10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2022

 

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 001-37566

 

SYNLOGIC, INC.

(Exact name of Registrant as specified in its Charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

26-1824804

(I.R.S. Employer

Identification No.)

 

 

 

301 Binney St., Suite 402

Cambridge, MA

(Address of principal executive offices)

 

02142

(Zip Code)

(617) 401-9975

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.001 per share

SYBX

The Nasdaq Capital 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, a 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 3, 2022, there were 70,519,940 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained herein are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

the success of our research and development efforts;
the initiation, progress, timing, costs and results of clinical trials for our product candidates;
the time and costs involved in obtaining regulatory approvals for our product candidates;
the success of our collaborations with third parties;
the progress, timing and costs involved in developing manufacturing processes and in manufacturing products, as well as agreements with third-party manufacturers;
the rate of progress and cost of our commercialization activities;
the expenses we incur in marketing and selling our product candidates, if approved;
the revenue generated by sales of our product candidates, if approved;
the emergence of competing or complementary technological developments;
the terms and timing of any additional collaborative, licensing or other arrangements that we may establish;
the acquisition of businesses, products and technologies;
our need to implement additional infrastructure and internal systems;
our need to add personnel and financial and management information systems to support our product development and potential future commercialization efforts, and to enable us to operate as a public company;
the development of major public health concerns, including the novel coronavirus outbreak or other pandemics arising globally, and the current and future impact of it and COVID-19, or geopolitical tensions, such as the armed conflict between Russia and Ukraine, on our clinical trials, business operations and funding requirements; and
other risks and uncertainties, including those listed under Part II, Item 1A. “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

 


SYNLOGIC, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Unaudited Consolidated Balance Sheets

 

1

 

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Loss

 

2

 

 

 

Unaudited Consolidated Statements of Stockholders’ Equity

 

3

 

 

 

Unaudited Consolidated Statements of Cash Flows

 

4

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

5

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

12

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

26

 

 

 

Item 4. Controls and Procedures

 

26

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

27

 

 

 

Item 1A. Risk Factors

 

27

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

60

 

 

 

Item 3. Defaults Upon Senior Securities

 

60

 

 

 

Item 4. Mine Safety Disclosures

 

60

 

 

 

Item 5. Other Information

 

60

 

 

 

Item 6. Exhibits

 

61

 

 

 

Signatures

 

62

 

 


 

SYNlogic, Inc. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,622

 

 

$

16,438

 

Short-term marketable securities

 

 

76,034

 

 

 

112,150

 

Accounts receivable

 

 

1,500

 

 

 

 

Prepaid expenses and other current assets

 

 

4,302

 

 

 

4,721

 

Total current assets

 

 

97,458

 

 

 

133,309

 

Long-term marketable securities

 

 

 

 

 

8,041

 

Property and equipment, net

 

 

7,901

 

 

 

9,088

 

Right of use asset - operating lease

 

 

14,240

 

 

 

13,889

 

Restricted cash

 

 

1,097

 

 

 

1,097

 

Prepaid research and development, net of current portion

 

 

7,529

 

 

 

9,309

 

Other assets

 

 

12

 

 

 

3

 

Total assets

 

$

128,237

 

 

$

174,736

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,718

 

 

$

1,944

 

Accrued expenses

 

 

4,770

 

 

 

4,402

 

Deferred revenue

 

 

971

 

 

 

531

 

Lease liability - operating lease

 

 

4,130

 

 

 

3,191

 

Finance lease obligations

 

 

13

 

 

 

12

 

Total current liabilities

 

 

11,602

 

 

 

10,080

 

Long-term liabilities:

 

 

 

 

 

 

Lease liability - operating lease, net of current portion

 

 

16,199

 

 

 

17,372

 

Finance lease obligations, net of current portion

 

 

8

 

 

 

18

 

Total long-term liabilities

 

 

16,207

 

 

 

17,390

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

 

 

 

 

250,000,000 shares authorized as of September 30, 2022 and December 31, 2021.
  
70,285,495 shares issued and outstanding as of September 30, 2022 and
   
69,698,844 shares issued and outstanding as of December 31, 2021.

 

 

70

 

 

 

70

 

Additional paid-in capital

 

 

441,072

 

 

 

438,113

 

Accumulated other comprehensive loss

 

 

(391

)

 

 

(45

)

Accumulated deficit

 

 

(340,323

)

 

 

(290,872

)

Total stockholders' equity

 

 

100,428

 

 

 

147,266

 

Total liabilities and stockholders' equity

 

$

128,237

 

 

$

174,736

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

1


 

Synlogic, INC. aND SUBSIDIARIES

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

September 30, 2022

 

 

September 30, 2021

 

 

September 30, 2022

 

 

September 30, 2021

 

Revenue

$

678

 

 

$

916

 

 

$

1,074

 

 

$

1,162

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

14,610

 

 

 

13,355

 

 

 

38,405

 

 

 

35,254

 

General and administrative

 

4,402

 

 

 

3,616

 

 

 

12,785

 

 

 

11,528

 

Total operating expenses

 

19,012

 

 

 

16,971

 

 

 

51,190

 

 

 

46,782

 

Loss from operations

 

(18,334

)

 

 

(16,055

)

 

 

(50,116

)

 

 

(45,620

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest and investment income

 

422

 

 

 

41

 

 

 

658

 

 

 

151

 

Interest expense

 

(1

)

 

 

(1

)

 

 

(3

)

 

 

(2

)

Other income (expense)

 

1

 

 

 

(1

)

 

 

10

 

 

 

(1

)

Total other income, net

 

422

 

 

 

39

 

 

 

665

 

 

 

148

 

Net loss

$

(17,912

)

 

$

(16,016

)

 

$

(49,451

)

 

$

(45,472

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

$

(0.25

)

 

$

(0.29

)

 

$

(0.69

)

 

$

(0.91

)

Weighted-average common stock outstanding - basic and diluted

 

72,108,113

 

 

 

55,336,936

 

 

 

72,061,935

 

 

 

49,730,231

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(17,912

)

 

$

(16,016

)

 

$

(49,451

)

 

$

(45,472

)

Net unrealized (loss) gain on marketable securities

 

42

 

 

 

(2

)

 

 

(346

)

 

 

(5

)

Comprehensive loss

$

(17,870

)

 

$

(16,018

)

 

$

(49,797

)

 

$

(45,477

)

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

2


 

Synlogic, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

 

 

Common stock
$0.001 par value

 

Additional
paid-in

 

Accumulated
other
comprehensive

 

Accumulated

 

Total

 

 

Shares

 

Amount

 

capital

 

income (loss)

 

deficit

 

equity

 

 

For the Three Months Ended September 30, 2022

 

Balance at June 30, 2022

 

70,230,235

 

$

70

 

$

440,124

 

$

(433

)

$

(322,411

)

$

117,350

 

Issuance of common stock under employee stock purchase plan

 

66,139

 

 

 

 

54

 

 

 

 

 

 

54

 

Cancellation of restricted stock

 

(10,879

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

894

 

 

 

 

 

 

894

 

Unrealized gain (loss) on securities

 

 

 

 

 

 

 

42

 

 

 

 

42

 

Net loss

 

 

 

 

 

 

 

 

 

(17,912

)

 

(17,912

)

Balance at September 30, 2022

 

70,285,495

 

$

70

 

$

441,072

 

$

(391

)

$

(340,323

)

$

100,428

 

 

For the Three Months Ended September 30, 2021

 

Balance at June 30, 2021

 

52,375,344

 

$

52

 

$

387,782

 

$

11

 

$

(259,767

)

$

128,078

 

Proceeds from issuance of common stock, net of issuance costs

 

17,250,000

 

 

18

 

 

48,426

 

 

 

 

48,444

 

Exercise of options

 

93,033

 

 

 

209

 

 

 

 

209

 

Issuance of common stock under employee stock purchase plan

 

23,592

 

 

 

61

 

 

 

 

 

 

61

 

Cancellation of restricted stock

 

(34,428

)

 

 

 

 

 

Equity-based compensation expense

 

 

 

808

 

 

 

 

808

 

Unrealized gain (loss) on securities

 

 

 

 

(2

)

 

 

(2

)

Net loss

 

 

 

 

 

(16,016

)

 

(16,016

)

Balance at September 30, 2021

 

69,707,541

 

$

70

 

$

437,286

 

$

9

 

$

(275,783

)

$

161,582

 

 

For the Nine Months Ended September 30, 2022

 

Balance at December 31, 2021

 

69,698,844

 

$

70

 

$

438,113

 

$

(45

)

$

(290,872

)

$

147,266

 

Exercise of options

 

35,562

 

 

 

 

61

 

 

 

 

 

 

61

 

Issuance of restricted stock

 

507,260

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

106,629

 

 

 

 

137

 

 

 

 

 

 

137

 

Cancellation of restricted stock

 

(62,800

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

2,761

 

 

 

 

 

 

2,761

 

Unrealized gain (loss) on securities

 

 

 

 

 

 

 

(346

)

 

 

 

(346

)

Net loss

 

 

 

 

 

 

 

 

 

(49,451

)

 

(49,451

)

Balance at September 30, 2022

 

70,285,495

 

$

70

 

$

441,072

 

$

(391

)

$

(340,323

)

$

100,428

 

 

For the Nine Months Ended September 30, 2021

 

Balance at December 31, 2020

 

38,183,273

 

$

38

 

$

345,394

 

$

14

 

$

(230,311

)

$

115,135

 

Proceeds from issuance of common stock in connection with ATM offering, net of issuance costs

 

2,447,211

 

 

3

 

 

8,047

 

 

 

 

8,050

 

Proceeds from issuance of common stock, net of issuance costs

 

28,750,000

 

 

29

 

 

80,990

 

 

 

 

 

 

81,019

 

Exercise of options

 

125,146

 

 

 

273

 

 

 

 

273

 

Issuance of restricted stock

 

242,454

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

42,653

 

 

 

94

 

 

 

 

94

 

Restricted stock awards withheld for payment of employees' withholding tax liability

 

(18,187

)

 

 

(73

)

 

 

 

(73

)

Cancellation of restricted stock

 

(65,009

)

 

 

 

 

 

Equity-based compensation expense

 

 

 

2,561

 

 

 

 

2,561

 

Unrealized gain (loss) on securities

 

 

 

 

(5

)

 

 

(5

)

Net loss

 

 

 

 

 

(45,472

)

 

(45,472

)

Balance at September 30, 2021

 

69,707,541

 

$

70

 

$

437,286

 

$

9

 

$

(275,783

)

$

161,582

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3


 

Synlogic, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(49,451

)

 

$

(45,472

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

1,907

 

 

 

1,832

 

Equity-based compensation expense

 

 

2,761

 

 

 

2,561

 

Accretion/amortization of investment securities

 

 

(364

)

 

 

243

 

Change in carrying amount of operating lease right of use asset

 

 

2,347

 

 

 

1,532

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,500

)

 

 

(1,000

)

Prepaid expenses and other current assets

 

 

419

 

 

 

854

 

Prepaid research and development, net of current portion

 

 

1,780

 

 

 

840

 

Accounts payable and accrued expenses

 

 

107

 

 

 

455

 

Deferred revenue

 

 

440

 

 

 

988

 

Operating lease liabilities

 

 

(2,932

)

 

 

(1,968

)

Other assets

 

 

(9

)

 

 

(3

)

Net cash used in operating activities

 

 

(44,495

)

 

 

(39,138

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(66,191

)

 

 

(97,981

)

Proceeds from maturity of marketable securities

 

 

110,366

 

 

 

77,272

 

Proceeds from redemption of marketable securities

 

 

 

 

 

1,270

 

Purchases of property and equipment

 

 

(685

)

 

 

(507

)

Net cash provided by (used in) investing activities

 

 

43,490

 

 

 

(19,946

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments on finance lease obligations