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10-Q

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 March 31, 2023


☐	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 Global 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 May 4, 2023, there were 68,211,278 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 fact 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 extent to which our business is adversely impacted by the effects of the coronavirus outbreak (COVID-19) or by other health epidemics or pandemics; 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		11

Item 3. Quantitative and Qualitative Disclosures about Market Risk		21

Item 4. Controls and Procedures		21

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		22

Item 1A. Risk Factors		22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		58

Item 3. Defaults Upon Senior Securities		58

Item 4. Mine Safety Disclosures		58

Item 5. Other Information		58

Item 6. Exhibits		59

Signatures		60

SYNlogic, Inc. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)


	March 31,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	25,539		$	15,861
Short-term marketable securities		31,829			61,768
Prepaid expenses and other current assets		4,991			2,153
Total current assets		62,359			79,782
Property and equipment, net		6,885			7,323
Right of use asset - operating lease		13,547			14,356
Restricted cash		1,097			1,097
Prepaid research and development, net of current portion		9,533			8,300
Other assets		22			7
Total assets	$	93,443		$	110,865
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,316		$	1,785
Accrued expenses		2,421			5,290
Deferred revenue		692			882
Lease liability - operating lease		4,294			4,152
Finance lease obligations		14			13
Total current liabilities		9,737			12,122
Long-term liabilities:
Lease liability - operating lease, net of current portion		14,993			16,129
Finance lease obligations, net of current portion		1			4
Total long-term liabilities		14,994			16,133
Commitments and contingencies (Note 11)
Stockholders' equity
Common stock, $0.001 par value
250,000,000 shares authorized as of March 31, 2023 and December 31, 2022. 72,238,745 shares issued and 68,041,856 shares outstanding as of March 31, 2023 and 70,933,140 shares issued and 66,736,251 shares outstanding as of December 31, 2022.		72			71
Additional paid-in capital		443,829			442,237
Accumulated other comprehensive loss		(30	)		(161	)
Accumulated deficit		(372,641	)		(357,019	)
Treasury stock, at cost (4,196,889 shares at March 31, 2023 and at December 31, 2022)		(2,518	)		(2,518	)
Total stockholders' equity		68,712			82,610
Total liabilities and stockholders' equity	$	93,443		$	110,865

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

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
	March 31, 2023			March 31, 2022
Revenue	$	174		$	244
Operating expenses:
Research and development		12,450			11,738
General and administrative		3,967			4,271
Total operating expenses		16,417			16,009
Loss from operations		(16,243	)		(15,765	)
Other income (expense):
Interest and investment income		628			67
Interest expense		(1	)		(1	)
Other income (expense)		(6	)		2
Total other income, net		621			68
Net loss	$	(15,622	)	$	(15,697	)

Net loss per share - basic and diluted	$	(0.23	)	$	(0.22	)
Weighted-average common stock outstanding - basic and diluted		69,070,211			71,969,007
Comprehensive loss:
Net loss	$	(15,622	)	$	(15,697	)
Net unrealized (loss) gain on marketable securities		131			(300	)
Comprehensive loss	$	(15,491	)	$	(15,997	)

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

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			Treasury Stock						Total
	Shares			Amount		capital		income (loss)			deficit			Shares			Amount			equity
Balance at December 31, 2022		70,933,140		$	71	$	442,237	$	(161	)	$	(357,019	)		(4,196,889	)	$	(2,518	)	$	82,610
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		1,033,398			1		815		—			—			—			—			816
Issuance of restricted stock		162,210			—		—		—			—			—			—			—
Issuance of common stock under employee stock purchase plan		109,997			—		59		—			—			—			—			59
Equity-based compensation expense		—			—		718		—			—			—			—			718
Unrealized gain (loss) on securities		—			—		—		131			—			—			—			131
Net loss		—			—		—		—			(15,622	)		—			—			(15,622	)
Balance at March 31, 2023		72,238,745		$	72	$	443,829	$	(30	)	$	(372,641	)		(4,196,889	)	$	(2,518	)	$	68,712


Balance at December 31, 2021		69,698,844		$	70	$	438,113	$	(45	)	$	(290,872	)	—			—			$	147,266
Exercise of options		30,622			—		52	—			—			—			—				52
Issuance of restricted stock		507,260		—			—	—			—			—			—				—
Issuance of common stock under employee stock purchase plan		40,528		—			83		—			—		—			—				83
Cancellation of restricted stock		(9,668	)	—		—		—			—			—			—			—
Equity-based compensation expense	—			—			890	—			—			—			—				890
Unrealized gain (loss) on securities	—			—		—			(300	)	—			—			—				(300	)
Net loss	—			—		—		—				(15,697	)	—			—				(15,697	)
Balance at March 31, 2022		70,267,586		$	70	$	439,138	$	(345	)	$	(306,569	)	—			—			$	132,294

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

Synlogic, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In thousands)


	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Cash flows from operating activities:
Net loss	$	(15,622	)	$	(15,697	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		576			601
(Gain)/loss on disposal of property and equipment		(11	)		—
Equity-based compensation expense		718			890
Accretion/amortization of investment securities		(327	)		(11	)
Change in carrying amount of operating lease right of use asset		809			769
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(2,838	)		821
Prepaid research and development, net of current portion		(1,233	)		(488	)
Accounts payable and accrued expenses		(2,378	)		(1,387	)
Deferred revenue		(190	)		(217	)
Operating lease liabilities		(994	)		(739	)
Other assets		(15	)		(19	)
Net cash used in operating activities		(21,505	)		(15,477	)
Cash flows from investing activities:
Purchases of marketable securities		—			(12,121	)
Proceeds from maturity of marketable securities		30,397			32,356
Purchases of property and equipment		(143	)		(477	)
Proceeds from the sale of property and equipment		16			—
Net cash provided by investing activities		30,270			19,758
Cash flows from financing activities:
Payments on finance lease obligations		(2	)		(3	)
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		856			—
Proceeds from employee stock purchases and exercise of stock options		59			135
Net cash provided by financing activities		913			132
Net increase in cash, cash equivalents and restricted cash		9,678			4,413
Cash, cash equivalents and restricted cash at beginning of period		16,958			17,535
Cash, cash equivalents and restricted cash at end of period	$	26,636		$	21,948

Supplemental disclosure of non-cash investing activities:
Assets acquired under operating lease obligation	$	—		$	1,773
Property and equipment purchases included in accounts payable and accrued expenses	$	—		$	118
Supplemental disclosure of non-cash financing activities:
Issuance costs included in accounts payable and accrued expenses	$	40		$	—
Cash paid for interest	$	—		$	1

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

SYNLOGIC, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(1)

Nature of Business

Organization

Synlogic, Inc., together with its wholly owned and consolidated subsidiaries (Synlogic or the Company), is a clinical-stage biopharmaceutical company applying synthetic biology to the discovery and development of Synthetic Biotics. Synthetic Biotics are generated from Synlogic’s proprietary platform, leveraging a reproducible, modular approach to the generation of novel drug candidates that perform or deliver critical therapeutic functions. Synthetic Biotics are designed to metabolize a toxic substance, compensate for missing or damaged metabolic pathways or deliver combinations of therapeutic factors. Synlogic’s goal is to discover, develop and ultimately commercialize Synthetic Biotics. Since incorporation, the Company has devoted substantially all of its efforts to the research and development of its product candidates.

Risks and Uncertainties

At March 31, 2023, the Company had approximately $57.4 million in cash, cash equivalents, and short-term marketable securities, $1.1 million of restricted cash and an accumulated deficit of approximately $372.6 million. Since its inception through March 31, 2023, the Company has primarily financed its operations through the issuance of preferred stock, units and warrants, the sale of its common stock, and collaborations, including with Roche. In the absence of positive cash flows from operations, the Company is highly dependent on its ability to find additional sources of funding in the form of debt or equity financing. Management believes that the Company has sufficient cash and other sources of liquidity, including cash equivalents and short-term marketable securities, to fund its operations through at least twelve months from the date of issuance of these financial statements.

As an early-stage company, the Company is subject to a number of risks common to other life science companies, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology. The Company’s therapeutic programs are currently pre-commercial, spanning discovery through development and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization of any product candidates. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company may never achieve profitability, and unless and until it does, it will continue to need to raise additional capital or obtain financing from other sources, such as strategic collaborations or alliances.

COVID-19

While the Company is not aware of a material impact from the continuation of the COVID-19 pandemic through March 31, 2023, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations, and financial condition, including expenses and manufacturing, clinical trials, and research and development costs, depends on future developments that are uncertain at this time.

(2)

Summary of Significant Accounting Policies

The significant accounting policies described in the Company’s audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (SEC) on March 29, 2023 (the 2022 Annual Report), have had no material changes during the three months ended March 31, 2023.

Basis of Presentation

The accompanying consolidated financial statements and the related disclosures as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and the rules and regulations of the SEC for interim financial statements. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s 2022 and 2021 audited consolidated financial statements and notes included in the 2022 Annual Report. The consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position and results of operations for the three months ended March 31, 2023 and 2022. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or any other interim period or future year or period.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Synlogic and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

New accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) from time to time, and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future financial statements.

(3)

Fair Value of Financial Instruments

The tables below present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, as described under Note 2, Summary of Significant Accounting Policies, in the audited financial statements included in the 2022 Annual Report.

The Company’s investment portfolio includes many fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company applied other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, model processes were used to assess interest rate impact and develop prepayment scenarios. These models take into consideration relevant credit information, perceived market movements, sector news and economic events. The inputs into these models may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads and other relevant data.

At March 31, 2023 and December 31, 2022, the Company has classified assets measured at fair value on a recurring basis as follows (in thousands):


	Fair Value Measurements at Reporting Date Using
	March 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	2023		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	25,539	$	25,539	$	—	$	—
Commercial paper		25,849		—		25,849		—
U.S. treasuries		5,980		5,980		—		—
Total	$	57,368	$	31,519	$	25,849	$	—

	Fair Value Measurements at Reporting Date Using
	December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	2022		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	15,861	$	15,861	$	—	$	—
Commercial paper		44,375		—		44,375		—
U.S. treasuries		17,393		17,393		—		—
Total	$	77,629	$	33,254	$	44,375	$	—

Cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses at March 31, 2023 and December 31, 2022 are carried at amounts that approximate fair value due to their short-term maturities. Finance lease obligations at March 31, 2023 and December 31, 2022 approximate fair value as they bear interest at a rate approximating a market interest rate.

(4)

Available-for-Sale Securities

The following tables summarize the available-for-sale securities held at March 31, 2023 and December 31, 2022 (in thousands):


March 31, 2023	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Commercial paper	$	25,863	$	2	$	(16	)	$	25,849
U.S. treasuries		5,996		—		(16	)		5,980
Total	$	31,859	$	2	$	(32	)	$	31,829

December 31, 2022	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Commercial paper	$	44,437	$	8	$	(70	)	$	44,375
U.S. treasuries		17,492