Solid Biosciences Inc. (SLDB)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements.

Overview

We are a life sciences company focused on advancing a portfolio of current and future gene therapy candidates, which we refer to collectively as our Candidates, including SGT-003 for the treatment of Duchenne muscular dystrophy, or Duchenne, SGT-212 for the treatment of Friedreich's ataxia, or FA, SGT-501 for the treatment of Catecholaminergic polymorphic ventricular tachycardia, or CPVT, SGT-601 for the treatment of TNNT2-mediated dilated cardiomyopathy, or TNNT2 DCM, and additional assets for the treatment of genetic cardiac and other diseases, at different stages of development, with varying levels of investment. We are advancing our diverse pipeline across rare neuromuscular and cardiac diseases, bringing together experts in science, technology, disease management and care. Patient-focused and founded by those directly impacted by Duchenne, our mission is to improve the daily lives of patients living with these devastating diseases.

Solid was purpose-built to advance the best science and accelerate the discovery and development of treatments that may benefit all patients with Duchenne. As we expand to bring meaningful treatments to patients living with other neuromuscular and cardiac diseases, the values and guiding principles that drive us continue. Our corporate vision is to build an innovation platform enabling the discovery and development of high-value genetic medicines for neuromuscular and cardiac diseases by integrating internal capabilities, including a vector core, use of validated animal models, optimized expression cassettes, novel capsids and regulatory expertise, and collaborations with leaders in related clinical and research fields. Our mission, which guides our operations, is to treat and change the course of neuromuscular and cardiac diseases at all stages. Underscoring this mission, our disease-focused business model is founded on the following fundamental principles:

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identify and develop meaningful therapies for underserved patients with sometimes fatal neuromuscular and cardiac diseases;

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build innovative libraries of delivery capsids and other enabling technologies with the potential to have broad impact on the gene therapy field at large:

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bring together the leading experts in neuromuscular and cardiac diseases, science, technology, disease management and care; and

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be guided by the needs of these patients.

We are continuing to advance our pipeline of Candidates. The U.S. Food and Drug Administration, or the FDA, has granted orphan drug designation, Rare Pediatric Disease designation and Fast Track designation for SGT-003 for Duchenne. The FDA has granted Fast Track Designation for SGT-212 for the treatment of FA. The FDA and the European Medicines Agency, or EMA, have granted orphan drug designation to SGT-501 for the treatment of CPVT and the FDA has granted Rare Pediatric Disease Designation for SGT-501.

SGT-003

Patient dosing in the Phase 1/2 INSPIRE DUCHENNE trial of SGT-003 began in the second quarter of 2024. The INSPIRE DUCHENNE trial is a Phase 1/2 first-in-human, open-label, single-dose, multicenter trial designed to evaluate the safety, tolerability and efficacy of SGT-003 in pediatric patients with Duchenne at a dose of 1E14vg/kg. SGT-003 is administered as a one-time intravenous infusion. In September 2024, we amended the INSPIRE DUCHENNE clinical trial protocol to increase the anticipated participant enrollment size, expand the participant cohort age groups, and extend the timepoints of certain secondary objective measurements. In connection with the expanded clinical trial, we have initiated work for additional GMP batches of SGT-003.

On February 18, 2025, we announced positive initial data from the Phase 1/2 INSPIRE DUCHENNE trial as of the data cutoff date of February 11, 2025. Interim biopsy data reported in the first three participants showed an average microdystrophin expression of 110%, as measured by western blot, and improvements in multiple biomarkers that are indicators of muscle integrity, health and resilience.

SGT-003 was well-tolerated in the first six participants dosed as of February 11, 2025. For a full description of the initial results from the INSPIRE DUCHENNE trial, see Part I, Item I, “Business” appearing in this Annual Report on Form 10-K.

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Enrollment in the INSPIRE DUCHENNE trial is ongoing, with at least 10 total participants in the trial anticipated to be dosed by early in the second quarter of 2025 and approximately 20 total participants anticipated to be dosed by the fourth quarter of 2025.

INSPIRE DUCHENNE currently has a total of six active clinical sites in the United States and Canada and approved clinical trial applications in the United Kingdom and Italy. We expect to activate additional trial sites by the end of 2025. In mid-2025, we plan to request a meeting with the U.S. Food and Drug Administration, or the FDA, to discuss the potential for accelerated approval regulatory pathways for SGT-003.

SGT-212

In January 2025, we announced that the FDA cleared our investigational new drug, or IND, for SGT-212 for the treatment of FA. We anticipate initiating an open-label, multi-center Phase 1b clinical trial of SGT-212 in non-ambulatory and ambulatory adult patients living with FA in the second half of 2025. The FDA has granted Fast Track designation to SGT-212 for the treatment of FA.

SGT-501

We have conducted preclinical studies of SGT-501, including three-and six-month good laboratory practices, or GLP, toxicology studies. IND-enabling GLP toxicology studies of SGT-501 in non-human primates, including the in-life portion of the six-month toxicology, were completed in the first quarter of 2025. We expect to submit an IND to the FDA for SGT-501 for the treatment of patients with RYR2-mediated CPVT in the first half of 2025.

Other Cardiac Programs

We are currently developing a preclinical stage product candidate, SGT-601, for the treatment of TNNT2 DCM. Efficacy studies in mice suggest that SGT-601 treatment resulted in a restoration of ejection fraction function and a stabilization in cardiac function over time. We anticipate submitting an IND to the FDA for SGT-601 for the treatment of TNNT2 DCM in the second half of 2026.

Capsid

Solid's proprietary capsid used in SGT-003, AAV-SLB101, was well tolerated in the first patients dosed in the INSPIRE DUCHENNE trial as well as in NHP and mouse studies.

We are focused on developing transformative treatments to improve the lives of patients with rare neuromuscular and cardiac diseases. The majority of our current programs are designed to treat these diseases with gene transfer products. Gene transfer, a type of gene therapy, is designed to address diseases caused by mutated genes through the delivery of functional versions of those genes, called transgenes. The transgenes are then utilized by the body to produce proteins that act therapeutically to treat the condition. In addition to a transgene, our gene transfer Candidates include a viral capsid or vector (a protein shell utilized as a vehicle to deliver a transgene to cells in the body) and a promoter (a specialized DNA sequence that directs cells to produce the protein in specific tissues). The capsid is modified to no longer self-replicate yet still retain its ability to introduce new genetic material directly into patients’ cells. Adeno-associated virus, or AAV, capsids have been approved for use to deliver transgenes to patients, including via systemic delivery as well as stereotactic neurosurgical administration to the brain. The use of AAV capsids to deliver gene therapies has also been extensively studied by third parties in human clinical trials for multiple disease indications, and in certain of these trials AAV was delivered systemically to the patient.

Our Operations

Due to our significant research and development expenditure, licensing and patent investment, and general and administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were $124.7 million and $96.0 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $783.5 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize our Candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at

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all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of our Candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2024, we had cash, cash equivalents, and available-for-sale securities of $148.9 million, excluding restricted cash of $2.0 million. In February 2025, we issued and sold in an underwritten offering, or the February 2025 Offering, 35,739,810 shares of our common stock at a price per share of $4.03, and, to certain investors in lieu of shares of common stock, pre-funded warrants to purchase 13,888,340 shares of our common stock at a price per warrant of $4.029. We received net proceeds of approximately $187.5 million, after deducting underwriting discounts and commissions and estimated offering costs. We believe that our cash, cash equivalents, and available-for-sale securities as of December 31, 2024, together with the net proceeds from the February 2025 Offering, will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Financial Operations Overview

Revenue

We have not generated any commercial product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever. If our development efforts for our Candidates are successful and result in marketing approval, we may generate commercial product revenue in the future from product sales.

Operating Expenses

We classify our operating expenses into two categories: research and development and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses, and equity-based compensation expense comprise a significant component of both expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and clinical and preclinical development activities for our Candidates and include:

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expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical and clinical activities on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture SGT-003, SGT-501, and other Candidates for use in our preclinical studies and clinical trials;

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salaries, benefits and other related costs, including equity-based compensation expense, for personnel engaged in research and development functions;

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costs of outside consultants, engaged to assist in our research and development activities, including their fees, equity-based compensation and related travel expenses;

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costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

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costs incurred in seeking regulatory approval of our Candidates;

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expenses incurred under our intellectual property licenses; and

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facility-related research and development expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Research and development activities are central to our business model. We are still in the early stages of development of our Candidates. Candidates in later stages of clinical development generally have higher development costs than those in preclinical development or in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable

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future if and as we conduct clinical trials for SGT-003, initiate clinical trials for our other Candidates, including our planned Phase 1b clinical trial of SGT-212, and continue to identify and develop additional Candidates.

We typically use our employee and infrastructure resources across our Candidates. We track outsourced development costs and milestone payments made under our licensing arrangements by Candidate, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to Candidates on a program-specific basis. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by Candidate for the respective periods (in thousands):

We cannot determine with certainty the duration, costs, and timing of clinical trials of ongoing and planned SGT-003, SGT-212, SGT-501, or our other Candidates, or if, when, or to what extent we will generate revenue from the commercialization and sale of any of our Candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our Candidates. The duration, costs, and timing of clinical trials and development of our Candidates will depend on a variety of factors, including:

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the scope, rate of progress, expense, and results of any clinical trials of our Candidates and other research and development activities that we may conduct;

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the imposition of regulatory restrictions on clinical trials, including full and partial clinical holds and the time and activities required to lift any such holds;

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uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;

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significant and changing government regulation and regulatory guidance;

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potential additional studies or clinical trials requested by regulatory agencies;

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the timing and receipt of any marketing approvals; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, and facility-related expenses.

We expect that our general and administrative expenses will increase in the future as we support our research and development activities and activities related to our INSPIRE DUCHENNE trial, our planned Phase 1b clinical trial of SGT-212, and any other planned or future clinical trials for and potential commercialization of our Candidates.

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Other Income, Net

Other income, net consists primarily of interest income. Interest income consists of income earned on our cash and cash equivalents, available-for-sale securities, and restricted cash.

Income Taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ materially from these estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements and that involve a significant level of estimation uncertainty.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

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CROs in connection with performing research activities, clinical trials and preclinical studies on our behalf;

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vendors in connection with preclinical development and clinical activities;

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vendors related to product manufacturing and development and distribution of clinical and preclinical supplies; and

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third parties under our intellectual property licenses.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services rendered and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of

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services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed, and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

Equity-Based Compensation

We have equity plans under which we make equity awards to employees, directors and non-employees. We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on the fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions. For performance-based restricted stock unit awards, which are subject to the achievement of performance milestones, the fair value is recognized as expense over the requisite service periods when the achievement of such performance milestones is determined to be probable. If a performance milestone is not determined to be probable or is not met, no equity-based compensation expense is recognized, and any previously recognized expense is reversed. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. In the first quarter of 2024, we determined that we have adequate historical stock price data to utilize solely our stock for historical volatility purposes. The expected term of stock options with service-based vesting conditions and options granted to non-employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. We use a 0% expected dividend yield in our determination of fair value based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future, if ever.

Derivative Liabilities

In connection with the asset purchase agreement with FA212 LLC, or FA212, certain development milestone payments to FA212 are payable in either cash, equity, or a combination of both, at our discretion. Such contingent payments were determined to be derivative liabilities.

Derivative liabilities are recorded at fair value based on the probability weighted present value of the estimated cash flows pursuant to the contractual terms of each agreement. The derivative liabilities are remeasured quarterly with changes in fair value recorded in change in fair value of derivative liabilities in the consolidated statements of operations.

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Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands, except percentages):

Research and Development Expenses

The following table summarizes our research and development expenses by Candidate for the respective periods (in thousands, except percentages):

Research and development expenses for the year ended December 31, 2024 were $96.4 million, compared to $76.6 million for the year ended December 31, 2023. The increase of $19.9 million in research and development expenses was primarily related to a $14.0 million increase in costs for SGT-501 from increased manufacturing and study related costs, a $4.6 million increase in costs for SGT-212 related to the entry into the asset purchase agreement with FA212, and a $6.7 million increase in license fees and research and consulting costs for other development programs, partially offset by a $5.7 million decrease in costs for SGT-003 related to manufacturing and study related costs.

General and Administrative Expenses

General and administrative expenses were $33.3 million for the year ended December 31, 2024, compared to $27.8 million for the year ended December 31, 2023. The increase of $5.5 million was primarily related to a $4.1 million increase in personnel costs and a $1.4 million increase in legal fees.

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Restructuring Expense

There was no restructuring expense during the year ended December 31, 2024, compared to $(0.1) million of restructuring expense for the year ended December 31, 2023. The restructuring expense was related to severance and other employee-related costs we recorded in the year ended December 31, 2022, in connection with a restructuring that occurred in December 2022. We paid $0.3 million and $3.7 million in severance and other employee-related costs during the years ended December 31, 2024 and 2023, respectively. See Note 16 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

Other Income, Net

Other income, net was $5.0 million and $8.2 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $3.2 million was primarily related to a $4.8 million expense for a change in fair value of derivative liabilities, partially offset by a $1.9 million increase in interest income primarily related to available-for-sale securities included within our portfolio.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of securities in private placements and follow-on offerings, the sale of common stock in our initial public offering, and sales of common stock under our “at-the-market offering” sales agreement with Jefferies LLC, or Jefferies, or the ATM Sales Agreement. Through December 31, 2024, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, and an aggregate of $668.9 million of net proceeds from the sale of our common stock through public offerings, including our IPO and follow-on public offering, private placements, the ATM Sales Agreement, and pursuant to the stock purchase agreements.

On March 13, 2019, we entered into the ATM Sales Agreement, which was amended and restated in March 2024, under which we may offer and sell, from time to time, shares of our common stock through Jefferies as sales agent. Any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act. We will pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the ATM Sales Agreement. During the years ended December 31, 2024 and 2023, we sold 2,212,937 and 602,030 shares of common stock, respectively, pursuant to the ATM Sales Agreement resulting in net proceeds of $18.4 million and $3.0 million, respectively. During the three months ended December 31, 2024, we sold 1,004,650 shares pursuant to the ATM Sales Agreement resulting in net proceeds of $6.9 million.

On January 11, 2024, we issued and sold 16,973,103 shares of our common stock at a price per share of $5.53 and, to one investor in lieu of shares of common stock, pre-funded warrants to purchase 2,712,478 shares of common stock at a price of $5.529 per pre-funded warrant, in a private placement, which we refer to as the January 2024 Private Placement. We received $103.7 million of net proceeds from the January 2024 Private Placement after deducting offering costs.

As of December 31, 2024, we had cash, cash equivalents and available-for-sale securities of $148.9 million, excluding restricted cash of $2.0 million, and had no debt outstanding.

On February 19, 2025, we issued and sold in the February 2025 Offering 35,739,810 shares of our common stock at a price of $4.03 per share, and, to certain investors in lieu of shares of common stock, pre-funded warrants to purchase 13,888,340 shares of our common stock at a price of $4.029 per pre-funded warrant. We received approximately $187.5 million of net proceeds from the February 2025 Offering, after deducting underwriting discounts and commissions and estimated offering costs.

Summary of Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

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Operating Activities

During the year ended December 31, 2024, operating activities used $100.0 million of cash, primarily resulting from our net loss of $124.7 million offset by non-cash charges of $21.8 million due primarily to equity-based compensation of $10.5 million, an increase in the fair value of the derivative liabilities of $4.8 million, non-cash acquired in-process research and development of $3.4 million, depreciation expense of $2.5 million, non-cash lease expense of $2.4 million, and a non-cash up-front equity payment for a collaboration and license agreement of $2.0 million, partially offset by amortization of discount on available-for sale-securities of $3.6 million. Net cash provided by changes in our operating assets and liabilities was $2.9 million which included an increase of $4.8 million in accrued expenses and other current and non-current liabilities, and an increase in accounts payable of $2.2 million, partially offset by an increase in prepaid expenses and other current and non-current assets of $2.4 million and a decrease in operating lease liability of $1.7 million.

During the year ended December 31, 2023, operating activities used $94.2 million of cash, primarily resulting from our net loss of $96.0 million offset by non-cash charges of $10.7 million due primarily to equity-based compensation of $7.6 million and depreciation and impairment expense of $2.6 million, non-cash lease expense of $2.5 million, partially offset by amortization of discount on available-for sale-securities of $2.4 million. Net cash used by changes in our operating assets and liabilities was $8.9 million which included a decrease of $6.9 million in accrued expenses and other current and non-current liabilities, a decrease in operating lease liability of $1.7 million, and a decrease in accounts payable of $0.8 million, partially offset by a decrease in prepaid expenses and other current and non-current assets of $0.6 million.

Investing Activities

During the year ended December 31, 2024, investing activities used $16.1 million of cash, resulting from the purchases of available-for sale securities of $204.3 million and the purchases of property and equipment of $0.7 million, partially offset by the maturity of available-for sale securities of $188.9 million.

During the year ended December 31, 2023, investing activities provided cash of $9.7 million, consisting primarily of the sale of available-for-sale securities of $128.6 million, partially offset by net purchases of available-for-sale securities of $117.4 million and the purchase of property and equipment of $1.5 million primarily related to the corporate headquarters lease.

Financing Activities

During the year ended December 31, 2024, financing activities provided $122.4 million of cash, primarily resulting from the net proceeds from the sale of common stock and pre-funded warrants to purchase shares of common stock in the January 2024 Private Placement of $103.7 million and net proceeds from the sale of common stock under the ATM Sales Agreement of $18.4 million, proceeds from the exercise of common stock options of $0.5 million, and proceeds from the issuance of shares under the Company's Amended and Restated 2021 Employee Stock Purchase Plan, or ESPP, of $0.3 million, partially offset by payments of the principal portion of finance lease obligations of $0.5 million.

During the year ended December 31, 2023, financing activities provided $3.1 million of cash as a result of proceeds from the issuance of common stock of $3.0 million under the ATM Sales Agreement and from the issuance of shares of common stock of $0.1 million under the ESPP.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to our Candidates. In addition, we have incurred and expect to continue to incur costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

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continue to enroll patients in our INSPIRE DUCHENNE trial and advance clinical development of SGT-003;

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advance our other Candidates into clinical trials, including our planned Phase 1b clinical trial of SGT-212;

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continue research and preclinical development of our Candidates and adjacent technologies such as assays;

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seek to identify additional candidates;

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engage in regulatory interactions with the FDA and other regulatory authorities;

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submit regulatory filings relating to the development of our Candidates and seek marketing approvals for our Candidates that successfully complete clinical trials, if any;

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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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scale up our manufacturing processes and arrange manufacturing for larger quantities of our product candidates for preclinical and clinical development and potential commercialization;

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maintain, expand, protect and enforce our intellectual property portfolio;

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hire and retain additional clinical, quality control and scientific personnel;

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build out new facilities or expand existing facilities to support our activities;

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acquire or in-license other drugs, drug candidates, technologies and intellectual property; and

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add operational, financial and management information systems and personnel.

As of December 31, 2024, we had cash, cash equivalents and available-for-sale securities of $148.9 million, excluding restricted cash of $2.0 million. Based on our current operating plan, we believe that our cash, cash equivalents and available-for-sale securities as of December 31, 2024, together with the net proceeds from our February 2025 Offering, will be sufficient to fund our operating expenses and capital requirements into the first half of 2027. As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all. In addition, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Due to the numerous risks and uncertainties associated with the development of our Candidates and because the extent to which we may enter collaborations with third parties for development of our Candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our Candidates. Our future capital requirements will depend on many factors, including:

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the progress, costs and results of the INSPIRE DUCHENNE trial, our planned clinical trial of SGT-212, and any future clinical trials of our Candidates;

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the costs, timing and outcome of regulatory review of our Candidates;

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the scope, progress, results and costs of discovery, laboratory testing, manufacturing, preclinical development and clinical trials for our Candidates;

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the costs associated with manufacturing and use of third-party manufacturers;

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the revenue, if any, received from commercial sale of our Candidates, should any of our Candidates receive marketing approval;

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the costs of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights and defending intellectual property-related claims;

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the outcome of any lawsuits filed against us;

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the terms of our current and any future license agreements and collaborations;

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our ability to establish and maintain additional strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

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the payment or receipt of milestones, royalties and other collaboration-based revenues, if any;

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the extent to which we acquire or in-license other candidates, technologies and intellectual property; and

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if and as we need to adapt our business in response to public health emergencies or pandemics and collateral consequences related thereto.

We are supplying, and expect to continue to supply, our ongoing and future pre-clinical and clinical development programs with drug produced at a cGMP compliant facility located at one of our CMOs. We intend to establish the capability and capacity to supply Candidates at commercial scale from multiple sources.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any Candidates or generate revenue from the sale of any products for which we

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may obtain marketing approval. In addition, our Candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity securities, our existing stockholders’ ownership interest may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders’ ownership interests.

If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or Candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our Candidates or any future commercialization efforts or grant rights to develop and market Candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We lease certain office space, lab space and lab equipment in Massachusetts and North Carolina. These leases are used for our continuing operations. For a description of our lease obligations, refer to Note 10 to our consolidated financial statements appearing in this Annual Report on Form 10-K.

Under various agreements with third-party licensors, we have agreed to make milestone payments and pay royalties to third parties based on specified milestones. For a description of our license agreements, see Part I, Item 1, “Business—Strategic Partnerships and Collaborations/Licenses” and see Note 12 of our consolidated financial statements appearing in this Annual Report on Form 10-K.

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts are cancelable by us upon prior notice of 30 days.

Recently Issued Accounting Pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described, in or implied, by these forward-looking statements.

Unless otherwise indicated, all information in this Annual Report on Form 10-K gives effect to a 1-for-15 reverse stock split of our common stock that became effective on October 27, 2022, and all references to historical share and per share amounts give effect to the reverse stock split.

Overview

We are a life sciences company focused on advancing a portfolio of current and future gene therapy candidates, which we refer to collectively as our Candidates, including SGT-003 for the treatment of Duchenne muscular dystrophy, or Duchenne, SGT-501 for the treatment of Catecholaminergic polymorphic ventricular tachycardia, or CPVT, and additional assets for the treatment of cardiac and other diseases, at different stages of development, with varying levels of investment. We are advancing our diverse pipeline across rare neuromuscular and cardiac diseases, bringing together experts in science, technology, disease management and care. Patient-focused and founded by those directly impacted by Duchenne, our mission is to improve the daily lives of patients living with these devastating diseases.

Solid was purpose-built to advance the best science and accelerate the discovery and development of treatments that may benefit all patients with Duchenne. As Solid expands to bring meaningful treatments to patients living with other neuromuscular and cardiac diseases, the values and guiding principles that drive us continue. Our corporate vision is to build an innovation platform enabling the discovery and development of high-value genetic medicines for neuromuscular and cardiac diseases by integrating internal capabilities, including a vector core, use of validated animal models, optimized expression cassettes, novel capsids and regulatory expertise, and collaborations with leaders in related clinical and research fields. Our mission, which guides our operations, is to treat and change the course of neuromuscular and cardiac diseases at all stages. Underscoring this mission, our disease-focused business model is founded on the following fundamental principles:

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identify and develop meaningful therapies for patients with neuromuscular and cardiac diseases;

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bring together the leading experts in neuromuscular and cardiac diseases, science, technology, disease management and care; and

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be guided by the needs of these patients.

On December 2, 2022, we completed our acquisition of AavantiBio, Inc., or AavantiBio, a privately held gene therapy company focused on transforming the lives of patients with Friedreich’s ataxia, or FA, and rare cardiomyopathies, or the Acquisition. Upon the consummation of the Acquisition, we acquired AavantiBio’s gene therapy programs, AVB-202-TT for the treatment of FA and AVB-401 for the treatment of BAG3-mediated dilated cardiomyopathy ("DCM"), additional assets for the treatment of cardiac diseases, platform technologies and know-how related thereto.

Our Operations

We are focused on developing transformative treatments to improve the lives of patients with rare neuromuscular and cardiac diseases. Our current programs are all designed to treat these diseases with gene transfer products. Gene transfer, a type of gene therapy, is designed to address diseases caused by mutated genes through the delivery of functional versions of those genes, called transgenes. The transgenes are then utilized by the body to produce proteins that are absent or not functional prior to treatment, potentially offering long-lasting clinical benefit. In addition to a transgene, our gene transfer candidates include a viral capsid or vector (a protein shell utilized as a vehicle to deliver a transgene to cells in the body) and a promoter (a specialized DNA sequence that directs cells to produce the protein in specific tissues). The capsid is modified to no longer self-replicate yet still retain its ability to introduce new genetic material directly into patients’ cells. Adeno-associated virus, or AAV, capsids have been approved for use to deliver transgenes to patients, including via systemic delivery. The use of AAV capsids to deliver gene therapies has also been extensively studied by third parties in human clinical trials for multiple disease indications, and in certain of these trials AAV was delivered systemically to the patient.

Due to our significant research and development expenditure, licensing and patent investment, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were $96.0 million, $86.0 million and $72.2 million for the years ended December 31, 2023, 2022

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and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $658.8 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize our Candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of our Candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2023, we had cash, cash equivalents, and available-for-sale securities of $123.6 million, excluding restricted cash of $1.8 million. In January 2024, we sold to investors in a private placement, or the January 2024 Private Placement, an aggregate of 16,973,103 shares of our common stock at a price of $5.53 per share, and, to one investor in lieu of shares, pre-funded warrants to purchase 2,712,478 shares of our common stock, at a price of $5.529 per pre-funded warrant. We received approximately $104.0 million of aggregate net proceeds, after deducting offering costs. We believe that our cash, cash equivalents, and available-for-sale securities as of December 31, 2023, together with the net proceeds from the January 2024 Private Placement, will enable us to fund our operating expenses and capital expenditure requirements into 2026. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Financial operations overview

Revenue

Collaboration revenue

There was no collaboration revenue for the year ended December 31, 2023. Collaboration revenue was $8.1 million for the year ended December 31, 2022. We recognized this revenue related to research services and cost reimbursement from the collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx. No other research and development has commenced under the Collaboration Agreement.

Product revenue

We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products, if approved, for the foreseeable future, if ever. If our development efforts for our Candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.

Operating expenses

We classify our operating expenses into two categories: research and development, and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses and equity-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-003 and other Candidates and include:

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expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research and preclinical activities on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture SGT-003 and other Candidates for use in our preclinical studies and clinical trials;

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salaries, benefits and other related costs, including equity-based compensation expense, for personnel engaged in research and development functions;

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costs of outside consultants, engaged to assist in our research and development activities, including their fees, equity-based compensation and related travel expenses;

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costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

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costs incurred in seeking regulatory approval of SGT-003 and other Candidates;

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expenses incurred under our intellectual property licenses; and

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facility-related research and development expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Research and development activities are central to our business model. We are still in the early stages of development of our Candidates. Product candidates in later stages of clinical development generally have higher development costs than those in preclinical development or in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future if and as we conduct clinical trials for SGT-003, initiate clinical trials for our other Candidates and continue to identify and develop additional candidates.

We typically use our employee and infrastructure resources across our product candidates. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidates, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to product candidates on a program-specific basis. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by product candidates for the respective periods:

We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-003 or other Candidates, or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our candidates will depend on a variety of factors, including:

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the scope, rate of progress, expense and results of any clinical trials of our Candidates and other research and development activities that we may conduct;

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the imposition of regulatory restrictions on clinical trials, including full and partial clinical holds and the time and activities required to lift any such holds;

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uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;

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significant and changing government regulation and regulatory guidance;

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potential additional studies or clinical trials requested by regulatory agencies;

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the timing and receipt of any marketing approvals; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

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General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, acquisition costs, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we support our research and development activities and activities related to our INSPIRE Duchenne trial and any planned or future clinical trials for and potential commercialization of our Candidates.

Restructuring charges

In April 2022, we implemented changes to our corporate strategy. In connection with the changes to corporate operations, we reduced headcount by approximately 35 percent.

In November 2022, we approved a plan designed to streamline our operating structure in connection with the Acquisition. In connection with the plan, we reduced headcount by approximately 18 percent in December 2022.

Other income (expense), net

Other income (expense), net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, amortization of investment premium or accretion of investment discount.

Income taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements and that involve a significant level of estimation uncertainty.

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Revenue recognition

As discussed in Note 2 to our consolidated audited financial statements, under Accounting Standards Codification, or ASC 606, Revenue from Contracts with Customers, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

When optional goods or services are offered, we assess the options to determine whether the options grant the customer a material right. This determination includes whether the option is priced at an amount that the customer would not have received without entering into the contract. If we conclude the option conveys a material right, it is accounted for as a separate performance obligation. In identifying performance obligations in a contract, we identify those promises that are distinct. Promised goods or services are considered distinct when the customer can benefit from the goods or services on their own, or together with readily available resources, and the goods or services are separately identifiable from other promises in the contract. If a promise is not distinct, it is combined with other promises in the contract until the combined group of promises is capable of being distinct.

We estimate the transaction price based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of the potential payments and the likelihood that the payments will be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. For contracts that include sales-based royalties for licensed compounds, we recognize revenue at the date when the related sales occur. Finally, we determine whether the contract contains a significant financing component by analyzing the promised consideration relative to the standalone selling price of the promised goods and services and the timing of payment relative to the transfer of the promised goods and services. At each reporting date, we reassess the transaction price and probability of achievement of the performance obligations and the associated constraints on transaction price. If necessary, we adjust the transaction price, recording a cumulative catch-up based on progress for the amount that was previously constrained.

Revenue is recognized when (or as) control of a performance obligation is transferred to the customer. When combined performance obligations contain a promised license and related services or other promises, management judgment is required to determine the appropriate timing of revenue recognition. In doing so, we must identify the predominant promise or promises in the contract to determine whether revenue is recognized at a point in time or over time. If over time, we must determine the appropriate measure of progress. If a license is deemed to be the predominant promise in a performance obligation, we must determine the nature of the license, whether functional or symbolic intellectual property, to conclude whether point-in-time or over-time revenue recognition is most appropriate. The determination of functional or symbolic intellectual property requires an assessment of whether the customer is able to exploit and benefit from the license in its

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current condition, or if the utility of the license is dependent on or influenced by our ongoing activities or being associated with us.

At each reporting date, we calculate the measure of progress for the performance obligations transferred over time. The calculation generally uses an input measure based on costs incurred to-date relative to estimated total costs to complete the transfer of the performance obligation. The measurement of progress is then used to calculate the total revenue earned, including any cumulative catch-up adjustment.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

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CROs in connection with performing research activities on our behalf and conducting clinical trials and preclinical studies on our behalf;

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vendors in connection with preclinical development activities;

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vendors related to product manufacturing and development and distribution of clinical and preclinical supplies; and

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third parties under our intellectual property licenses.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed, and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

Equity-based compensation

We have equity plans under which we make equity awards to employees, directors and non-employees. We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on the fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions. We have not issued any awards with performance-based vesting conditions. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.

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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. We historically have been a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. For options with service-based vesting conditions and options granted to non-employees, the expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future, if ever.

Results of operations

Comparison of the years ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

Collaboration revenue

There was no collaboration revenue for the year ended December 31, 2023, compared to $8.1 million of collaboration revenue for the year ended December 31, 2022. The decrease in collaboration revenue of $8.1 million was related to the completion of research and development services contemplated under the Collaboration Agreement during the second quarter of fiscal year 2022, resulting in the recognition of the remaining deferred revenue, which was recorded at the time the Collaboration Agreement was executed. No other research and development has commenced under the Collaboration Agreement.

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Research and development expenses

Research and development expenses for the year ended December 31, 2023 were $76.6 million, compared to $78.4 million for the year ended December 31, 2022. The decrease of $1.8 million in research and development expenses was primarily related to a $21.4 million decrease in costs for SGT-001 due to our decision to prioritize development of SGT-003, offset by an $11.0 million increase in manufacturing, clinical, and study related costs for SGT-003, a $4.0 million increase in costs for other development programs, a $3.2 million increase in costs for SGT-501, and a $1.4 million increase in external expenses.

General and administrative expenses

General and administrative expenses were $27.8 million for the year ended December 31, 2023, compared to $28.9 million for the year ended December 31, 2022. The decrease of $1.1 million was primarily related to a $1.6 million decrease in legal fees due to acquisition related costs occurring in 2022, a $1.0 million decrease in insurance premiums, a $0.4 million decrease in business development research, and a $0.1 million decrease in charitable contributions, offset by a $1.0 million increase in personnel related costs, a $0.4 million increase in IT related costs, a $0.3 million increase in recruiting costs, and a $0.3 million increase in facilities costs.

Restructuring charges

During the year ended December 31, 2023, restructuring charges were $(0.1) million compared to $7.2 million for the year ended December 31, 2022. The restructuring charges were related to severance and other employee-related costs in connection with the restructurings that occurred in April 2022 and December 2022. We paid $3.7 million during the year ended December 31, 2023 and $3.3 million during the year ended December 31, 2022.

Other income (expense)

Other income (expense) was $8.2 million and $20.5 million for the years ended December 31, 2023 and 2022, respectively. The decrease in other income was primarily related to the gain recorded in connection with the Acquisition of $18.2 million during the year ended December 31, 2022, partially offset by a $4.5 million increase in interest income primarily related to available-for-sale securities included within our portfolio, and a $1.5 million increase in other income primarily related to our sublease of space at our Massachusetts facility.

Results of operations—Years ended December 31, 2022 and 2021

Discussion and analysis of the year ended December 31, 2022 compared to the year ended December 31, 2021 is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 23, 2023 (the “2022 Form 10-K”).

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Liquidity and capital resources

Sources of liquidity

To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of our common stock in private placements and the sale of common stock in our initial public offering and a follow-on public offering, and sales of common stock under our “at-the-market offering” sales agreement, dated March 13, 2019 and as amended on August 16, 2021, by and between us and Jefferies LLC, or Jefferies, or the ATM Sales Agreement. Through December 31, 2023, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, and an aggregate of $546.8 million of net proceeds from the sale of our common stock through public offerings, including our IPO and follow-on public offering, private placements, the ATM Sales Agreement, and pursuant to the stock purchase agreement with Ultragenyx, as detailed in the following paragraphs.

On March 13, 2019, we entered into the ATM Sales Agreement, which was amended in August 2021, under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Jefferies as sales agent. Any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act. We pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the ATM Sales Agreement. During the years ended December 31, 2023 and 2022, we sold 602,030 and 0 shares of common stock, respectively, pursuant to the ATM Sales Agreement resulting in net proceeds of $3.0 million and $0, respectively. During the three months ended December 31, 2023, we sold 182,030 shares pursuant to the ATM Sales Agreement.

On March 23, 2021, we issued and sold in a public offering 1,666,666 shares of our common stock at a price per share of $86.25, including the full exercise by the underwriters of an option to purchase additional shares of common stock. We received net proceeds of approximately $134.9 million after deducting underwriting discounts and commissions and offering expenses.

On December 2, 2022, we issued and sold 10,638,290 shares of our common stock at a price per share of $7.05 in a private placement, or the December 2022 Private Placement, which closed immediately following the Acquisition. We received $72.6 million of net proceeds from the December 2022 Private Placement after deducting placement agent fees.

As of December 31, 2023, we had cash, cash equivalents and available-for-sale securities of $123.6 million, excluding restricted cash of $1.8 million, and had no debt outstanding.

On January 11, 2024, we issued and sold 16,973,103 shares of our common stock at a price per share of $5.53 and, to one investor in lieu of shares of common stock, pre-funded warrants to purchase 2,712,478 shares of common stock at a price of $5.529 per pre-funded warrant, in the January 2024 Private Placement. We received approximately $104.0 million of net proceeds from the January 2024 Private Placement after deducting offering costs.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

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Operating activities

During the year ended December 31, 2023, operating activities used $94.2 million of cash, primarily resulting from our net loss of $96.0 million offset by non-cash charges of $8.2 million due primarily to equity-based compensation of $7.6 million and depreciation and impairment expense of $3.0 million, partially offset by amortization of discount on available-for sale-securities of $2.4 million. Net cash used by changes in our operating assets and liabilities was $6.3 million which included a decrease of $9.0 million in accrued other current and non-current liabilities, and a decrease in accounts payable of $0.7 million, partially offset by a decrease in prepaid and other non-current assets of $3.4 million.

During the year ended December 31, 2022, operating activities used $98.0 million of cash, primarily resulting from our net loss of $86.0 million and non-cash charges of $8.3 million due primarily to the gain on acquisition of $18.2 million, offset by equity-based compensation of $7.5 million and depreciation expense of $2.4 million. Net cash used by changes in our operating assets and liabilities was $3.7 million which included a decrease in deferred revenue of $8.1 million, a decrease in accounts receivable of $0.1 million as a result of the Ultragenyx Collaboration Agreement, and a decrease in accounts payable of $5.2 million due to the timing of payments, partially offset by an increase in prepaid and other non-current assets of $3.7 million and a decrease in accrued other liabilities and non-current liabilities of $5.8 million.

Investing activities

During the year ended December 31, 2023, investing activities provided cash of $9.7 million, consisting primarily of the sale of available-for-sale securities of $128.6 million, partially offset by net purchases of available-for-sale securities of $117.4 million and the purchase of property and equipment of $1.5 million primarily related to the corporate headquarters lease.

During the year ended December 31, 2022, investing activities provided cash of $59.2 million, consisting primarily of the sale of available-for-sale securities of $212.8 million, net cash received upon the closing of the Acquisition of $31.5 million, and cash proceeds from the sale of property and equipment of $0.6 million, partially offset by net purchases of available-for-sale securities of $182.8 million and the purchase of property and equipment of $3.0 million primarily related to our corporate headquarters lease.

Financing activities

During the year ended December 31, 2023, net cash provided by financing activities was $3.1 million as a result of proceeds from the issuance of common stock of $3.0 million and from the issuance of shares of $0.1 million under the Company's employee stock purchase plan.

During the year ended December 31, 2022, net cash provided by financing activities was $74.8 million as a result of the December 2022 Private Placement.

A discussion of changes in our cash flow from the year ended December 31, 2021 to the year ended December 31, 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2022 Form 10-K.

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Funding requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to our Candidates. In addition, we have incurred and expect to continue to incur costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

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enroll patients in our INSPIRE Duchenne trial and advance clinical development of SGT-003;

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advance our other Candidates into clinical trials;

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continue research and preclinical development of our Candidates and adjacent technologies such as assays;

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seek to identify additional candidates;

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engage in regulatory interactions with the FDA and other regulatory authorities;

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submit regulatory filings relating to the development of our Candidates and seek marketing approvals for our Candidates that successfully complete clinical trials, if any;

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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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arrange manufacturing for larger quantities of our product candidates for preclinical and clinical development and potential commercialization;

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maintain, expand, protect and enforce our intellectual property portfolio;

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hire and retain additional clinical, quality control and scientific personnel;

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build out new facilities or expand existing facilities to support our activities;

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acquire or in-license other drugs, drug candidates, technologies and intellectual property;

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fund a portion of the development or commercialization of products in collaboration with Ultragenyx pursuant to the Collaboration Agreement; and

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add operational, financial and management information systems and personnel.

As of December 31, 2023, we had cash, cash equivalents and available-for-sale securities of $123.6 million, excluding restricted cash of $1.8 million. Based on our current operating plan, we believe that our cash, cash equivalents and available-for-sale securities as of December 31, 2023, together with the net proceeds from our January 2024 Private Placement, will be sufficient to fund our operating expenses and capital requirements into 2026. As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all. In addition, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Because of the numerous risks and uncertainties associated with the development of our Candidates and because the extent to which we may enter collaborations with third parties for development of our product candidates is unknown, we are

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unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

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the progress, costs and results of the INSPIRE Duchenne trial and any future clinical trials of our Candidates;

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the costs, timing and outcome of regulatory review of our Candidates;

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the scope, progress, results and costs of discovery, laboratory testing, manufacturing, preclinical development and clinical trials for our Candidates;

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the costs associated with manufacturing and use of third-party manufacturers;

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the revenue, if any, received from commercial sale of our Candidates, should any of our Candidates receive marketing approval;

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the costs of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights and defending intellectual property-related claims;

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the outcome of any lawsuits filed against us;

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the terms of our current and any future license agreements and collaborations;

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the success of our collaboration with Ultragenyx;

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our ability to establish and maintain additional strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

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the payment or receipt of milestones, royalties and other collaboration-based revenues, if any;

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the extent to which we acquire or in-license other candidates, technologies and intellectual property; and

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if and as we need to adapt our business in response to public health emergencies or pandemics, such as the recent COVID-19 pandemic, and collateral consequences related thereto.

We are supplying, and expect to continue to supply, our ongoing and future clinical development programs with drug produced at a cGMP compliant facility located at one of our CMOs. We intend to establish the capability and capacity to supply Candidates at commercial scale from multiple sources.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity securities, our existing stockholders’ ownership interest may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders’ ownership interests.

If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual obligations and commitments

We lease certain office space, lab space and lab equipment in Massachusetts, North Carolina and Florida. These leases are used for our continuing operations. For a description of our lease obligations, refer to Note 11 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

Under various agreements with third-party licensors, we have agreed to make milestone payments and pay royalties to third parties based on specified milestones. For a description of our license agreements, see “Business—Strategic partnerships and collaborations/licenses” and see Note 13 of our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts are cancelable by us upon prior notice of 30 days.

Recently issued accounting pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described, in or implied, by these forward-looking statements.

Unless otherwise indicated, all information in this Annual Report on Form 10-K gives effect to a 1-for-15 reverse stock split of our common stock that became effective on October 27, 2022, and all references to historical share and per share amounts give effect to the reverse stock split.

Overview

We are a life science company focused on advancing a portfolio of neuromuscular and cardiac programs, including SGT-003, a differentiated gene therapy candidate, for the treatment of Duchenne muscular dystrophy, or Duchenne; AVB-202-TT, a gene therapy program for the treatment of Friedreich’s ataxia, or FA; AVB-401, a gene therapy program for the treatment of BAG3-mediated dilated cardiomyopathy; and additional assets for the treatment of undisclosed cardiac diseases. We aim to be a center of excellence, bringing together those with expertise in science, technology, disease management and care. Patient-focused and founded by those directly impacted by Duchenne, our mandate is to improve the daily lives of patients living with these devastating diseases.

Solid was purpose-built to advance the best science and accelerate the discovery and development of treatments that may benefit all patients with Duchenne. As Solid expands to bring meaningful treatments to patients living with other neuromuscular and cardiac diseases, the values and guiding principles that drive us continue. Our corporate vision is to build an innovation platform enabling the discovery and development of high-value genetic medicines for neuromuscular and cardiac diseases by integrating internal capabilities, including a vector core, use of validated animal models, optimized expression cassettes, novel capsids and regulatory elements, and collaborations with leaders in related clinical and research fields. Our mission, which guides our operations, is to treat and change the course of neuromuscular and cardiac diseases at all stages. Underscoring this mission, our disease-focused business model is founded on the following fundamental principles:

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identify and develop meaningful therapies for patients with neuromuscular and cardiac diseases;

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bring together the leading experts in neuromuscular and cardiac diseases, science, technology, disease management and care; and

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be guided by the needs of these patients.

Reverse Stock Split

On October 26, 2022, our board of directors approved a reverse stock split of our outstanding shares of common stock at a ratio of one-for-15 (1:15). The reverse stock split became effective on October 27, 2022. The reverse stock split was approved by our stockholders at our Annual Meeting of Stockholders on June 7, 2022. All share and per share amounts of the common stock included in this Annual Report on Form 10-K, including in the accompanying consolidated financial statements, have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.

Acquisition and Private Placement

On December 2, 2022, we completed our acquisition of AavantiBio, Inc., or AavantiBio, a privately held gene therapy company focused on transforming the lives of patients with Friedreich’s ataxia, or FA, and rare cardiomyopathies, or the Acquisition. Upon the consummation of the Acquisition, we acquired AavantiBio’s gene therapy programs, AVB-202-TT and AVB-401, additional assets for the treatment of undisclosed cardiac diseases, platform technologies and know-how related thereto.

On December 2, 2022, we issued and sold 10,638,290 shares of our common stock at a price per share of $7.05 in a private placement, or the December 2022 Private Placement, which closed immediately following the Acquisition. We received $72.6 million of net proceeds from the December 2022 Private Placement after deducting offering costs.

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Our Operations

We are focused on developing transformative treatments to improve the lives of patients with rare neuromuscular and cardiac diseases. Our current programs are all designed for treating these diseases with gene transfer products. Gene transfer, a type of gene therapy, is designed to address diseases caused by mutated genes through the delivery of functional versions of those genes, called transgenes. The transgenes are then utilized by the body to produce proteins that are absent or not functional prior to treatment, potentially offering long-lasting clinical benefit. In addition to a transgene, our gene transfer candidates include a viral capsid (a protein shell utilized as a vehicle to deliver a transgene to cells in the body) and a promoter (a specialized DNA sequence that directs cells to produce the protein in specific tissues). The vector is modified to no longer self-replicate yet still retain its ability to introduce new genetic material directly into patients’ cells. Adeno-associated virus, or AAV, vectors have been approved for use to deliver transgenes to patients, including via systemic delivery. The use of AAV vectors to deliver gene therapies has also been extensively studied by third parties in human clinical trials for multiple disease indications, and in certain of these trials AAV was delivered systemically to the patient.

Due to our significant research and development expenditure, licensing and patent investment, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were $86.0 million, $72.2 million and $88.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $562.7 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize SGT-003, AVB-202-TT, AVB-401 or other future candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of SGT-003, AVB-202-TT, AVB-401 or other future candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2022, we had cash, cash equivalents, and available-for-sale securities of $213.7 million, excluding restricted cash of $1.8 million. We believe that our cash, cash equivalents, and available-for-sale securities as of December 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

The COVID-19 pandemic has caused federal, state, and local governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measures. The full extent of the impact of COVID-19 on our business, results of operations and financial condition will depend on future developments that are highly uncertain, including the actions taken to contain it or treat its impact and the impact on our preclinical development, employees, vendors and suppliers, all of which are uncertain and cannot be predicted. We will continue to monitor the situation closely.

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Financial operations overview

Revenue

Collaboration revenue

Collaboration revenue was $8.1 million for the year ended December 31, 2022. Collaboration revenue was $13.6 million for the year ended December 31, 2021. We recognized this revenue related to research services and cost reimbursement from the collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx. No other research and development has commenced under this agreement.

Product revenue

We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever. If our development efforts for SGT-003, AVB-202-TT, AVB-401 or other future candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.

Operating expenses

We classify our operating expenses into two categories: research and development, and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses and equity-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-001, our first-generation Duchenne microdystrophin gene transfer candidate that we are no longer developing, SGT-003, AVB-202-TT, AVB-401 and our other future candidates and include:

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expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research and preclinical activities on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture SGT-001, SGT-003, AVB-202-TT, AVB-401 and other future candidates for use in our preclinical studies and clinical trials;

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salaries, benefits and other related costs, including equity-based compensation expense, for personnel engaged in research and development functions;

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costs of outside consultants, engaged to assist in our research and development activities, including their fees, equity-based compensation and related travel expenses;

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costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

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costs incurred in seeking regulatory approval of SGT-001, SGT-003, AVB-202-TT, AVB-401 and our other future candidates;

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expenses incurred under our intellectual property licenses; and

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facility-related research and development expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Research and development activities are central to our business model. We are still in the early stages of development of our candidates. For example, we expect to file an IND for SGT-003 in the second half of 2023 to allow us to initiate clinical development. Product candidates in later stages of clinical development generally have higher development costs than those in preclinical development or in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future if and as we initiate clinical trials for SGT-003, AVB-202-TT, AVB-401 or any other future candidates and continue to identify and develop additional candidates.

We typically use our employee and infrastructure resources across our product candidates. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidates, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to product

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candidates on a program-specific basis. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by product candidates for the respective periods:

We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-003, AVB-202-TT, AVB-401 and other future candidates, or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our candidates will depend on a variety of factors, including:

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the scope, rate of progress, expense and results of any clinical trials of SGT-003, AVB-202-TT, AVB-401 and other future candidates and other research and development activities that we may conduct;

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the imposition of regulatory restrictions on clinical trials, including full and partial clinical holds and the time and activities required to lift any such holds;

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uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;

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significant and changing government regulation and regulatory guidance;

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potential additional studies or clinical trials requested by regulatory agencies;

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the timing and receipt of any marketing approvals; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, acquisition costs, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we support our research and development activities and activities related to any planned or future clinical trials for and potential commercialization of SGT-003, AVB-202-TT, AVB-401 and other future candidates.

Restructuring charges

In April 2022, we implemented changes to our corporate strategy. In connection with the changes to corporate operations, we reduced headcount by approximately 35 percent.

In November 2022, we approved a plan designed to streamline our operating structure in connection with the Acquisition. In connection with the plan, we reduced headcount by approximately 18 percent in December 2022.

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Other income (expense), net

Other income (expense), net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, amortization of investment premium or accretion of investment discount, and the gain related to the Acquisition, net of financing leases interest expense.

Income taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements and that involve a significant level of estimation uncertainty.

Revenue Recognition

As discussed in Note 2 to our consolidated audited financial statements, under Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

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When optional goods or services are offered, we assess the options to determine whether the options grant the customer a material right. This determination includes whether the option is priced at an amount that the customer would not have received without entering into the contract. If we conclude the option conveys a material right, it is accounted for as a separate performance obligation. In identifying performance obligations in a contract, we identify those promises that are distinct. Promised goods or services are considered distinct when the customer can benefit from the goods or services on their own, or together with readily available resources, and the goods or services are separately identifiable from other promises in the contract. If a promise is not distinct, it is combined with other promises in the contract until the combined group of promises is capable of being distinct.

We estimate the transaction price based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of the potential payments and the likelihood that the payments will be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. For contracts that include sales-based royalties for licensed compounds, we recognize revenue at the date when the related sales occur. Finally, we determine whether the contract contains a significant financing component by analyzing the promised consideration relative to the standalone selling price of the promised goods and services and the timing of payment relative to the transfer of the promised goods and services. At each reporting date, we reassess the transaction price and probability of achievement of the performance obligations and the associated constraints on transaction price. If necessary, we adjust the transaction price, recording a cumulative catch-up based on progress for the amount that was previously constrained.

Revenue is recognized when (or as) control of a performance obligation is transferred to the customer. When combined performance obligations contain a promised license and related services or other promises, management judgment is required to determine the appropriate timing of revenue recognition. In doing so, we must identify the predominant promise or promises in the contract to determine whether revenue is recognized at a point in time or over time. If over time, we must determine the appropriate measure of progress. If a license is deemed to be the predominant promise in a performance obligation, we must determine the nature of the license, whether functional or symbolic intellectual property, to conclude whether point-in-time or over-time revenue recognition is most appropriate. The determination of functional or symbolic intellectual property requires an assessment of whether the customer is able to exploit and benefit from the license in its current condition, or if the utility of the license is dependent on or influenced by our ongoing activities or being associated with us.

At each reporting date, we calculate the measure of progress for the performance obligations transferred over time. The calculation generally uses an input measure based on costs incurred to-date relative to estimated total costs to complete the transfer of the performance obligation. The measurement of progress is then used to calculate the total revenue earned, including any cumulative catch-up adjustment. A 10% increase or decrease in the transaction price impacts net revenues from collaborators by a corresponding increase or decrease of approximately $0.8 million. A 10% increase or decrease in the total forecasted costs to be incurred over the period the transfer of goods or services occurs impacts net revenues from collaborators by a corresponding decrease or increase of approximately $0 million as the contract is complete as of December 31, 2022.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

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CROs in connection with performing research activities on our behalf and conducting clinical trials and preclinical studies on our behalf;

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vendors in connection with preclinical development activities;

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vendors related to product manufacturing and development and distribution of clinical and preclinical supplies; and

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third parties under our intellectual property licenses.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed, and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

Equity-based compensation

In connection with the completion of our initial public offering, we adopted the 2018 Omnibus Incentive Plan, or the 2018 Plan, which provides for the issuance of share-based awards, including options to purchase common stock. The 2018 Plan provides for the awarding of up to 333,400 shares of common stock for equity awards. On June 16, 2020, our stockholders approved the 2020 Equity Incentive Plan, or the 2020 Plan, which consists of (i) 200,000 shares of common stock and (ii) additional shares of common stock (up to 325,268) as is equal to (i) the number of shares reserved under the 2018 Plan that remained available for grant under the 2018 Plan as of immediately prior to the date the 2020 Plan was approved by our stockholders and (ii) the number of shares subject to awards granted under the 2018 Plan which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right. On June 16, 2021, our stockholders approved an amendment to the 2020 Plan to reserve an additional 466,666 shares of common stock for issuance under the plan. On December 1, 2022, our stockholders approved an amendment and restatement of the 2020 Plan, or the Amended and Restated 2020 Plan, to (i) increase the number of shares of common stock reserved for issuance under the plan by 866,666 shares to 1,533,333 shares, subject to adjustment in the event of stock splits and other similar events, (ii) provide for an annual increase, to be added on the first day of each fiscal year during the term of the plan, beginning with the fiscal year ending December 31, 2023, of 5% of the number of shares of common stock outstanding on the first day of such fiscal year or a lesser number of shares determined by our board of directors, (iii) provide that up to 1,858,601 shares of common stock may be granted as “incentive stock options” under the Amended and Restated 2020 Plan, (iv) extend the term of the plan to December 1, 2032 and (v) revise certain provisions of the plan relating to the board’s ability to delegate authority to make awards under the plan. Under the 2020 Plan, stock options may not be granted at less than fair value on the date of grant. At December 31, 2022, 1,049,472 shares remained available for future issuance under the 2020 Plan.

In June 2021, our stockholders also approved the 2021 Employee Stock Purchase Plan, or the ESPP, which provides for 73,525 shares to be available for purchase by eligible employees according to its terms. At December 31, 2022, 41,417 shares remained available for future issuance under the ESPP.

We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on the fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions. We have not issued any awards with performance-based vesting conditions. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.

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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. We historically have been a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. For options with service-based vesting conditions, the expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Through December 31, 2018, the expected term of stock options granted to non-employees is equal to the contractual term of the option award and effective January 1, 2019, the “simplified” method is used. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future, if ever.

Results of operations

Comparison of the years ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:

Collaboration revenue

Collaboration revenue for the year ended December 31, 2022 was $8.1 million, compared to $13.6 million of collaboration revenue for the year ended December 31, 2021. The decrease in collaboration revenue of $5.5 million was related to the completion of research and development services contemplated under the Collaboration Agreement during the second quarter of fiscal year 2022, resulting in the recognition of the remaining deferred revenue, which was recorded at the time the Collaboration Agreement was executed. No other research and development has commenced under this agreement.

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Research and development expenses

Research and development expenses for the year ended December 31, 2022 were $78.4 million, compared to $58.7 million for the year ended December 31, 2021. The increase of $19.7 million in research and development expenses was due to an increase in SGT-003 manufacturing cost of $9.7 million, primarily due to increase in program initiatives, and an increase in SGT-001 manufacturing cost of $2.0 million, primarily due to the change in the manufacturing process, an increase of other development programs costs of $2.8 million, and an increase in unallocated expenses of $5.2 million primarily driven by facilities cost, including the relocation of our corporate headquarters and the purchase of lab supplies.

General and administrative expenses

General and administrative expenses were $28.9 million for the year ended December 31, 2022, compared to $27.1 million for the year ended December 31, 2021. The increase of $1.8 million was due to an increase in legal expenses of $2.2 million primarily incurred in connection with the Acquisition offset by other non-recurring legal costs, an increase of $0.4 million related the relocation of our corporate headquarters, partially offset by a decrease in consulting and recruiting costs of $0.8 million.

Restructuring charges

During the year ended December 31, 2022, we recorded charges of $7.2 million related to restructuring compared to no restructuring charges for the year ended December 31, 2021. The restructuring charges related to severance and other employee-related costs in connection with the restructurings that occurred in April 2022 and December 2022. We paid approximately $3.3 million during the year ended December 31, 2022 and $0.1 million during the year ended December 31, 2021.

Other income, net

Other income, net was $20.5 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. The increase in other income was primarily related to the gain recorded in connection with the Acquisition of $18.2 million during the year ended December 31, 2022.

Results of Operations—Years Ended December 31, 2021 and 2020

Discussion and analysis of the year ended December 31, 2021 compared to the year ended December 31, 2020 is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 14, 2022 (the “2021 Form 10-K”).

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Liquidity and capital resources

Sources of liquidity

To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of our common stock in private placements and the sale of common stock in our initial public offering and a follow-on public offering, and sales of common stock under our “at-the-market offering” sales agreement, dated March 13, 2019 and as amended on August 16, 2021, by and between us and Jefferies LLC, or Jefferies, or the ATM Sales Agreement. Through December 31, 2022, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, and an aggregate of $543.9 million of net proceeds from the sale of our common stock through public offerings, including our IPO, private placements, the ATM Sales Agreement, and pursuant to the stock purchase agreement with Ultragenyx, as detailed in the following paragraphs.

On March 13, 2019, we entered into the ATM Sales Agreement, which was amended in August 2021, under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Jefferies as sales agent. Any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act. We will pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the ATM Sales Agreement. During the year ended December 31, 2021 and 2022, we did not sell any shares pursuant to the ATM Sales Agreement.

On March 23, 2021, we issued and sold in a public offering 1,666,666 shares of our common stock at a price per share of $86.25, including the full exercise by the underwriters of an option to purchase additional shares of common stock, or the March 2021 Offering. We received net proceeds of approximately $134.9 million after deducting underwriting discounts and commissions and offering expenses.

On December 2, 2022, we issued and sold 10,638,290 shares of our common stock at a price per share of $7.05 in a private placement, or the December 2022 Private Placement, which closed immediately following the Acquisition. We received $72.6 million of net proceeds from the December 2022 Private Placement after deducting offering costs.

As of December 31, 2022, we had cash, cash equivalents and available-for-sale securities of $213.7 million, excluding restricted cash of $1.8 million, and had no debt outstanding.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

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Operating activities

During the year ended December 31, 2022, operating activities used $98.0 million of cash, primarily resulting from our net loss of $86.0 million and non-cash charges of $8.3 million due primarily to the gain on acquisition of $18.2 million, offset by equity-based compensation of $7.5 million and depreciation expense of $2.4 million. Net cash used by changes in our operating assets and liabilities was $3.7 million which included a decrease in deferred revenue of $8.1 million, a decrease in accounts receivable of $0.1 million as a result of the Ultragenyx Collaboration Agreement, and a decrease in accounts payable of $5.2 million due to the timing of payments, partially offset by an increase in prepaid and other non-current assets of $3.7 million and a decrease in accrued other liabilities and non-current liabilities of $5.8 million.

During the year ended December 31, 2021, operating activities used $77.8 million of cash, primarily resulting from our net loss of $72.2 million offset by non-cash charges of $17.5 million due primarily to equity-based compensation of $13.4 million and depreciation expense of $3.0 million and marketable securities of $1.1 million. Net cash used by changes in our operating assets and liabilities was $23.1 million which included a decrease in deferred revenue of $12.6 million and an increase in accounts receivable of $0.1 million as a result of the Ultragenyx Collaboration Agreement, a decrease in prepaid and other non-current assets of $9.3 million and a decrease in accrued other liabilities and non-current liabilities of $2.3 million partially offset by an increase in accounts payable of $1.2 million due to the timing of payments.

Investing activities

During the year ended December 31, 2022, investing activities provided cash of $59.2 million, consisting primarily of the sale of available-for-sale securities of $212.8 million, net cash received upon the closing of the Acquisition of $31.5 million, and cash proceeds from the sale of property and equipment of $0.6 million, partially offset by net purchases of available-for-sale securities of $182.8 million and the purchase of property and equipment of $3.0 million primarily related to our new corporate headquarters lease.

During the year ended December 31, 2021, investing activities used $91.1 million of cash, consisting primarily of net purchases of available-for-sale securities of $141.2 million and the purchase of property and equipment of $1.3 million partially offset by the sale of available-for-sale securities of $51.4 million.

Financing activities

During the year ended December 31, 2022, net cash provided by financing activities was $74.8 million as a result of the December 2022 Private Placement.

During the year ended December 31, 2021, net cash provided by financing activities was $135.0 million as a result of the March 2021 Offering.

A discussion of changes in our cash flow from the year ended December 31, 2020 to the year ended December 31, 2021 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2021 Form 10-K.

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Funding requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to SGT-003, AVB-202-TT, AVB-401 and other future candidates. In addition, we have incurred and expect to continue to incur costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

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move SGT-003, AVB-202-TT, AVB-401 or other future candidates into clinical trials;

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continue research and preclinical development of SGT-003, AVB-202-TT, AVB-401 or other future candidates;

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seek to identify additional product candidates;

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seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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arrange for manufacture of larger quantities of our product candidates for clinical development and potential commercialization;

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maintain, expand, protect and enforce our intellectual property portfolio;

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hire and retain additional clinical, quality control and scientific personnel;

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integrate employees of AavantiBio;

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build out new facilities or expand existing facilities to support our activities;

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acquire or in-license other drugs, drug candidates, technologies and intellectual property;

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fund a portion of the development or commercialization of products in collaboration with Ultragenyx pursuant to the Collaboration Agreement; and

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add operational, financial and management information systems and personnel.

As of December 31, 2022, we had cash, cash equivalents and available-for-sale securities of $213.7 million, excluding restricted cash of $1.8 million. Based on our current operating plan, we believe that our cash, cash equivalents and available-for-sale securities as of December 31, 2022 will be sufficient to fund our operating expenses and capital requirements into 2025. As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all. In addition, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Because of the numerous risks and uncertainties associated with the development of SGT-003, AVB-202-TT, AVB-401 and other future candidates and programs and because the extent to which we may enter collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital

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outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

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the progress, costs and results of integrating AavantiBio operations into our business;

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the results of future clinical trials of SGT-003, AVB-202-TT, AVB-401 and other future candidates;

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the costs, timing and outcome of regulatory review of SGT-003, AVB-202-TT, AVB-401 and other future candidates;

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the scope, progress, results and costs of discovery, laboratory testing, manufacturing, preclinical development and clinical trials for SGT-003, AVB-202-TT, AVB-401 and other future candidates that we may pursue in the future, if any;

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the costs associated with our manufacturing process development and evaluation of third-party manufacturers;

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the revenue, if any, received from commercial sale of SGT-003, AVB-202-TT, AVB-401 or other future candidates, should any of our future candidates receive marketing approval;

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the costs of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights and defending intellectual property-related claims;

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the outcome of any lawsuits filed against us;

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the terms of our current and any future license agreements and collaborations;

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the success of our collaboration with Ultragenyx;

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our ability to establish and maintain additional strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

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the payment or receipt of milestones, royalties and other collaboration-based revenues, if any;

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the extent to which we acquire or in-license other candidates, technologies and intellectual property; and

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if and as we need to adapt our business in response to the COVID-19 pandemic or other pandemics and collateral consequences related thereto.

We expect to supply future clinical development programs for SGT-003 with drug produced at a cGMP compliant facility located at one of our CMOs. We intend to establish the capability and capacity to supply SGT-003 and other future product candidates at commercial scale from multiple sources.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity securities, our existing stockholders’ ownership interest may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders’ ownership interests.

If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual obligations and commitments

We lease certain office space, lab space and lab equipment in Massachusetts, North Carolina and Florida. These leases are used for our continuing operations. For a description of our lease obligations, refer to Note 11 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

Under various agreements with third-party licensors, we have agreed to make milestone payments and pay royalties to third parties based on specified milestones. For a description of our license agreements, see “Business—Strategic partnerships and collaborations/licenses.”

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts are cancelable by us upon prior notice of 30 days.

Recently issued accounting pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.

Emerging growth company status

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to opt out of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described, in or implied, by these forward-looking statements.

Overview

Our mission is to cure Duchenne muscular dystrophy, or Duchenne, a genetic muscle-wasting disease predominantly affecting boys, with symptoms that usually manifest between three and five years of age. Duchenne is a progressive, irreversible and ultimately fatal disease that affects approximately one in every 3,500 to 5,000 live male births and has an estimated prevalence of 5,000 to 15,000 cases in the United States alone. Duchenne is caused by mutations in the dystrophin gene, which result in the absence or near-absence of dystrophin protein. Dystrophin protein works to strengthen muscle fibers and protect them from daily wear and tear. Without functioning dystrophin and certain associated proteins, muscles suffer excessive damage from normal daily activities and are unable to regenerate, leading to the build-up of fibrotic, or scar, and fat tissue. There is no cure for Duchenne and, for the vast majority of patients, there are no satisfactory symptomatic or disease-modifying treatments.

Our efforts are focused on our lead product candidate, SGT-001, a gene transfer candidate under investigation for its ability to drive functional dystrophin protein expression in patients’ muscles and improve the course of the disease, as well as SGT-003, our next-generation gene therapy candidate for the treatment of Duchenne.

In addition, we are actively involved in engaging with the Duchenne patient, clinical and research communities to support advancement of therapies for patients with Duchenne. In November 2021, in collaboration with REGENXBIO, we formally launched the Pathway Development Consortium, or the PDC, a multistakeholder initiative which aims to identify, develop, expand and maintain pathways to effective therapies for patients diagnosed early in life with rare diseases, including Duchenne. The PDC seeks to achieve these goals by bringing together a broad and diverse group of stakeholders from the rare disease and AAV gene therapy communities, including patients, industry, regulators, academia and payers, among others, for meaningful scientific and policy discussions.

To date, nine patients have been dosed in IGNITE DMD with SGT-001. In 2021, we dosed three patients in February (Patient 7), April (Patient 8) and November (Patient 9) in the 2E14 vg/kg cohort with SGT-001. All three patients were dosed with our second generation manufacturing process. Patients 7 and 9 were safely dosed, with transient and manageable adverse events, none of which were serious. Patient 8 experienced a systemic inflammatory response which has since fully resolved. The event was classified as a serious adverse event, or SAE, and considered to be drug related. The type of event is described in our Investigators Brochure and is not considered unexpected. Following the dosing of Patient 8, we conducted an extensive review of all clinical data from IGNITE DMD, which resulted in a strengthened risk mitigation plan that was submitted to the U.S. Food and Drug Administration, or the FDA, and implemented prior to the dosing of the Patient 9.

In 2021, we reported long-term biomarker data from biopsies of skeletal muscle from IGNITE DMD patients four through six taken 24 months, 18 months and 12 months post-dosing, respectively. In addition, we reported interim safety and efficacy data for motor function as assessed by North Star Ambulatory Assessment, or NSAA, and 6-Minute Walk Test, or 6MWT, pulmonary function as assessed by pulmonary function tests, or PFTs, including forced vital capacity, or FVC, peak expiratory flow, or PEF, forced expiratory volume in one second, or FEV1, as well as patient reported outcome measures, or PROMs, as assessed by the key functional domains of the Pediatric Outcomes Data Collection Instrument, or PODCI at the 12-month and 18-month post-dosing time points.

In March 2022, we announced two-year interim safety and efficacy data from the first three Patients (Patients 4-6) treated with SGT-001 in the 2E14 vg/kg dose cohort of IGNITE DMD. Results suggested durable benefit 24-months post-administration of SGT-001, when compared to natural history. These data were consistent with results reported at the 12-month and 18-month time periods for the same patients. The average age of Patients 4-6 at the two year timepoint was 10.4 years. Data from Patients 4-6 suggested sustained motor function at two years post-infusion, as assessed by 6MWT and NSAA, against expected natural history declines. In addition, the data suggested improved pulmonary function, as measured by FVC and PEF, and sustained or improved PROMs as assessed in key functional domains of the PODCI when compared to both baseline and natural history. In March 2022, we also reported data from skeletal muscle biopsies collected three months after infusion of SGT-001 from the most recently dosed Patients 7-9.  The range by immunofluorescence of 1% to 50% and

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by western blot of Below the 5% Limit of Quantification (BLQ) to 6.8%, were within the range of previously dosed Patients 4-6 in the high dose cohort. Microdystrophin expression levels for all six patients dosed in the high dose cohort (Patients 4-9) ranged from 1 to 70% by immunofluorescence and BLQ to 17.5% by western blot. All six patients dosed with SGT-001 in the high dose cohort have demonstrated microdystrophin expression and proper membrane localization.

No new drug-related safety findings have been identified in Patients 1-9 in post-dosing periods of 90 days to approximately four years. We continue to follow dosed patients and collect data to support the potential benefit of SGT-001.

SGT-003 is our next-generation gene transfer candidate. It is comprised of our nNOS binding domain microdystrophin transgene and muscle-specific promoter present in SGT-001 and uses a lead candidate novel, rationally designed AAV capsid, developed for enhanced muscle tropism, to deliver these components to target tissues. We believe that the properties of this novel capsid may allow for enhanced benefit over therapies using traditional capsids, potentially both in terms of efficacy and safety.

We intend to initiate IND-enabling studies for SGT-003 in 2022 to support a planned IND submission in early 2023.

In addition to our gene transfer candidates, we have development programs focusing on platform technologies, including dual gene expression, a technology that allows us to package multiple transgenes into one vector, as well as novel capsids. These programs are part of our ongoing research efforts to develop innovative technologies that we believe may hold potential to translate into meaningful treatments and drive our future pipeline expansion.  Preclinical data in both wild-type and disease animal models demonstrate that we have developed a library of novel capsids that have shown increased muscle tropism with concomitant decreased liver biodistribution resulting in improved efficiency compared with AAV9.

Since our inception, we have devoted substantial resources to identifying and developing SGT-001, SGT-003 and our other product candidates, developing our manufacturing processes, organizing and staffing our company and providing general and administrative support for these operations. We have incurred significant losses every year since our inception. We do not have any products approved for sale. To date, we have not generated any revenue from product sales. Our ability to eventually generate any product revenue sufficient to achieve profitability will depend on the successful development, approval and eventual commercialization of SGT-001, SGT-003 and our other product candidates. If successfully developed and approved, we intend to commercialize SGT-001 and SGT-003 in the United States and European Union and may enter into licensing agreements or strategic collaborations in other markets. If we generate product sales or enter into licensing agreements or strategic collaborations, we expect that any revenue we generate will fluctuate from quarter to quarter and year to year as a result of the timing and amount of any product sales, license fees, milestone payments and other payments. If we fail to complete the development of SGT-001, SGT-003 and our other product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Due to our significant research and development expenditure, licensing and patent investment, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were $72.2 million, $88.3 million and $117.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $476.8 million. We expect to incur significant expenses and operating losses for the foreseeable future.

In January 2020, we announced a reduction in workforce by approximately 30% as part of a strategic plan designed to create a leaner company focused on advancing SGT-001.

As we seek to develop and commercialize SGT-001, SGT-003 or any other product candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of SGT-001, SGT-003 or our other product candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

In October 2020, we entered into a collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx, pursuant to which we granted Ultragenyx an exclusive worldwide license

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under certain intellectual property rights controlled by us to make, have made, use, distribute, offer for sale, sell, import and export, including to research, develop, modify, enhance, improve, register, distribute, commercialize, or otherwise dispose of AAV8 or other clade E AAV variant pharmaceutical products that express our MD5 nNOS binding domain form of microdystrophin protein for the diagnosis, treatment, cure, mitigation or prevention of Duchenne and other disease indications resulting from a lack of functional dystrophin, including Becker muscular dystrophy. On a product-by-product basis, we have the option to fund 30% of the development costs in the United States and European Union and share 30% of the net income and net losses on net sales of such Licensed Product in the United States and European Union. In connection with the execution of the Collaboration Agreement, we also entered into a stock purchase agreement with Ultragenyx, pursuant to which we issued and sold 7,825,797 shares of our common stock to Ultragenyx for an aggregate purchase price of approximately $40 million.

During the year ended December 31, 2020, we sold 6,309,632 shares pursuant to an “at-the-market offering” sales agreement, dated March 13, 2019, or the ATM Sales Agreement, by and between us and Jefferies LLC, or Jefferies, resulting in net proceeds of $23.2 million.

In December 2020, we completed a private placement of shares of common stock resulting in net proceeds to us of $86.2 million, after deducting offering costs.

In March 2021, we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share to the public of $5.75, including the full exercise by the underwriters of an option to purchase additional shares of common stock. We received net proceeds of approximately $134.9 million after deducting underwriter discounts and commissions and offering expenses.

As of December 31, 2021, we had cash, cash equivalents, and available-for-sale securities of $207.8 million. We believe that our cash, cash equivalents, and available-for-sale securities as of December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

The ongoing COVID-19 pandemic has caused federal, state, and local governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measures. We are following, and will continue to follow, recommendations from the U.S. Centers for Disease Control and Prevention as well as federal, state, and local governments regarding working-from-home practices for non-essential employees. As a result, we have modified our business practices, including implementing a work from home policy for all employees who are able to perform their duties remotely. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, and other business partners in light of COVID-19. The full extent of the impact of COVID-19 on our business, results of operations and financial condition will depend on future developments that are highly uncertain, including the length and severity of this pandemic, the actions taken to contain it or treat its impact and the impact on our clinical development, employees, vendors and suppliers, all of which are uncertain and cannot be predicted. We will continue to monitor the situation closely.

Financial operations overview

Revenue

Collaboration revenue

Collaboration revenue was $13.6 million for the year ended December 31, 2021. We recognized this revenue related to research services and cost reimbursement from the Collaboration Agreement. There was no revenue in the year ended December 31, 2020.

Product revenue

We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever. If our development efforts for SGT-001, SGT-003 or our other product candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.

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Operating expenses

We classify our operating expenses into two categories: research and development, and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses and equity-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-001, SGT-003 and our other product candidates and include:

We expense research and development costs as incurred. We recognize costs for certain development activities, such as preclinical research and development and clinical trial costs, based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

We typically use our employee and infrastructure resources across our product candidates. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidates, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to product candidates on a program-specific basis. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by product candidates for the respective periods:

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We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-001 and our other product candidates, including SGT-003, or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we proceed with clinical trials for SGT-001, initiate clinical trials for SGT-003 and other product candidates and continue to identify and develop additional product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support our research and development activities and activities related to the potential commercialization of SGT-001 and our other product candidates, including SGT-003.

Restructuring charges

In January 2020, we implemented changes to our organizational structure to create a leaner company focused on advancing SGT-001. In connection with the restructuring, we made changes to our management team and reduced headcount by approximately 30 percent.

Other income (expense), net

Other income (expense), net consists of interest income earned on our cash, cash equivalents, and available-for-sale securities, and funding from charitable organizations, net of financing leases interest expense.

Income taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood

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that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

As discussed in Note 2 to our consolidated audited financial statements, under Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers , an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

When optional goods or services are offered, we assess the options to determine whether the options grant the customer a material right. This determination includes whether the option is priced at an amount that the customer would not have received without entering into the contract. If we conclude the option conveys a material right, it is accounted for as a separate performance obligation. In identifying performance obligations in a contract, we identify those promises that are distinct. Promised goods or services are considered distinct when the customer can benefit from the goods or services on their own, or together with readily available resources, and the goods or services are separately identifiable from other promises in the contract. If a promise is not distinct, it is combined with other promises in the contract until the combined group of promises is capable of being distinct.

We estimate the transaction price based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of the potential payments and the likelihood that the payments will be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. For contracts that include sales-based royalties for licensed compounds, we recognize revenue at the date when the related sales occur. Finally, we determine whether the contract contains a significant financing component by analyzing the promised consideration relative to the standalone selling price of the promised goods and services and the timing of payment relative to the transfer of the promised goods and services. At each reporting date, we reassess the transaction price and probability of achievement of the performance obligations and the associated constraints on transaction price. If necessary, we adjust the transaction price, recording a cumulative catch-up based on progress for the amount that was previously constrained.

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Revenue is recognized when (or as) control of a performance obligation is transferred to the customer. When combined performance obligations contain a promised license and related services or other promises, management judgment is required to determine the appropriate timing of revenue recognition. In doing so, we must identify the predominant promise or promises in the contract to determine whether revenue is recognized at a point in time or over time. If over time, we must determine the appropriate measure of progress. If a license is deemed to be the predominant promise in a performance obligation, we must determine the nature of the license, whether functional or symbolic intellectual property, to conclude whether point-in-time or over-time revenue recognition is most appropriate. The determination of functional or symbolic intellectual property requires an assessment of whether the customer is able to exploit and benefit from the license in its current condition, or if the utility of the license is dependent on or influenced by our ongoing activities or being associated with us.

At each reporting date, we calculate the measure of progress for the performance obligations transferred over time. The calculation generally uses an input measure based on costs incurred to-date relative to estimated total costs to complete the transfer of the performance obligation. The measurement of progress is then used to calculate the total revenue earned, including any cumulative catch-up adjustment. A 10% increase or decrease in the transaction price impacts net revenues from collaborators by a corresponding increase or decrease of approximately $1.3 million. A 10% increase or decrease in the total forecasted costs to be incurred over the period the transfer of goods or services occurs impacts net revenues from collaborators by a corresponding decrease or increase of approximately $0.5 million.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed, and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

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Equity-based compensation

In connection with the completion of our initial public offering, we adopted the 2018 Omnibus Incentive Plan, or the 2018 Plan, which provides for the issuance of share-based awards, including options to purchase common stock. The 2018 Plan provides for the awarding of up to 5,001,000 shares of common stock for equity awards. On June 16, 2020, our stockholders approved the 2020 Equity Incentive Plan, or the 2020 Plan, which consists of (i) 3,000,000 shares of common stock and (ii) additional shares of common stock (up to 4,879,025) as is equal to (i) the number of shares reserved under the 2018 Plan that remained available for grant under the 2018 Plan as of immediately prior to the date the 2020 Plan was approved by our stockholders and (ii) the number of shares subject to awards granted under the 2018 Plan which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right. On June 16, 2021, our stockholders approved an amendment to the 2020 Plan to reserve an additional 7,000,000 shares of common stock for issuance under the plan. Under the 2020 Plan, stock options may not be granted at less than fair value on the date of grant. At December 31, 2021, 8,557,152 shares remained available for future issuance under the 2020 Plan.

In June 2021, the Company’s stockholders also approved the 2021 Employee Stock Purchase Plan, or the ESPP, which provides for 1,102,885 shares to be available for purchase by eligible employees according to its terms. At December 31, 2021, 1,058,204 shares remained available for future issuance under the ESPP.

We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on the fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions. We have not issued any awards with performance-based vesting conditions. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. We historically have been a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. For options with service-based vesting conditions, the expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Through December 31, 2018, the expected term of stock options granted to non-employees is equal to the contractual term of the option award and effective January 1, 2019, the “simplified” method is used. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future, if ever.

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Results of operations

Comparison of the years ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

Collaboration revenue

Collaboration revenue for the year ended December 31, 2021 was $13.6 million, compared to no collaboration revenue for the year ended December 31, 2020. The increase in collaboration revenue was related to research services and cost reimbursement received under the Collaboration Agreement with Ultragenyx, which we entered into in the fourth quarter of 2020.

Research and development expenses

Research and development costs for the year ended December 31, 2021 were $58.7 million, compared to $64.9 million for the year ended December 31, 2020. The decrease of $6.1 million in research and development costs was due to a decrease in SGT-001 research and development costs of $6.7 million primarily due to the impacts of COVID-19, and a decrease of SGT-003 and other product candidates costs of $2.2 million primarily due to license fees incurred in 2020 in conjunction with the Ultragenyx Collaboration agreement. This was partially offset by an increase in unallocated expenses of $2.7 million primarily driven by personnel related expenses from an increase in headcount in 2021.

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General and administrative expenses

General and administrative expenses were $27.1 million for the year ended December 31, 2021, compared to $21.6 million for the year ended December 31, 2020. The increase of $5.5 million was due to an increase in personnel related expenses of $4.1 million due to the increase in headcount in 2021 and an increase in consulting fees of $1.4 million.

Restructuring charges

During the year ended December 31, 2021 we recorded no expense related to restructuring compared to $1.9 million of restructuring charges as of December 31, 2020. The restructuring charges related to severance and other employee-related costs in connection with the restructuring that occurred in January 2020. We paid approximately $1.8 million during the year ended December 31, 2020 and $0.1 million during the year ended December 31, 2021.

Interest income

Interest income was $0.1 million and $0.1 million for the years ended December 31, 2021 and 2020, respectively. There was no change as the portfolio of available-for-sale securities remained consistent.

Other income

Other income relates to contributions from charitable organizations. We do not expect these contributions to reoccur in future periods.

Results of Operations—Years Ended December 31, 2020 and 2019

Discussion and analysis of the year ended December 31, 2020 compared to the year ended December 31, 2019 is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 15, 2021 (“2020 Form 10-K”).

Liquidity and capital resources

Sources of liquidity

To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of our common stock in private placements and the sale of common stock in our initial public offering and a follow-on public offering. Through December 31, 2021, we raised an aggregate of $144.6 million of gross proceeds from our sales of preferred units prior to the completion of our initial public offering, and an aggregate of $471.3 million of net proceeds from the sale of our common stock through public offerings, including our IPO, our ATM Sales Agreement, private placements including the stock purchase agreement with Ultragenyx, as detailed in the following paragraphs.

On July 30, 2019, we issued and sold in a private placement (i) 10,607,525 shares of our common stock at a price per share of $4.65 and (ii) 2,295,699 pre-funded warrants to purchase shares of our common stock at a price per warrant of $4.64. Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.01 and the pre-funded warrants have no expiration date. We received $57.9 million of net proceeds from the private placement after deducting offering costs. On October 2, 2020, 137,460 of these pre-funded warrants were exercised.

On October 22, 2020, we entered into the Collaboration Agreement with Ultragenyx. In connection with the execution of the Collaboration Agreement, we also entered into a stock purchase agreement with Ultragenyx, pursuant to which we issued and sold 7,825,797 shares of our common stock to Ultragenyx for an aggregate purchase price of approximately $40 million.

On December 15, 2020, we issued and sold in a private placement 24,324,320 shares of our common stock at a price per share of $3.70. We received $86.2 million of net proceeds from the private placement after deducting offering costs.

On March 13, 2019, we entered into the ATM Sales Agreement, which was amended in August 2021, under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Jefferies as sales agent. Any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act. We will pay Jefferies a commission of up to 3% of the gross

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proceeds of any sales of common stock pursuant to the ATM Sales Agreement. During the year ended December 31, 2020, we sold 6,309,632 shares pursuant to the ATM Sales Agreement resulting in net proceeds of $23.2 million. During the year ended December 31, 2021, we did not sell any shares pursuant to the ATM Sales Agreement

On March 23, 2021, we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share of $5.75, including the full exercise by the underwriters of an option to purchase additional shares of common stock, or the March 2021 Offering. We received net proceeds of approximately $134.9 million after deducting underwriter discounts and commissions and offering expenses.

As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities of $207.8 million and had no debt outstanding.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Operating activities

During the year ended December 31, 2021, operating activities used $77.8 million of cash, primarily resulting from our net loss of $72.2 million offset by non-cash charges of $17.5 million due primarily to equity-based compensation of $13.4 million and depreciation expense of $3.0 million and marketable securities of $1.1 million. Net cash used by changes in our operating assets and liabilities was $23.1 million which included a decrease in deferred revenue of $12.6 million and an increase in accounts receivable of $0.1 million as a result of the Ultragenyx Collaboration Agreement, a decrease in prepaid and other non-current assets of $9.3 million and a decrease in accrued other liabilities and non-current liabilities of $2.3 partially offset by an increase in accounts payable of $1.2 million due to the timing of payments.

During the year ended December 31, 2020, operating activities used $56.6 million of cash, primarily resulting from our net loss of $88.3 million offset by non-cash charges of $15.5 million due primarily to equity-based compensation of $11.6 million and depreciation expense of $3.9 million as well as cash provided by changes in our operating assets and liabilities. Net cash provided by changes in our operating assets and liabilities included a decrease in accounts payable, accrued expenses and non-current liabilities of $4.6 million due to the timing of payments and an increase in deferred revenue of $20.8 million as a result of the Ultragenyx Collaboration Agreement. Net cash provided by changes in our operating assets and liabilities also consisted primarily of an increase in prepaid expenses and other assets of $0.1 million which was primarily due to an increase in prepayments related to research and development activities.

Investing activities

During the year ended December 31, 2021, investing activities used $91.1 million of cash, consisting primarily of net purchases of available-for-sale securities of $141.2 million and the purchase of property and equipment of $1.3 million partially offset by the sale of available-for-sale securities of $51.4 million.

During the year ended December 31, 2020, investing activities provided $6.6 million of cash, consisting primarily of net proceeds on the sale and maturity of available-for-sale securities partially offset by purchases of property and equipment.

Financing activities

During the year ended December 31, 2021, net cash provided by financing activities was $135.0 million as a result of the March 2021 Offering.

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During the year ended December 31, 2020, net cash provided by financing activities was $128.7 million, due to the net proceeds from our private placement of shares of our common stock that we completed in December 2020 and sales under the ATM Sales Agreement as well as proceeds from the issuance of common stock to Ultragenyx.

A discussion of changes in our cash flow from the year ended December 31, 2019 to the year ended December 31, 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2020 Form 10-K.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to SGT-001, SGT-003 and our other product candidates. In addition, we have incurred and expect to continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities of $207.8 million.  We believe that our existing cash, cash equivalents and available-for-sale securities as of December 31, 2021 will be sufficient to fund our operating expenses and capital requirements into the third quarter of 2023. As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all.  In addition, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate.

Because of the numerous risks and uncertainties associated with the development of SGT-001, SGT-003 and other product candidates and programs and because the extent to which we may enter collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

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We are supplying, and expect to continue to supply, our clinical development program for SGT-001 with drug product produced at a cGMP compliant facility located at one of our CDMO partners. We intend to establish the capability and capacity to supply SGT-001 at commercial scale from multiple sources.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity securities, our existing stockholders’ ownership interest may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders’ ownership interests.

If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual obligations and commitments

We lease certain office space, lab space and lab equipment in Massachusetts. These leases are used for our continuing operations.  For a description of the Company’s lease obligations, refer to Note 10 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

We will lease our new corporate headquarters starting in May 2022, which consists of approximately 49,869 square feet of office, laboratory, research and development and manufacturing space in Charlestown, Massachusetts. The lease for our new corporate headquarters has an initial term of approximately ten years that expires in 2032 with an option to extend the lease for an additional five years.

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts are cancelable by us upon prior notice of 30 days.

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Unconditional purchase commitments of $0.8 million represent minimum payments due within a year to purchase goods that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed or variable price provisions, and the approximate timing of the transaction.

Recently issued accounting pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.

Emerging growth company status

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to opt out of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.