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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, 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 October 29, 2020, there were 34,833,584 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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,815

 

 

$

26,184

 

Short-term marketable securities

 

 

75,151

 

 

 

93,387

 

Prepaid expenses and other current assets

 

 

8,677

 

 

 

13,675

 

Total current assets

 

 

110,643

 

 

 

133,246

 

Long-term marketable securities

 

 

 

 

 

7,502

 

Property and equipment, net

 

 

11,418

 

 

 

13,021

 

Right of use asset - operating lease

 

 

15,977

 

 

 

17,263

 

Restricted cash

 

 

1,097

 

 

 

1,097

 

Prepaid research and development, net of current portion

 

 

9,217

 

 

 

16,381

 

Other assets

 

 

-

 

 

 

64

 

Total assets

 

$

148,352

 

 

$

188,574

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,382

 

 

$

2,165

 

Accrued expenses

 

 

2,892

 

 

 

3,946

 

Deferred revenue

 

 

 

 

 

544

 

Lease liability - operating lease

 

 

2,444

 

 

 

2,000

 

Finance lease obligations

 

 

20

 

 

 

208

 

Total current liabilities

 

 

6,738

 

 

 

8,863

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Lease liability - operating lease, net of current portion

 

 

20,941

 

 

 

22,804

 

Finance lease obligations, net of current portion

 

 

 

 

 

2

 

Other long-term liabilities

 

 

176

 

 

 

 

Total long-term liabilities

 

 

21,117

 

 

 

22,806

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

 

 

 

 

 

 

250,000,000 shares authorized as of September 30, 2020 and December 31, 2019.

34,672,052 and 32,266,814 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.

 

 

35

 

 

 

33

 

Additional paid-in capital

 

 

336,106

 

 

 

327,900

 

Accumulated other comprehensive loss

 

 

79

 

 

 

110

 

Accumulated deficit

 

 

(215,723

)

 

 

(171,138

)

Total stockholders' equity

 

 

120,497

 

 

 

156,905

 

Total liabilities and stockholders' equity

 

$

148,352

 

 

$

188,574

 

 

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, 2020

 

 

September 30, 2019

 

 

September 30, 2020

 

September 30, 2019

 

Revenue

$

-

 

 

$

305

 

 

$

545

 

$

993

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

10,481

 

 

 

10,564

 

 

 

36,067

 

 

30,651

 

General and administrative

 

2,956

 

 

 

3,879

 

 

 

10,250

 

 

11,272

 

Total operating expenses

 

13,437

 

 

 

14,443

 

 

 

46,317

 

 

41,923

 

Loss from operations

 

(13,437

)

 

 

(14,138

)

 

 

(45,772

)

 

(40,930

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and investment income

 

216

 

 

 

857

 

 

 

1,196

 

 

2,373

 

Interest expense

 

(1

)

 

 

(5

)

 

 

(6

)

 

(17

)

Other income (expense)

 

 

 

 

1

 

 

 

(3

)

 

(1

)

Other income (expense), net

 

215

 

 

 

853

 

 

 

1,187

 

 

2,355

 

Net loss

$

(13,222

)

 

$

(13,285

)

 

$

(44,585

)

$

(38,575

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

$

(0.36

)

 

$

(0.39

)

 

$

(1.27

)

$

(1.33

)

Weighted-average common stock outstanding - basic and diluted

 

36,297,780

 

 

 

34,213,096

 

 

 

35,174,203

 

 

28,956,280

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(13,222

)

 

$

(13,285

)

 

$

(44,585

)

$

(38,575

)

Net unrealized (loss) gain on marketable securities

 

(135

)

 

 

46

 

 

 

(31

)

 

179

 

Comprehensive loss

$

(13,357

)

 

$

(13,239

)

 

$

(44,616

)

$

(38,396

)

 

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

 

 

 

 

 

 

 

 

 

 

 

$0.001 par value

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

equity

 

 

 

For the Three Months Ended September 30, 2020

 

Balance at June 30, 2020

 

 

34,145,111

 

 

$

34

 

 

$

333,925

 

 

$

214

 

 

$

(202,501

)

 

$

131,672

 

Issuance of common stock under employee stock purchase plan

 

 

29,857

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Exercise of options

 

 

724

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

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

 

 

533,711

 

 

 

1

 

 

 

1,203

 

 

 

 

 

 

 

 

 

1,204

 

Cancellation of restricted stock

 

 

(37,351

)

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

935

 

 

 

 

 

 

 

 

 

935

 

Unrealized loss on securities

 

 

 

 

 

 

 

 

-

 

 

 

(135

)

 

 

 

 

 

(135

)

Net loss

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

(13,222

)

 

 

(13,222

)

Balance at September 30, 2020

 

 

34,672,052

 

 

$

35

 

 

$

336,106

 

 

$

79

 

 

$

(215,723

)

 

$

120,497

 

 

 

For the Three Months Ended September 30, 2019

 

Balance at June 30, 2019

 

 

31,719,719

 

 

$

32

 

 

$

325,778

 

 

$

68

 

 

$

(145,055

)

 

$

180,823

 

Issuance of restricted stock

 

 

585,600

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Cancellation of restricted stock

 

 

(14,505

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment to accrued common stock issuance costs

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

1,069

 

 

 

 

 

 

 

 

 

1,069

 

Unrealized gain on securities

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

46

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,285

)

 

 

(13,285

)

Balance at September 30, 2019

 

 

32,290,814

 

 

$

33

 

 

$

326,860

 

 

$

114

 

 

$

(158,340

)

 

$

168,667

 

 

 

For the Nine Months Ended September 30, 2020

 

Balance at December 31, 2019

 

 

32,266,814

 

 

$

33

 

 

$

327,900

 

 

$

110

 

 

$

(171,138

)

 

$

156,905

 

Issuance of common stock under employee stock purchase plan

 

 

29,857

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Exercise of options

 

 

724

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of restricted stock

 

 

226,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

2,312,693

 

 

 

2

 

 

 

5,058

 

 

 

 

 

 

 

 

 

5,060

 

Cancellation of restricted stock

 

 

(164,371

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

3,105

 

 

 

 

 

 

 

 

 

3,105

 

Unrealized loss on securities

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

 

 

 

(31

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,585

)

 

 

(44,585

)

Balance at September 30, 2020

 

 

34,672,052

 

 

$

35

 

 

$

336,106

 

 

$

79

 

 

$

(215,723

)

 

$

120,497

 

 

 

For the Nine Months Ended September 30, 2019

 

Balance at December 31, 2018

 

 

25,401,479

 

 

$

25

 

 

$

243,903

 

 

$

(65

)

 

$

(119,765

)

 

$

124,098

 

Issuance of restricted stock

 

 

585,600

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

6,340,771

 

 

 

7

 

 

 

56,990

 

 

 

 

 

 

 

 

 

56,997

 

Proceeds from pre-funded common stock warrants, net of issuance costs

 

 

 

 

 

 

 

 

22,874

 

 

 

 

 

 

 

 

 

22,874

 

Cancellation of restricted stock

 

 

(37,036

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

3,094

 

 

 

 

 

 

 

 

 

3,094

 

Unrealized gain on securities

 

 

 

 

 

 

 

 

 

 

 

179

 

 

 

 

 

 

179

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,575

)

 

 

(38,575

)

Balance at September 30, 2019

 

 

32,290,814

 

 

$

33

 

 

$

326,860

 

 

$

114

 

 

$

(158,340

)

 

$

168,667

 

 

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, 2020

 

 

September 30, 2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(44,585

)

 

$

(38,575

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,983

 

 

 

2,030

 

Equity-based compensation expense

 

 

3,105

 

 

 

3,094

 

Accretion/amortization of investment securities

 

 

(50

)

 

 

(1,177

)

Reduction in carrying amount of operating lease right-of-use asset

 

 

1,286

 

 

 

959

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

5,062

 

 

 

(9,444

)

Prepaid research and development, net of current portion

 

 

7,164

 

 

 

(20,571

)

Accounts payable and accrued expenses

 

 

(1,843

)

 

 

(670

)

Deferred revenue

 

 

(544

)

 

 

1,507

 

Operating lease liabilities

 

 

(1,419

)

 

 

(1,407

)

Other long-term liabilities

 

 

176

 

 

 

 

Net cash used in operating activities

 

 

(29,665

)

 

 

(64,254

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(52,726

)

 

 

(129,517

)

Proceeds from maturity of marketable securities

 

 

61,736

 

 

 

131,146

 

Proceeds from redemption of marketable securities

 

 

16,747

 

 

 

 

Purchases of property and equipment

 

 

(384

)

 

 

(842

)

Net cash provided by investing activities

 

 

25,373

 

 

 

787

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments on finance lease obligations

 

 

(190

)

 

 

(198

)

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

 

 

5,070

 

 

 

 

Proceeds from employee stock purchases and exercise of stock options

 

 

43

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

56,997

 

Proceeds from issuance of pre-funded common stock warrants, net of issuance costs

 

 

 

 

 

22,874

 

Net cash provided by financing activities

 

 

4,923

 

 

 

79,673

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

631

 

 

 

16,206

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

27,281

 

 

 

12,349

 

Cash, cash equivalents and restricted cash at end of period

 

$

27,912

 

 

$

28,555

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Property and equipment purchases included in accounts payable and accrued expenses

 

$

(4

)

 

$

(365

)

Assets acquired under operating lease obligation