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 March 31, 2024

 

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

Preferred Stock Purchase Rights

N/A

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 May 7, 2024, there were 11,707,011 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:

 

our evaluation of strategic alternatives with a goal to enhance stockholder value, including the possibility of a merger or a sale of the Company;
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

 

14

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

23

 

 

 

Item 4. Controls and Procedures

 

23

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

24

 

 

 

Item 1A. Risk Factors

 

24

 

 

 

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

 

63

 

 

 

Item 3. Defaults Upon Senior Securities

 

63

 

 

 

Item 4. Mine Safety Disclosures

 

63

 

 

 

Item 5. Other Information

 

63

 

 

 

Item 6. Exhibits

 

64

 

 

 

Signatures

 

65

 

 


 

SYNlogic, Inc. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,822

 

 

$

23,960

 

Short-term marketable securities

 

 

7,489

 

 

 

23,786

 

Prepaid expenses and other current assets

 

 

2,429

 

 

 

2,161

 

Assets held for sale

 

 

206

 

 

 

 

Total current assets

 

 

34,946

 

 

 

49,907

 

Property and equipment, net

 

 

 

 

 

5,603

 

Right of use asset - operating lease

 

 

 

 

 

12,102

 

Restricted cash

 

 

1,097

 

 

 

1,097

 

Prepaid research and development, net of current portion

 

 

 

 

 

6,825

 

Other assets

 

 

14

 

 

 

16

 

Total assets

 

$

36,057

 

 

$

75,550

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

719

 

 

$

1,457

 

Accrued expenses

 

 

3,116

 

 

 

3,000

 

Lease liability - operating lease

 

 

2,671

 

 

 

4,780

 

Finance lease obligations

 

 

1

 

 

 

4

 

Purchase warrant liability

 

 

4,433

 

 

 

11,163

 

Total current liabilities

 

 

10,940

 

 

 

20,404

 

Long-term liabilities:

 

 

 

 

 

 

Lease liability - operating lease, net of current portion

 

 

11,792

 

 

 

12,491

 

Total long-term liabilities

 

 

11,792

 

 

 

12,491

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

 

 

 

 

250,000,000 shares authorized as of March 31, 2024 and December 31, 2023;
   
11,907,004 shares issued and 11,627,212 shares outstanding as of March 31, 2024 and 9,465,949 shares issued and 9,186,157 shares outstanding as of December 31, 2023

 

 

12

 

 

 

10

 

Additional paid-in capital

 

 

461,696

 

 

 

459,458

 

Accumulated other comprehensive income

 

 

 

 

 

6

 

Accumulated deficit

 

 

(445,865

)

 

 

(414,301

)

Treasury stock, at cost (279,792 shares at March 31, 2024 and at December 31, 2023)

 

 

(2,518

)

 

 

(2,518

)

Total stockholders' equity

 

 

13,325

 

 

 

42,655

 

Total liabilities and stockholders' equity

 

$

36,057

 

 

$

75,550

 

 

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

 

 

 

2024

 

 

2023

 

Revenue

 

$

8

 

 

$

174

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

7,680

 

 

 

12,450

 

General and administrative

 

 

2,884

 

 

 

3,967

 

Restructuring and other charges

 

 

28,289

 

 

 

 

Total operating expenses

 

 

38,853

 

 

 

16,417

 

Loss from operations

 

 

(38,845

)

 

 

(16,243

)

Other income (expense):

 

 

 

 

 

 

Interest and investment income

 

 

553

 

 

 

628

 

Interest expense

 

 

 

 

 

(1

)

Change in fair value of purchase warrant liability

 

 

6,730

 

 

 

 

Other expense

 

 

(2

)

 

 

(6

)

Other income (expense), net

 

 

7,281

 

 

 

621

 

Net loss

 

$

(31,564

)

 

$

(15,622

)

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(2.60

)

 

$

(3.39

)

Weighted-average common stock outstanding - basic and diluted

 

 

12,131,461

 

 

 

4,604,682

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(31,564

)

 

$

(15,622

)

Net unrealized gain (loss) on marketable securities

 

 

(6

)

 

 

131

 

Comprehensive loss

 

$

(31,570

)

 

$

(15,491

)

 

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

 

 

Additional

 

 

Accumulated
other

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

$0.001 par value

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

Shares

 

 

Amount

 

 

equity

 

Balance at December 31, 2022

 

 

4,728,874

 

 

$

5

 

 

$

442,303

 

 

$

(161

)

 

$

(357,019

)

 

 

(279,792

)

 

$

(2,518.00

)

 

$

82,610

 

Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs

 

 

68,893

 

 

 

 

 

 

816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

816

 

Issuance of restricted stock

 

 

10,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

 

7,322

 

 

 

 

 

 

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

 

 

4,815,892

 

 

$

5

 

 

$

443,896

 

 

$

(30

)

 

$

(372,641

)

 

 

(279,792

)

 

$

(2,518

)

 

$

68,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

 

9,465,949

 

 

$

10

 

 

$

459,458

 

 

$

6

 

 

$

(414,301

)

 

 

(279,792

)

 

$

(2,518

)

 

$

42,655

 

Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs

 

 

7,839

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Exercise of options

 

 

2,494

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Exercise of pre-funded warrants

 

 

2,251,000

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Issuance of restricted stock

 

 

362,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of restricted stock

 

 

(182,978

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,221

 

Unrealized gain (loss) on securities

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

(6

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,564

)

 

 

 

 

 

 

 

 

(31,564

)

Balance at March 31, 2024

 

 

11,907,004

 

 

 

12

 

 

 

461,696

 

 

 

 

 

 

(445,865

)

 

 

(279,792

)

 

 

(2,518

)

 

 

13,325

 

 

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)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(31,564

)

 

 

(15,622

)

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

 

 

 

 

 

 

Depreciation

 

 

347

 

 

 

576

 

Gain on disposal of property and equipment

 

 

(103

)

 

 

(11

)

Impairment loss on fixed assets

 

 

5,393

 

 

 

 

Impairment loss on ROU assets

 

 

9,571

 

 

 

 

Gain on lease termination

 

 

(43

)

 

 

 

Impairment of prepaid research and development

 

 

5,219

 

 

 

 

Equity-based compensation expense

 

 

2,221

 

 

 

718

 

Change in fair value of warrant liability

 

 

(6,730

)

 

 

 

Accretion/amortization of investment securities

 

 

(231

)

 

 

(327

)

Reduction in carrying amount of operating lease right of use asset

 

 

948

 

 

 

809

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(568

)

 

 

(2,838

)

Prepaid research and development, net of current portion

 

 

1,906

 

 

 

(1,233

)

Other assets

 

 

2

 

 

 

(15

)

Accounts payable and accrued expenses

 

 

(622

)

 

 

(2,378

)

Deferred revenue

 

 

 

 

 

(190

)

Operating lease liabilities

 

 

(1,182

)

 

 

(994

)

Net cash used in operating activities

 

 

(15,436

)

 

 

(21,505

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(1,477

)

 

 

Proceeds from maturity of marketable securities

 

 

17,999

 

 

 

30,397

 

Purchases of property and equipment

 

 

(395

)

 

 

(143

)

Proceeds from the sale of property and equipment

 

 

155

 

 

 

16

 

Net cash provided by investing activities

 

 

16,282

 

 

 

30,270

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments on finance lease obligations

 

 

(3

)

 

 

(2

)

Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs

 

 

13

 

 

 

856

 

Proceeds from employee stock purchases and exercise of stock options

 

 

4

 

 

 

59

 

Proceeds from exercise of pre-funded warrants

 

 

2

 

 

 

 

Net cash provided by financing activities

 

 

16

 

 

 

913

 

Net increase in cash, cash equivalents and restricted cash

 

 

862

 

 

 

9,678

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

25,057

 

 

 

16,958

 

Cash, cash equivalents and restricted cash at end of period

 

$

25,919

 

 

$

26,636

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Decrease in right-of-use asset and operating lease liabilities due to lease termination

 

$

1,626

 

 

$

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

Issuance costs included in accounts payable and accrued expenses

 

$

 

 

$

40

 

 

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

4


 

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.

In February 2024, the Company and its board of directors decided to discontinue the Synpheny-3 trial and to conduct a comprehensive review of strategic alternatives. The Company also announced a corporate restructuring that resulted in a reduction in its workforce by 90% that was substantially completed in the first quarter of 2024 (see Note 8).

Going Concern and Liquidity

The Company’s consolidated financial statements have been prepared assuming it will continue as a going concern. The going concern assumption contemplates the continuity of operations, and the realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has historically generated negative cash flows from operations and has an accumulated deficit of $445.9 million at March 31, 2024. At March 31, 2024, the Company had $32.3 million in unrestricted cash, cash equivalents and short-term marketable securities. The Company believes the conditions and events raising substantial doubt about its ability to continue as a going concern no longer exist following the execution of the corporate restructuring (see Note 8) that was substantially completed in the first quarter of 2024. Accordingly, its current cash and cash equivalents as of March 31, 2024 will be sufficient to fund its operations at the current levels for at least the next 12 months from the date of this filing. The Company expects to continue to incur costs and expenditures in connection with the process of evaluating strategic alternatives.

 

(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, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on March 19, 2024 (the 2023 Annual Report), have had no material changes during the three months ended March 31, 2024.

Reverse Stock Split

On September 27, 2023, the Company effected a one-for-fifteen reverse stock split of its issued and outstanding common stock, which also adjusted all outstanding warrants. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split. All fractional shares resulting from the reverse stock split were paid in cash.

 

Basis of Presentation

The accompanying consolidated financial statements and the related disclosures as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 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 2023 and 2022 audited consolidated financial statements and notes included in the 2023 Annual Report. The consolidated balance sheet as of December 31, 2023 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, 2024 and 2023. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other interim period or future year or period.

5


 

 

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

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other accounting standard setting boards that the Company adopts as of the effective date. Unless otherwise discussed below, recently issued pronouncements that are or will be applicable to the Company did not have, or are not 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 and liabilities 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 2023 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.

The Company accounts for issued warrants either as derivative liabilities or as equity instruments depending on the specific terms of the agreement. Warrants that are equity-classified instruments and recorded in additional paid-in capital at issuance are not subject to remeasurement. The purchase warrants issued in October 2023 are liability classified and recorded at fair value using the Black-Scholes option-pricing model at issuance, with any subsequent changes in fair value recognized in the consolidated statements of operations. We periodically evaluate changes in facts and circumstances that could impact the classification of warrants. None of the purchase warrants have been exercised since their issuance.

6


 

At March 31, 2024 and December 31, 2023, the Company has classified assets and liabilities 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

 

2024

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

22,825

 

 

$

22,825

 

 

$

 

 

$

 

Commercial paper (included in cash and cash equivalents)

 

 

1,997

 

 

 

 

 

 

1,997

 

 

 

 

Commercial paper

 

 

7,489

 

 

 

 

 

 

7,489

 

 

 

 

Total

 

$

32,311

 

 

$

22,825

 

 

$

9,486

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchase warrant liability

 

$

4,433

 

 

$

 

 

$

 

 

$

4,433

 

Total

 

$

4,433

 

 

$

 

 

$

 

 

$

4,433

 

 

 

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

 

2023

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

15,476

 

 

$

15,476

 

 

$

 

 

$

 

Commercial paper (included in cash and cash equivalents)

 

 

8,484

 

 

 

 

 

 

8,484

 

 

 

 

Commercial paper

 

 

14,342

 

 

 

 

 

 

14,342

 

 

 

 

U.S. government agency securities and treasuries

 

 

9,444

 

 

 

6,956

 

 

 

2,488

 

 

 

 

Total

 

$

47,746

 

 

$

22,432

 

 

$

25,314

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchase warrant liability

 

$

11,163

 

 

$

 

 

$

 

 

$

11,163

 

Total

 

$

11,163

 

 

$

 

 

$

 

 

$

11,163

 

 

Cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses at March 31, 2024 and December 31, 2023 are carried at amounts that approximate fair value due to their short-term maturities. Finance lease obligations at March 31, 2024 and December 31, 2023 approximate fair value as they bear interest at a rate approximating a market interest rate.

 

The following tables summarize the estimated fair value of the assets presented within cash and cash equivalents measured at fair value and the gross unrealized holding gains and losses (in thousands):

 

March 31, 2024

 

Amortized Cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair Value

 

Money market funds (included in cash and cash equivalents)

 

$

22,825

 

 

$

 

 

$

 

 

$

22,825

 

Commercial paper (included in cash and cash equivalents)

 

 

1,997

 

 

 

 

 

 

 

 

 

1,997

 

Total

 

$

24,822

 

 

$

 

 

$

 

 

$

24,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

Amortized Cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair Value

 

Money market funds (included in cash and cash equivalents)

 

$

15,476

 

 

$

 

 

$

 

 

$

15,476

 

Commercial paper (included in cash and cash equivalents)

 

 

8,482

 

 

 

2

 

 

 

 

 

 

8,484

 

Total

 

$

23,958

 

 

$

2

 

 

$

 

 

$

23,960

 

 

 

7


 

Assumptions Used in Determining Fair Value of Warrants

The assumptions used in the Black-Scholes option-pricing model for the purchase warrants on the consolidated balance sheets at March 31, 2024 and December 31, 2023 are included below:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Expected Term

 

4.5 years

 

 

4.75 years

 

Weighted-average, risk free interest rate

 

 

4.3

%

 

 

3.9

%

Expected volatility

 

 

98.2

%

 

 

94.0

%

Dividend yield

 

 

 

 

 

 

Strike price

 

$

3.41

 

 

$

3.41

 

Stock price

 

$

1.79

 

 

$

3.85

 

 

 

(4)
Available-for-Sale Securities

 

The following tables summarize the available-for-sale securities held at March 31, 2024 and December 31, 2023 (in thousands):

 

March 31, 2024

 

Amortized cost

 

 

Gross unrealized
gains

 

 

Gross unrealized
losses

 

 

Fair Value

 

Commercial paper

 

$

7,489

 

 

$

 

 

$

 

 

$

7,489

 

Total

 

$

7,489

 

 

$

 

 

$

 

 

$

7,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

Amortized cost

 

 

Gross unrealized
gains

 

 

Gross unrealized
losses

 

 

Fair Value

 

Commercial paper

 

$

14,338

 

 

$

4

 

 

$

 

 

$

14,342

 

U.S. government agency securities and treasuries

 

 

9,444

 

 

 

1

 

 

 

(1

)

 

 

9,444

 

Total

 

$

23,782

 

 

$

5

 

 

$

(1

)

 

$

23,786

 

 

The contractual maturity of all securities held at March 31, 2024 was two months or less. There was one investment in an unrealized loss position at March 31, 2024. The aggregate fair value of the security in an unrealized loss position at March 31, 2024 was $1.5 million. There were two investments in an unrealized loss position at December 31, 2023, none of which had been in an unrealized loss position for more than twelve months. The aggregate fair value of the securities in an unrealized loss position at December 31, 2023 was $5.4 million. The Company reviews its investments for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. The Company did not hold any securities with an other-than-temporary impairment at March 31, 2024.

Gross realized gains and losses on the sales of investments have not been material to the Company’s consolidated statement of operations.

(5)
Assets Held for Sale

In February 2024, the Company committed to a plan to sell its remaining lab equipment and therefore has classified the amount as assets held for sale on the consolidated balance sheet as of March 31, 2024. The assets held for sale were reported at the lower of the carrying amount or fair value, less costs to sell. Accordingly, during the three months ended March 31, 2024, the Company recorded an impairment charge, which was included in restructuring and other charges, of $0.8 million related to the lab equipment classified as assets held for sale.

 

(6)
Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consist of the following (in thousands):

 

8


 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Prepaid insurance

 

$

432

 

 

$

691

 

Prepaid research and development

 

 

1,384

 

 

 

788

 

Other prepaid expenses

 

 

502

 

 

 

536

 

Other current assets

 

 

111

 

 

 

146

 

Total prepaid expenses and other current assets

 

$

2,429

 

 

$

2,161

 

 

 

(7)
Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Payroll related

 

$

15

 

 

$

2,556

 

Professional fees

 

 

392

 

 

 

290

 

Research and development

 

 

507

 

 

 

91

 

Restructuring costs

 

 

2,079

 

 

 

 

Other

 

 

123

 

 

 

63

 

Total accrued expenses

 

$

3,116

 

 

$

3,000

 

(8)
Restructuring and Other Charges

In February 2024, the Company and its board of directors decided to discontinue the Synpheny-3 trial and as a result are currently evaluating strategic options for the Company with a goal to enhance stockholder value, including the possibility of a merger or sale of the Company. Due to this decision there has been an interim evaluation of impairment of long-lived and other assets which is described in detail below.

The Company also announced a corporate restructuring that included a reduction in its workforce by more than 90% that was substantially completed during the three months ended March 31, 2024. In connection with the corporate restructuring, the Company recorded a restructuring charge for severance and related costs of $5.6 million during the three months ended March 31, 2024. The Company also executed consulting agreements with a select number of former employees in which their equity continues to vest under the terms of the original award. The consulting services were determined to be non-substantive and as a result, the Company has accelerated the related stock compensation expense and recorded an additional $1.8 million to stock compensation included in restructuring charges for the three months ended March 31, 2024.

Restructuring and other charges also includes impairment of the right-of-use assets associated with the Company's existing leased spaces of $9.6 million and impairment of property and equipment of $5.3 million, primarily related to leasehold improvements in connection with the lease impairment.

Other charges relating to the restructuring include a $5.2 million charge to impairment for prepaid research and development in relation to the Ginkgo collaboration (see Note 11) and $0.8 million for various costs related to the restructuring including legal fees, banking fees and lab decommissioning fees.

As of March 31, 2024, approximately $2.1 million of the total restructuring charges remain unpaid and were included in accrued restructuring charges.

(9)
Stockholders’ Equity

Reverse Stock Split

On September 27, 2023, the Company effected a reverse stock split of its shares of common stock, pursuant to which every fifteen (15) shares of the its issued and outstanding common stock was automatically converted into one (1) issued and outstanding share of common stock without any change in the par value of $0.001 per share. The reverse stock split was approved by the stockholders on September 21, 2023 at a special meeting of stockholders.

October 2023 Financing

On October 3, 2023, the Company issued and sold, through an underwritten public offering:

9


 

3,921,928 shares of its common stock at a price of $2.84 per share less underwriting discounts and commissions;
pre-funded warrants to purchase up to 3,472,435 shares of its common stock at a price of $2.839 immediately following the consummation of the offering, and;
accompanying common stock warrants to purchase up to 7,394,363 shares of its common stock at a price of $3.408 per share exercisable immediately after issuance and expires five years from the date of issuance.

Each share of its common stock and each pre-funded warrant was sold together with a common warrant to purchase one share of its common stock. A holder of pre-funded warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 4.99% (or, upon election by a holder prior to the issuance of any warrants, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. The net proceeds to the Company from the sale of common stock and pre-funded warrants through the offering, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, were approximately $19.6 million.

The common stock and pre-funded warrants met the criteria for equity classification. The purchase warrants met the definition of a derivative instrument. Accordingly, upon issuance, the purchase warrants were recorded as a liability at fair value using the Black-Scholes option-pricing model in the amount of $7.1 million. Any subsequent changes in fair value of the purchase warrants is recognized in the consolidated statements of operations. The residual proceeds were allocated between the common stock and pre-funded warrants based on their relative fair values at the time of issuance. The amount allocated to the pre-funded warrants was recorded as a component of stockholders’ equity within additional paid-in capital.

At March 31, 2024, the fair value of the purchase warrants was $4.4 million. Accordingly, a gain on remeasurement of the purchase warrant liability of $6.7 million was recorded in the three months ended March 31, 2024. Subsequent to their issuance and through March 31, 2024, 2,920,126 pre-funded warrants have been exercised. None of the purchase warrants have been exercised since their issuance.

At-the-Market (ATM) Offering Program

In July 2021, the Company entered into a sales agreement with Jefferies, LLC (Jefferies) with respect to an ATM, under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having aggregate sales proceeds of up to $50.0 million. Jefferies is not required to sell any specific amount but acts as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices. During the three months ended March 31, 2024, 7,839 shares of common stock were sold pursuant to the sales agreement with Jefferies, resulting in net proceeds of approximately $0.01 million.

Ginkgo Warrants

In June 2019, the Company issued to Ginkgo Bioworks, Inc. (Ginkgo) an aggregate of 422,718 shares of common stock at a purchase price per share of $135, and pre-funded warrants (the Ginkgo pre-funded warrants) to purchase up to an aggregate of 169,874 shares of common stock at an exercise price of $135 per share, with $134.85 of such exercise price paid at the closing of the offering. The net proceeds to the Company were approximately $79.9 million. None of the Ginkgo pre-funded warrants have been exercised as of March 31, 2024. (See Note 9, Collaboration Agreements: Ginkgo Collaboration).

The Company has reserved for future issuance the following shares of common stock related to the potential exercise of Ginkgo pre-funded warrants, exercise of stock options, and the employee stock purchase plan:

 

 

March 31, 2024

 

Common stock issuable under pre-funded warrants

 

552,309

 

Common stock issuable under purchase warrants

 

3,921,928

 

Common stock issuable under Ginkgo pre-funded warrants

 

169,874

 

Options exercisable to purchase common stock

 

334,081

 

Employee Stock Purchase Plan

 

-

 

Total

 

4,978,192

 

 

10


 

(10)
Equity-based Compensation

On January 1, 2024, the number of shares of common stock available for issuance under the 2015 Equity Incentive Award Plan (the 2015 Plan) and the 2015 Employee Stock Purchase Plan (ESPP) was increased by 459,392 shares and 91,878 shares, respectively, due to the annual evergreen provision to increase shares available under the 2015 Plan and the ESPP. As of March 31, 2024, there were an aggregate of 604,072 shares available for future grant under the 2017 Stock Incentive Plan (the 2017 Plan) and the 2015 Plan, and 187,012 shares available for future grant under the ESPP.

The following table summarizes equity‑based compensation expense within the Company’s consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

Three months ended 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

115

 

 

$

277

 

General and administrative

 

 

306

 

 

 

441

 

Restructuring charges: expense acceleration

 

 

1,800

 

 

 

 

 

 

$

2,221

 

 

$

718

 

 

The following table summarizes equity‑based compensation expense by type of award for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

$

1,480

 

 

$

607

 

Restricted stock awards

 

 

763

 

 

 

91

 

ESPP

 

 

(22

)

 

 

20

 

 

 

$

2,221

 

 

$

718

 

During the three months ended March 31, 2024, the Company granted 44,701 stock options with a weighted average exercise price of $4.20 per share. As of March 31, 2024, there was $0.7 million of unrecognized share-based compensation related to unvested stock option grants which is expected to be recognized over a weighted average period of 1.93 years. The total unrecognized share-based compensation cost will be adjusted for actual forfeitures as they occur.

During the three months ended March 31, 2024, the Company granted 362,700 restricted stock awards with a weighted average grant date fair value per share of $4.44. As of March 31, 2024, there was approximately $0.5 million of unrecognized share-based compensation related to restricted stock awards granted, which is expected to be recognized over a weighted average period of 1.8 years. The total unrecognized share-based compensation cost will be adjusted for actual forfeitures as they occur.

For a full description of the Company’s equity plans, refer to Note 9, Equity-based Compensation and Equity Incentive Plans in the 2023 Annual Report.

 

(11)
Collaboration Agreements

 

Roche Collaboration

In June 2021, the Company entered into a Pilot Collaboration and Option Agreement (the Roche Collaboration and Option Agreement) with F. Hoffmann-La Roche Ltd (Roche Basel) and Hoffmann-La Roche Inc. (Roche US, and together with Roche Basel, Roche). Under the terms of the Roche Collaboration and Option Agreement, the Company and Roche will seek to collaborate to research and pre-clinically develop Synthetic Biotics for addressing an undisclosed novel target for the treatment of inflammatory bowel disease.

During the three months ended March 31, 2024 and 2023, the Company recognized $0.01 million and $0.2 million, respectively, as collaboration revenue associated with the Roche Collaboration and Option Agreement. The Roche Collaboration and Option Agreement concluded after the last milestone was achieved by the Company in October 2023. Subsequently, Roche did not exercise its exclusive option to enter into a licensing and collaboration agreement for further development and commercialization of the product candidate

For a full description of the Roche Collaboration and Option Agreement, refer to Note 10, Collaboration Agreements in the 2023 Annual Report.

11


 

Ginkgo Collaboration

 

In 2017, the Company established a technology collaboration with Ginkgo. In June 2019, the Company expanded its collaboration and entered into an agreement with Ginkgo for the research and development of engineered microbial therapeutic products (See Note 9). Under the 2019 expanded agreement, the Company made a prepayment to Ginkgo of $30.0 million for its foundry services that was to be provided to the Company over an initial term of five years, which could be extended for an additional three (3) years, subject to the satisfaction of specified conditions. Upon the expiration of such initial term and, if applicable, an additional term, any portion of the prepayment that has not been used to purchase services from Ginkgo will be retained by Ginkgo. In February 2024, the Company and its board of directors decided to discontinue the Synpheny-3 trial and significantly reduce its workforce and have made the decision to evaluate strategic options for the Company. As a result of this decision, the Company would no longer be purchasing services from Ginkgo. At March 31, 2024, the remaining $5.2 million of prepaid expenses related to this collaboration that were historically recorded in prepaid expenses and other current assets and prepaid research and development, net of current portion on the consolidated balance sheet, were recorded as restructuring and other charges on the consolidated statements of operations and comprehensive loss.

(12)
Net Loss per Share

Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the sum of the weighted-average number of shares of common stock outstanding during the period and if dilutive, the weighted-average number of potential shares of common stock, including unvested restricted common stock and outstanding stock options. In June 2019, the Company sold 422,718 shares of common stock and pre-funded warrants to purchase an aggregate of 169,874 shares of common stock at an exercise price of $135 per share, with $134.85 of such exercise price paid at the closing of the offering (see Note 8, Stockholder's Equity and Note 10, Collaborations: Ginkgo Collaboration, in the audited financial statements included in the 2023 Annual Report). The shares of common stock into which the warrants may be exercised are considered outstanding for the purposes of computing net loss per share.

The Company’s potentially dilutive shares, which include outstanding stock options, unvested restricted common stock and potential shares issuable under the ESPP, are considered to be common share equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of the diluted net loss per share attributable to common stockholders for the period indicated because including them would have had an anti-dilutive effect.

 

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

Purchase warrants

 

 

3,921,928