex regulatory and intellectual property challenges Risks Related to Our Business and Operations The company faces risks from historical net losses, future capital requirements, dependence on clinical-stage product candidates, unproven platform technology, and the impact of the COVID-19 pandemic - The company has incurred net losses since inception, reporting a $17.1 million net loss for Q1 2020, and expects to continue incurring significant losses as it advances product candidates[119] - Additional capital will be required to fund operations beyond Q4 2021 and complete clinical development and commercialization of product candidates, with no committed external funding sources beyond existing collaborations[104][123][127] - The business is highly dependent on the success of its clinical-stage product candidates, SRK-015 and SRK-181, which require significant additional clinical development, regulatory review, and investment[128] - The proprietary platform for discovering monoclonal antibodies is unproven and may not result in marketable products, potentially rendering the entire platform and pipeline of little value[130] - The company expects to grow its organization, requiring additional managerial, clinical, scientific, regulatory, and commercial personnel, which may be difficult to manage and attract due to intense competition[131][134] - The COVID-19 pandemic could materially and adversely affect the business, preclinical studies, clinical trials (e.g., enrollment delays, site access, data readouts), and financial results[143] - Preclinical development is uncertain, and programs may experience delays or fail to advance to clinical trials, impacting the product pipeline[148][149] - Interim and preliminary clinical trial results may change as more patient data become available and are subject to audit, validation, and verification procedures[176] - The company faces significant competition from other biotechnology and pharmaceutical companies with greater resources, potentially limiting demand and pricing for its product candidates[186][187] - Operations are concentrated in Cambridge, Massachusetts, and any business interruptions (e.g., natural disasters, disease outbreaks like COVID-19) or facilities transitions could adversely affect the business[198][200] Risks Related to Government Regulation The company is subject to lengthy and unpredictable regulatory approval processes, limited benefits from Orphan Drug Designation, strict healthcare laws, and complex data protection regulations - The regulatory approval process in the U.S., EU, and other jurisdictions is lengthy, time-consuming, and unpredictable, with significant potential for delays in clinical development and regulatory approval[201][206] - Orphan Drug Designation for SRK-015 for SMA provides limited benefits and does not assure faster development or market exclusivity if certain conditions are not met or if a clinically superior drug is approved[208][211][212] - Relationships with healthcare providers and third-party payors are subject to strict anti-kickback, fraud and abuse, and other healthcare laws (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA), with potential for criminal sanctions, civil penalties, and reputational harm for non-compliance[219][221][227] - Receiving regulatory approval in one jurisdiction does not guarantee approval in others, and ongoing regulatory obligations post-approval are costly and subject to penalties for non-compliance[228][230][233] - Commercial success depends on coverage and adequate reimbursement from third-party payors, which is uncertain and subject to increasing pressures to cap or reduce healthcare costs, including legislative and regulatory reforms like the ACA[236][238][240][243] - Compliance with U.S. and international data protection laws (e.g., HIPAA, GDPR, CCPA) is complex, costly, and subject to evolving interpretations, with potential for substantial fines and adverse publicity for non-compliance[253][255][260] - International operations are subject to anti-corruption (FCPA), anti-money laundering, export control, and sanctions laws, requiring additional resources and posing risks of civil and criminal penalties for violations[261][264][265] Risks Related to Our Intellectual Property Commercial success depends on obtaining and maintaining robust intellectual property protection, which is challenging, costly, and subject to legal uncertainties and third-party infringement claims - The company's commercial success depends on obtaining and maintaining patent, trademark, and trade secret protection, which is difficult, costly, and uncertain, with no guarantee that patent applications will result in issued patents or that existing patents will be upheld[266][267][268] - Changes in U.S. patent law (e.g., America Invents Act, Supreme Court rulings) have increased uncertainty regarding patent prosecution and enforcement, potentially diminishing the value of patents[271][306] - Reliance on intellectual property licensed from third parties means that termination of these licenses or disputes could result in the loss of significant rights essential for commercializing product candidates[274][279] - Failure to protect the confidentiality of trade secrets, or their independent development by others, would harm the company's business and competitive position[281][282] - Third-party claims of intellectual property infringement could prevent or delay product development, leading to expensive litigation, substantial damages, or the need to obtain costly licenses[285][286][288] - Patent terms may be inadequate to protect competitive position for a sufficient amount of time, potentially leading to competition from biosimilars upon patent expiration[316] - Obtaining patent term extensions and data exclusivity for product candidates is not guaranteed, and failure to do so could materially harm the business[317] Risks Related to Our Reliance On Third Parties The company heavily relies on third parties for preclinical and clinical development, manufacturing, and collaborations, posing risks of delays, quality issues, and funding disruptions - The company relies heavily on third parties (universities, CROs, strategic partners) to conduct preclinical studies and clinical trials, with limited control over their activities and compliance with regulatory requirements (GCPs)[319][320] - Failure by third parties to meet contractual duties, deadlines, or regulatory requirements, or disruptions due to the COVID-19 pandemic, could delay or terminate development timelines and hinder regulatory approval or commercialization[322] - Reliance on third-party contract manufacturers for preclinical and clinical product supplies carries risks of limited or interrupted supply, quality issues, and challenges in manufacturing scale-up, especially for single-source suppliers[324][325][329] - The Gilead Collaboration Agreement, while a source of funding, carries risks including Gilead's potential non-performance, disagreements, or early termination, which could negatively impact funding and development of the programs[331][333] - Future collaborations are uncertain and complex to negotiate, and failure to secure or maintain them could force the company to curtail development or undertake costly activities independently[335][340] Risks Related to Our Common Stock The common stock price is highly volatile, influenced by clinical and regulatory outcomes, with significant insider ownership and anti-takeover provisions affecting stockholder control - The price of the company's common stock is highly volatile, influenced by clinical trial results, regulatory decisions, competition, and broader market factors, including the COVID-19 pandemic[341][345] - The company does not intend to pay dividends, meaning any returns to stockholders will be limited to stock appreciation[346] - Executive officers, directors, and their affiliates beneficially hold approximately 22.9% of outstanding voting stock, enabling them to exert significant influence over matters requiring stockholder approval[347] - As an emerging growth company (EGC) and potentially a smaller reporting company, the company benefits from reduced reporting requirements, which may make its common stock less attractive to some investors[348][351][353] - Operating as a public company incurs significant legal, accounting, and compliance expenses, and failure to maintain an effective system of internal control over financial reporting could harm the business and stock price[354][356] - Sales of a substantial number of shares by existing stockholders, including Gilead's locked-up shares, could cause the stock price to fall[360][361] - Anti-takeover provisions in charter documents and Delaware law could delay or prevent a change of control, limiting the market price of common stock and potentially frustrating stockholder attempts to replace management[364][366] - Exclusive forum provisions in the bylaws, requiring disputes to be resolved in specific judicial forums, could limit stockholders' ability to obtain a favorable forum for disputes and potentially increase litigation costs[368][371] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not engage in any unregistered sales of equity securities and had no issuer purchases of equity securities during the reporting period - Not applicable for unregistered sales of equity securities[373] - No issuer purchases of equity securities were made[374] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[375] Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - No mine safety disclosures were reported[376] Item 5. Other Information Dr. Alan J. Buckler, the company's Chief Scientific Officer, notified his resignation, effective June 1, 2020 - Alan J. Buckler, Ph.D., Chief Scientific Officer, notified the company of his resignation, effective June 1, 2020, to pursue other opportunities[377] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, investor agreements, and various certifications - Exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated By-laws, Investors' Rights Agreement, Specimen Stock Certificate, Warrant to Purchase Stock, and certifications (31.1, 31.2, 32.1, 101)[380] SIGNATURES The report is duly signed on behalf of Scholar Rock Holding Corporation by Nagesh K. Mahanthappa, Ph.D., President and Chief Executive Officer, and Erin Moore, Senior Vice President, Finance, on May 7, 2020 - The report was signed by Nagesh K. Mahanthappa, Ph.D., President and Chief Executive Officer, and Erin Moore, Senior Vice President, Finance, on May 7, 2020[384]