Singular Genomics Systems(OMIC) - 2022 Q3 - Quarterly Report

Part I Financial Statements (Unaudited) The company reported a net loss of $69.8 million for the nine months ended September 30, 2022, with $263.8 million in cash and an accumulated deficit of $221.7 million Notes to Condensed Financial Statements The notes detail the company's business as a life science technology firm developing sequencing technologies, highlighting its June 2021 IPO, adoption of ASC 842 for leases, and significant future lease commitments including a $179.0 million headquarters lease - The company develops next-generation sequencing technologies, with its commercially available G4 Sequencing Platform and the in-development PX system for multiomics[34] - The company believes its cash, cash equivalents, and short-term investments of $263.8 million as of September 30, 2022, are sufficient to fund operations for at least the next 12 months[37] - Effective January 1, 2022, the company adopted ASC 842, Leases, resulting in the recognition of $7.1 million in operating lease liabilities and $6.4 million in right-of-use lease assets[57] - The company has a significant future commitment for a new headquarters (OAS Lease), which has not yet commenced but has total undiscounted future minimum lease payments of approximately $179.0 million[89] - As of September 30, 2022, the company had $10.5 million in long-term debt outstanding under its loan agreement with Silicon Valley Bank (SVB). An amendment extended the drawdown period for an additional $25.0 million to March 31, 2024, contingent on a revenue hurdle[67][69][70] Condensed Balance Sheet Data (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents & short-term investments | $263,840 | $339,223 | | Total current assets | $286,114 | $347,760 | | Total assets | $345,475 | $355,648 | | Liabilities & Equity | | | | Total current liabilities | $14,178 | $6,744 | | Total liabilities | $68,550 | $19,475 | | Accumulated deficit | $(221,674) | $(151,896) | | Total stockholders' equity | $276,925 | $336,173 | Condensed Statement of Operations Data (in thousands, except per share data) | Account | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Research and development | $35,439 | $23,200 | | Selling, general and administrative | $35,518 | $18,406 | | Loss from operations | $(70,957) | $(41,606) | | Net loss | $(69,778) | $(79,011) | | Basic and diluted net loss per share | $(0.98) | $(2.05) | Condensed Statement of Cash Flows Data (in thousands) | Account | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(67,177) | $(36,002) | | Net cash used in investing activities | $(39,737) | $(107,536) | | Net cash provided by financing activities | $151 | $371,318 | | Net (decrease) increase in cash | $(106,763) | $227,780 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's pre-revenue status, significant operating losses due to R&D and commercialization investments, and strong liquidity with $263.8 million in cash expected to fund operations for at least 12 months - The company is executing a commercialization plan for its G4 sequencer, which launched in December 2021, and is developing its second product, the PX multiomics platform, with a technology access program planned for Q4 2022[114][115] - The company expects expenses to increase significantly due to the commercialization of the G4, development of the PX, expansion of sales and manufacturing infrastructure, and hiring of qualified personnel[119] - Although G4 shipments began in Q2 2022, the company has not yet recognized revenue, as it is contingent upon meeting customer acceptance criteria[121][163] - The company filed a shelf registration statement on Form S-3 in July 2022, allowing it to offer up to $250 million in securities, including an 'at the market' offering of up to $100 million in common stock, to provide future capital flexibility[144] Results of Operations The company's loss from operations increased significantly for both the three and nine-month periods ended September 30, 2022, driven by higher R&D and SG&A expenses due to increased personnel and facility costs Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $12,732 | $8,910 | 43% | | Selling, general and administrative | $11,962 | $8,551 | 40% | | Loss from operations | $(24,694) | $(17,461) | 41% | | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change | | Research and development | $35,439 | $23,200 | 53% | | Selling, general and administrative | $35,518 | $18,406 | 93% | | Loss from operations | $(70,957) | $(41,606) | 71% | - For the nine months ended Sep 30, 2022, R&D expenses increased by $12.2 million (53%) YoY, primarily due to a $6.1 million increase in employee compensation costs and a $3.5 million increase in facility and IT costs[136] - For the nine months ended Sep 30, 2022, SG&A expenses increased by $17.1 million (93%) YoY, driven by a $10.3 million rise in employee compensation and a $3.5 million increase in professional fees related to being a public company[138] Liquidity and Capital Resources The company held $263.8 million in cash as of September 30, 2022, sufficient for 12 months of operations, despite increased cash used in operating activities and significant future lease and debt obligations - As of September 30, 2022, the company held $263.8 million in cash, cash equivalents, and short-term investments, with an accumulated deficit of $221.7 million[140] - Future capital obligations include minimum lease payments of $6.5 million in 2023 and $259.0 million thereafter, and debt payments of $0.7 million in 2023 and $12.2 million thereafter[141] Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(67,177) | $(36,002) | | Net cash used in investing activities | $(39,737) | $(107,536) | | Net cash provided by financing activities | $151 | $371,318 | Quantitative and Qualitative Disclosures about Market Risk The company reported no substantial changes to its market risks during the quarter ended September 30, 2022, compared to its prior annual report - There were no substantial changes to the company's market risks during the quarter ended September 30, 2022[176] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[177] - No material changes to the company's internal control over financial reporting occurred during the quarter[178] Part II Legal Proceedings The company is not currently a party to any material legal proceedings but acknowledges potential involvement in future ordinary course business litigation - As of the filing date, the company is not a party to any material legal proceedings[182] Risk Factors The company faces extensive risks including limited operating history, significant losses, dependence on G4 commercialization and PX development, intense competition, supply chain issues, and intellectual property litigation - The company is a pre-revenue entity with a history of significant losses ($221.7 million accumulated deficit as of Sep 30, 2022) and expects losses to continue as it invests in commercialization and R&D[185] - The business is highly dependent on the successful commercialization of the G4 instrument and development of the planned PX, with noted delays in scaling up the manufacturing process for initial G4 units[193] - The company faces intense competition from established players with greater resources, brand recognition, and existing customer relationships[189][190] - Potential litigation over intellectual property is a significant risk, as the company operates in a crowded technology area with numerous patents held by competitors[260][261] - Changes in the regulatory landscape for Research Use Only (RUO) products or Laboratory Developed Tests (LDTs) by the FDA could subject the company's products to more stringent and costly regulation[296][297] Use of Proceeds The company's June 2021 IPO generated $237.2 million in net proceeds, with no material change in the planned use of these funds - The company's IPO in June 2021 resulted in net proceeds of approximately $237.2 million[343] - There has been no material change in the planned use of proceeds from the IPO[343] Other Items The company reported no defaults on senior securities, no mine safety disclosures, and no other information required under Item 5 for the period - The company reported 'None' for Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[344][345][346]