Synlogic(SYBX) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements present Synlogic's financial position, operating results, and cash flows as of and for the three months ended March 31, 2022 Unaudited Consolidated Balance Sheets The balance sheets as of March 31, 2022, show total assets of $159.3 million, cash and equivalents of $120.5 million, and an accumulated deficit of $306.6 million Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $20,851 | $16,438 | | Short-term marketable securities | $99,667 | $112,150 | | Total current assets | $124,418 | $133,309 | | Total assets | $159,309 | $174,736 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $9,664 | $10,080 | | Total liabilities | $27,015 | $27,470 | | Accumulated deficit | $(306,569) | $(290,872) | | Total stockholders' equity | $132,294 | $147,266 | Unaudited Consolidated Statements of Operations and Comprehensive Loss For Q1 2022, the company reported $0.244 million in revenue, a net loss of $15.7 million, and a loss per share of $0.22, reflecting increased operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $244 | $0 | | Research and development | $11,738 | $11,180 | | General and administrative | $4,271 | $3,851 | | Loss from operations | $(15,765) | $(15,031) | | Net loss | $(15,697) | $(14,971) | | Net loss per share | $(0.22) | $(0.36) | Unaudited Consolidated Statements of Cash Flows Net cash used in operating activities was $15.5 million for Q1 2022, offset by $19.8 million from investing activities, resulting in a net cash increase of $4.4 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,477) | $(13,976) | | Net cash provided by investing activities | $19,758 | $154 | | Net cash provided by financing activities | $132 | $8,019 | | Net increase (decrease) in cash | $4,413 | $(5,803) | Notes to Unaudited Consolidated Financial Statements The notes provide details on the company's clinical-stage biopharmaceutical business, its cash runway, revenue from the Roche collaboration, and significant prepayments to Ginkgo Bioworks - The company is a clinical-stage biopharmaceutical company focused on developing Synthetic Biotics, novel drug candidates designed to perform therapeutic functions[25] - Management believes the company has sufficient cash ($120.5 million in cash, cash equivalents, and short-term marketable securities) to fund operations for at least the next twelve months from the date of this filing[26] - In June 2021, the company entered into a collaboration and option agreement with Roche to develop Synthetic Biotics for inflammatory bowel disease. The company recognized $0.2 million in revenue from this agreement in Q1 2022[50][51] - The company has a collaboration with Ginkgo Bioworks, which included a $30.0 million prepayment for foundry services. As of March 31, 2022, $10.7 million of this prepayment remained ($0.9 million current, $9.8 million non-current)[53][62] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic shift to metabolic diseases, pipeline advancements, and financial performance, including Q1 2022 revenue of $0.2 million, a net loss of $15.7 million, and sufficient cash reserves Overview Synlogic, a clinical-stage biotech, focuses on developing Synthetic Biotics for metabolic diseases, with a lead PKU program nearing Phase 3 and a strategic shift away from immuno-oncology - The lead program in Phenylketonuria (PKU) has demonstrated proof of concept, with plans to start a pivotal Phase 3 clinical trial in the first half of 2023[66] - The pipeline also includes candidates for homocystinuria (HCU) and enteric hyperoxaluria, and a research collaboration with Roche for inflammatory bowel disease (IBD)[66] - In November 2021, the company announced it was not planning further studies for immuno-oncology to focus on orally administrated Synthetic Biotics for diseases with toxic metabolites in the GI tract[84] Results of Operations Q1 2022 revenue was $0.2 million from the Roche collaboration, with R&D expenses increasing to $11.7 million and G&A expenses to $4.3 million, resulting in a net loss of $15.7 million Comparison of Operations (in thousands) | Metric | Q1 2022 | Q1 2021 | Change ($) | | :--- | :--- | :--- | :--- | | Revenue | $244 | $0 | $244 | | Research and development | $11,738 | $11,180 | $558 | | General and administrative | $4,271 | $3,851 | $420 | | Loss from operations | $(15,765) | $(15,031) | $(734) | | Net loss | $(15,697) | $(14,971) | $(726) | R&D Expenses by Program (in thousands) | Program | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | SYNB1618 | $766 | $977 | | SYNB1934 | $517 | $90 | | SYNB8802 | $1,132 | $1,741 | | SYNB1891 | $216 | $762 | | External pre-development & unallocated | $1,551 | $1,032 | | Internal R&D expenses | $7,556 | $6,578 | | Total R&D | $11,738 | $11,180 | Liquidity and Capital Resources As of March 31, 2022, Synlogic held $120.5 million in cash and equivalents, used $15.5 million in operations for Q1 2022, and anticipates sufficient liquidity for the next 12 months, though future funding will be required - As of March 31, 2022, the company had approximately $120.5 million in cash, cash equivalents, and short-term marketable securities[110] - Net cash used in operating activities was approximately $15.5 million for the three months ended March 31, 2022[114] - The company believes its existing cash, cash equivalents, and marketable securities will be sufficient to meet anticipated cash requirements for at least the next 12 months from the filing date[121] - Future funding requirements are substantial and depend on the success of R&D, clinical trial outcomes, regulatory approval timelines, and manufacturing costs[122] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Synlogic is exempt from providing 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[128] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[131] - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[132] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[134] Item 1A. Risk Factors The company faces significant financial, development, regulatory, intellectual property, third-party reliance, and commercialization risks, including a history of losses and the unproven nature of its platform - Financial Risks: The company has a history of losses, expects them to continue, and will require substantial additional funding which may not be available[139][141][143] - Development Risks: The synthetic biology approach is unproven and may not lead to marketable products. Clinical trials are costly, time-consuming, and results from early trials may not predict future success[139][157][170] - Regulatory and Compliance Risks: The regulatory approval process is lengthy and unpredictable. The company is subject to complex healthcare fraud, abuse, and data privacy laws (e.g., HIPAA, CCPA)[183][209][213] - Intellectual Property Risks: The company may not be able to obtain or maintain effective patent protection, and could face infringement claims from third parties[140][233][244] - Reliance on Third Parties: The company relies on third parties for clinical trial conduct (CROs) and manufacturing, and these parties may not perform satisfactorily[140][259][264] - Commercialization Risks: The company faces substantial competition, and the success of any approved product depends on market acceptance by physicians and payors, as well as adequate reimbursement[280][283] Item 5. Other Information Michael Jensen was appointed Chief Financial Officer, effective March 3, 2022, and will assume principal accounting and financial officer roles on May 13, 2022 - Michael Jensen was appointed Chief Financial Officer, effective March 3, 2022, and will become the principal accounting and financial officer on May 13, 2022[312] - Gregg Beloff, the Interim Chief Financial Officer, will continue to serve the company as a consultant after the transition[312]