Synlogic(US:SYBX)2021-08-12 14:12PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Synlogic, Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2021, including balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instruments, equity, and collaboration agreements Unaudited Consolidated Balance Sheets This section provides a snapshot of Synlogic's financial position, detailing assets, liabilities, and equity as of June 30, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | December 31, 2020 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total Assets | $156,884 | $143,840 | +$13,044 | | Total Liabilities | $28,806 | $28,705 | +$101 | | Total Stockholders' Equity | $128,078 | $115,135 | +$12,943 | Unaudited Consolidated Statements of Operations and Comprehensive Loss This section presents Synlogic's financial performance, including revenue, expenses, and net loss for the three and six months ended June 30, 2021 and 2020 Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (YoY) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Revenue | $246 | $445 | $(199) | $246 | $545 | $(299) | | Research and development | $10,719 | $12,909 | $(2,190) | $21,899 | $25,586 | $(3,687) | | General and administrative | $4,061 | $3,473 | $588 | $7,912 | $7,294 | $618 | | Total operating expenses | $14,780 | $16,382 | $(1,602) | $29,811 | $32,880 | $(3,069) | | Loss from operations | $(14,534) | $(15,937) | $1,403 | $(29,565) | $(32,335) | $2,770 | | Net loss | $(14,485) | $(15,535) | $1,050 | $(29,456) | $(31,363) | $1,907 | | Net loss per share - basic and diluted | $(0.28) | $(0.44) | $0.16 | $(0.63) | $(0.91) | $0.28 | Unaudited Consolidated Statements of Stockholders' Equity This section details changes in Synlogic's stockholders' equity, including additional paid-in capital and accumulated deficit, for the periods presented Stockholders' Equity Highlights (in thousands) | Metric | June 30, 2021 | June 30, 2020 | | :-------------------- | :------------ | :------------ | | Total Stockholders' Equity | $128,078 | $131,672 | | Additional paid-in capital (6 months) | $387,782 | $333,925 | | Accumulated deficit (6 months) | $(259,767) | $(202,501) | - Proceeds from issuance of common stock, net of issuance costs, for the six months ended June 30, 2021, included $32,575 thousand from a public offering and $8,050 thousand from an at-the-market (ATM) offering20 - Equity-based compensation expense for the six months ended June 30, 2021, was $1,753 thousand20 Unaudited Consolidated Statements of Cash Flows This section outlines Synlogic's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash used in operating activities | $(25,321) | $(21,467) | $(3,854) | | Net cash (used in) provided by investing activities | $(18,591) | $22,915 | $(41,506) | | Net cash provided by financing activities | $40,649 | $3,718 | $36,931 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(3,263) | $5,166 | $(8,429) | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of Synlogic's accounting policies, financial instruments, equity, and collaboration agreements - Synlogic, Inc. is a clinical-stage biopharmaceutical company focused on the drug discovery and development of Synthetic Biotic™ medicines, leveraging a proprietary platform to develop beneficial microbes for therapeutic functions2485 - As of June 30, 2021, the Company had approximately $115.5 million in cash, cash equivalents, and short-term marketable securities, and an accumulated deficit of approximately $259.8 million. Management believes it has sufficient cash to fund operations for at least twelve months26134145 Fair Value Measurements at June 30, 2021 (in thousands) | Description | Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------ | :--------- | :------ | :------ | :------ | | Money market funds | $29,243 | $29,243 | $— | $— | | Commercial paper | $67,959 | $— | $67,959 | $— | | Corporate debt securities | $9,481 | $— | $9,481 | $— | | U.S. government agency securities and treasuries | $8,778 | $8,778 | $— | $— | | Total | $115,461 | $38,021 | $77,440 | $— | - During the six months ended June 30, 2021, the Company sold 2,447,211 shares of common stock through an at-the-market (ATM) offering program, generating net proceeds of approximately $8.1 million44 - Total equity-based compensation expense was approximately $1.8 million for the six months ended June 30, 2021, compared to $2.2 million for the corresponding period in 20205556 - In June 2021, Synlogic entered into a Pilot Collaboration and Option Agreement with Roche for the research and pre-clinical development of a Synthetic Biotic medicine for inflammatory bowel disease (IBD). Roche paid an upfront nonrefundable technology access fee of $1.0 million (received in July 2021) and the Company is eligible for up to $5.0 million in milestone payments575859103104 - The collaboration with AbbVie for IBD treatment was terminated in May 2020, with Synlogic regaining all rights to IBD Synthetic Biotic medicines. No revenue was recognized from the AbbVie collaboration for the three months ended June 30, 2021, compared to $0.4 million in the prior year period7173112 - The Company made a $30.0 million prepayment to Ginkgo Bioworks, Inc. for foundry services over an initial five-year term. As of June 30, 2021, remaining prepaid research and development costs related to this transaction were $4.5 million (current) and $7.5 million (non-current)7082 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Synlogic's business, pipeline progress, and financial performance for the three and six months ended June 30, 2021, addressing liquidity, funding, and COVID-19 impacts - Synlogic is a clinical-stage biopharmaceutical company focused on developing Synthetic Biotic™ medicines for metabolic disorders (Phenylketonuria (PKU) and Enteric Hyperoxaluria) and building a portfolio in immunology and oncology85 - SYNB1618 for PKU: Initiated a Phase 2 clinical trial (SynPheny-1 Study) in Q3 2020 to evaluate safety, tolerability, and potential to lower blood Phe levels in adult PKU patients94 - SYNB8802 for Enteric Hyperoxaluria: Initiated a Phase 1 clinical trial in Q4 2020. Part A results (March 2021) demonstrated proof of mechanism and dose-responsive reductions in urinary oxalate in healthy volunteers, leading to advancement to Part B in patients9798 - SYNB1891 for Oncology: Initiated a Phase 1 clinical trial in January 2020 for advanced solid tumors and lymphoma. Interim data (December 2020) showed target engagement and STING activation. The combination arm with atezolizumab was initiated in December 2020100 Key Financial Performance (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | | :-------------------- | :--- | :--- | :----- | | Revenue | $246 | $445 | $(199) | | R&D Expense | $10,719 | $12,909 | $(2,190) | | G&A Expense | $4,061 | $3,473 | $588 | | Net Loss | $(14,485) | $(15,535) | $1,050 | Key Financial Performance (Six Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | | :-------------------- | :--- | :--- | :----- | | Revenue | $246 | $545 | $(299) | | R&D Expense | $21,899 | $25,586 | $(3,687) | | G&A Expense | $7,912 | $7,294 | $618 | | Net Loss | $(29,456) | $(31,363) | $1,907 | - As of June 30, 2021, the Company had approximately $115.5 million in cash, cash equivalents, and short-term marketable securities. Net cash provided by financing activities for the six months ended June 30, 2021, totaled $40.6 million, primarily from common stock issuances134137142 - The Company expects to incur substantial net losses for the foreseeable future and will require additional funding to complete product development and potential commercialization144145 - The COVID-19 pandemic may significantly disrupt clinical trial activities, patient enrollment, and regulatory reviews, potentially impacting business operations and funding requirements110203204205207 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Synlogic is not required to provide quantitative and qualitative disclosures about market risk - Synlogic, Inc. is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk153 Item 4. Controls and Procedures Management evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2021, concluding they were effective. No material changes in internal controls over financial reporting were identified during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2021156 - No changes in internal controls over financial reporting were identified during the fiscal quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal controls157 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - Synlogic, Inc. is not currently a party to any material legal proceedings159 Item 1A. Risk Factors This section outlines significant risks to Synlogic's financial condition, product development, regulatory approvals, intellectual property, and commercialization, including external factors - Synlogic is a clinical-stage biopharmaceutical company with a history of significant operating losses (accumulated deficit of approximately $259.8 million as of June 30, 2021) and expects to continue incurring losses, with no guarantee of achieving profitability108166 - The company will require substantial additional funding for research and development, clinical trials, regulatory approvals, manufacturing, and marketing, which may not be available on acceptable terms, potentially leading to delays or termination of programs168170 - Clinical trials are costly, time-consuming, and inherently risky, with potential for delays due to patient enrollment difficulties, adverse events, or regulatory holds, and no guarantee of demonstrating safety and efficacy to regulatory authorities' satisfaction178180 - The company's synthetic biology approach for novel therapeutics is unproven, and product candidates may cause undesirable side effects, leading to clinical trial interruptions, restrictive labeling, or significant negative consequences post-marketing approval182187188 - Even if regulatory approval is obtained, the company will remain subject to ongoing regulatory requirements (manufacturing, labeling, safety reporting), and non-compliance could result in penalties, withdrawal of approval, or market restrictions211214215 - The company relies on a combination of patents, trade secret protection, and regulatory exclusivity (e.g., BPCIA) to protect its intellectual property, but obtaining and maintaining broad, enforceable protection is uncertain and subject to challenges and third-party infringement claims247249251258261 - Reliance on third parties for research, preclinical, clinical studies, and manufacturing introduces risks of unsatisfactory performance, delays, or non-compliance, which could adversely affect product development and commercialization schedules275276281 - Commercial success depends on developing internal sales and marketing capabilities or securing third-party collaborations, and achieving market acceptance by physicians, patients, and payors, which is uncertain, especially given substantial competition and pressure on reimbursement290295297300303 - The COVID-19 pandemic may materially and adversely affect business operations, including clinical trial activities, patient enrollment, and regulatory reviews, and could impact the company's ability to access capital203204205207 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the six months ended June 30, 2021, employees surrendered shares to cover tax withholding obligations upon the vesting of restricted stock awards, which is not considered a share buyback program - Employees surrendered 18,187 shares to the company during the six months ended June 30, 2021, for the payment of minimum tax liability withholding obligations upon the vesting of restricted stock. This is not considered a share buyback program320 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities reported by the company321 Item 4. Mine Safety Disclosures This item is not applicable to Synlogic, Inc - Mine Safety Disclosures are not applicable to Synlogic, Inc322 Item 5. Other Information No other information was reported under this item - No other information was provided under this item323 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements and certifications - Key exhibits filed include a License and Services Agreement with Azzur Cleanrooms-On-Demand, a Pilot Collaboration and Option Agreement with Roche, and Certifications of the Chief Executive Officer and Interim Chief Financial Officer328 Signatures The report is duly signed on behalf of Synlogic, Inc. by its President and Chief Executive Officer, Aoife Brennan, and Interim Chief Financial Officer, Gregg Beloff - The report was signed by Aoife Brennan, President and Chief Executive Officer, and Gregg Beloff, Interim Chief Financial Officer332