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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 June 30, 2020


☐	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 July 30, 2020, there were 34,165,785 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;

•

the revenue generated by sales of our product candidates;

•

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 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		16

Item 3. Quantitative and Qualitative Disclosures about Market Risk		25

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		55

Item 3. Defaults Upon Senior Securities		55

Item 4. Mine Safety Disclosures		55

Item 5. Other Information		55

Item 6. Exhibits		56

Signatures		57

SYNlogic, Inc. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

	June 30,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	31,350		$	26,184
Short-term marketable securities		77,786			93,387
Prepaid expenses and other current assets		13,096			13,675
Total current assets		122,232			133,246
Long-term marketable securities		—			7,502
Property and equipment, net		12,055			13,021
Right of use asset - operating lease		16,416			17,263
Restricted cash		1,097			1,097
Prepaid research and development, net of current portion		7,532			16,381
Other assets		61			64
Total assets	$	159,393		$	188,574
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,195		$	2,165
Accrued expenses		2,432			3,946
Deferred revenue		—			544
Lease liability - operating lease		2,359			2,000
Finance lease obligations		72			208
Total current liabilities		6,058			8,863
Long-term liabilities:
Lease liability - operating lease, net of current portion		21,581			22,804
Finance lease obligations, net of current portion		—			2
Other long-term liabilities		82			—
Total long-term liabilities		21,663			22,806
Commitments and contingencies (Note 11)
Stockholders' Equity
Common stock, $0.001 par value
250,000,000 shares authorized as of June 30, 2020 and December 31, 2019. 34,145,111 and 32,266,814 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.		34			33
Additional paid-in capital		333,925			327,900
Accumulated other comprehensive loss		214			110
Accumulated deficit		(202,501	)		(171,138	)
Total stockholders' equity		131,672			156,905
Total liabilities and stockholders' equity	$	159,393		$	188,574

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						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue	$	445		$	350		$	545		$	688
Operating expenses:
Research and development		12,909			9,703			25,586			20,087
General and administrative		3,473			3,742			7,294			7,393
Total operating expenses		16,382			13,445			32,880			27,480
Loss from operations		(15,937	)		(13,095	)		(32,335	)		(26,792	)
Other income (expense):
Interest and investment income		406			759			980			1,516
Interest expense		(2	)		(5	)		(5	)		(12	)
Other income (expense)		(2	)		(3	)		(3	)		(2	)
Other income (expense), net		402			751			972			1,502
Net loss	$	(15,535	)	$	(12,344	)	$	(31,363	)	$	(25,290	)

Net loss per share - basic and diluted	$	(0.44	)	$	(0.45	)	$	(0.91	)	$	(0.96	)
Weighted-average common stock outstanding - basic and diluted		34,967,761			27,242,514			34,604,738			26,284,262
Comprehensive loss:
Net loss	$	(15,535	)	$	(12,344	)	$	(31,363	)	$	(25,290	)
Net unrealized gain (loss) on marketable securities		159			29			104			133
Comprehensive loss	$	(15,376	)	$	(12,315	)	$	(31,259	)	$	(25,157	)

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					Additional		Accumulated other
	$0.001 par value					paid-in		comprehensive			Accumulated			Total
	Shares			Amount		capital		income (loss)			deficit			equity
	For the Three Months Ended June 30, 2020
Balance at March 31, 2020		32,459,394		$	33	$	328,995	$	55		$	(186,966	)	$	142,117
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		1,778,982			1		3,855		—			—			3,856
Cancellation of restricted stock		(93,265	)		—		—		—			—			—
Equity-based compensation expense		—			—		1,075		—			—			1,075
Unrealized gain (loss) on securities		—			—		—		159			—			159
Net loss		—			—		—		—			(15,535	)		(15,535	)
Balance at June 30, 2020		34,145,111		$	34	$	333,925	$	214		$	(202,501	)	$	131,672

	For the Three Months Ended June 30, 2019
Balance at March 31, 2019		25,388,643		$	25	$	244,857	$	39		$	(132,711	)	$	112,210
Proceeds from issuance of common stock, net of issuance costs		6,340,771		$	7	$	56,976		—			—			56,983
Proceeds from pre-funded common stock warrants, net of issuance costs		—			—	$	22,874		—			—			22,874
Cancellation of restricted stock		(9,695	)		—		—		—			—			—
Equity-based compensation expense		—			—		1,071		—			—			1,071
Unrealized gain (loss) on securities		—			—		—		29			—			29
Net loss		—			—		—		—			(12,344	)		(12,344	)
Balance at June 30, 2019		31,719,719		$	32	$	325,778	$	68		$	(145,055	)	$	180,823

	For the Six Months Ended June 30, 2020
Balance at December 31, 2019		32,266,814		$	33	$	327,900	$	110		$	(171,138	)	$	156,905
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		1,778,982		$	1	$	3,855		—			—			3,856
Issuance of restricted stock		226,335			—		—		—			—			—
Cancellation of restricted stock		(127,020	)		—		—		—			—			—
Equity-based compensation expense		—			—		2,170		—			—			2,170
Unrealized gain (loss) on securities		—			—		—		104			—			104
Net loss		—			—		—		—			(31,363	)		(31,363	)
Balance at June 30, 2020		34,145,111		$	34	$	333,925	$	214		$	(202,501	)	$	131,672

	For the Six Months Ended June 30, 2019
Balance at December 31, 2018		25,401,479		$	25	$	243,903	$	(65	)	$	(119,765	)	$	124,098
Proceeds from issuance of common stock, net of issuance costs		6,340,771		$	7	$	56,976		—			—			56,983
Proceeds from pre-funded common stock warrants, net of issuance costs		—			—	$	22,874		—			—			22,874
Cancellation of restricted stock		(22,531	)		—		—		—			—			—
Equity-based compensation expense		—			—		2,025		—			—			2,025
Unrealized gain (loss) on securities		—			—		—		133			—			133
Net loss		—			—		—		—			(25,290	)		(25,290	)
Balance at June 30, 2019		31,719,719		$	32	$	325,778	$	68		$	(145,055	)	$	180,823

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)

	Six Months Ended			Six Months Ended
	June 30, 2020			June 30, 2019
Cash flows from operating activities:
Net loss	$	(31,363	)	$	(25,290	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,326			1,356
Equity-based compensation expense		2,170			2,025
Accretion/amortization of investment securities		(29	)		(883	)
Reduction in carrying amount of operating lease right-of-use asset		848			565
Changes in operating assets and liabilities:
Prepaid expenses and other assets		582			(32,472	)
Prepaid research and development, net of current portion		8,849			—
Accounts payable and accrued expenses		(2,524	)		(273	)
Deferred revenue		(544	)		1,812
Operating lease liabilities		(864	)		(544	)
Other long-term liabilities		82			—
Net cash used in operating activities		(21,467	)		(53,704	)
Cash flows from investing activities:
Purchases of marketable securities		(35,744	)		(108,633	)
Proceeds from maturity of marketable securities		43,732			89,496
Proceeds from redemption of marketable securities		15,247			—
Purchases of property and equipment		(320	)		(695	)
Net cash provided by (used in) investing activities		22,915			(19,832	)
Cash flows from financing activities:
Payments on finance lease obligations		(138	)		(131	)
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		3,856			—
Proceeds from issuance of common stock, net of issuance costs		—			56,983
Proceeds from issuance of pre-funded common stock warrants, net of issuance costs		—			22,874
Net cash provided by financing activities		3,718			79,726
Net increase (decrease) in cash, cash equivalents and restricted cash		5,166			6,190
Cash, cash equivalents and restricted cash at beginning of period		27,281			12,349
Cash, cash equivalents and restricted cash at end of period	$	32,447		$	18,539

Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued expenses	$	41		$	(334	)
Issuance costs included in accounts payable and accrued expenses	$	10