Solid Biosciences Inc. (SLDB) FY 2023 MD&A

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.