# Synlogic, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Synlogic, Inc.](/companies/sybx.md) (CIK 1527599)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 06:30 ET
- Period: 2023-09-30
- Accession: 0000950170-23-061493
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1527599/000095017023061493/sybx-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1527599/000095017023061493/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $393.0k | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $602.0k | us-gaap:Revenues |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $9.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $33.8m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$12.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$44.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $1.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $3.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $12.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$12.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$42.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$2.57 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.17 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$2.57 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.17 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 4,699,847 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 4,662,444 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$46.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $186.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $24.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $37.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $66.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $9.1m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2023-09-30 | $43.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,942 characters.

### Forward-Looking Information

*The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for the years ended December 31, 2022 and 2021 included in our Annual Report on Form 10-K filed with the SEC on March 29, 2023 (the "2022 Annual Report"). In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Please see “Risk Factors” beginning on page \[23\] of this Quarterly Report on Form 10-Q for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period. On August 28, 2017, Synlogic, Inc., formerly known as Mirna Therapeutics, Inc. (NASDAQ: MIRN) (Mirna), completed a business combination with Synlogic, a private company, pursuant to the Agreement and Plan of Merger and Reorganization, dated as of May 15, 2017 (the Merger Agreement), pursuant to which the private Synlogic entity survived as a wholly owned subsidiary of Mirna (the Merger). Immediately after completion of the Merger, Mirna changed its name to “Synlogic, Inc.” (NASDAQ: SYBX). The term “Private Synlogic” refers to Synlogic Operating Company, Inc. (formerly known as Synlogic, Inc.) prior to the consummation of the Merger. Unless otherwise indicated, references to the terms the "combined company”, “Synlogic”, the "Company”, “we”, “our” and “us” refer to Private Synlogic prior to the consummation of the Merger and Synlogic, Inc. (formerly known as Mirna Therapeutics, Inc.) and its subsidiaries upon the consummation of the Merger described herein. The term "Mirna" refers to the Mirna Therapeutics, Inc. and its subsidiaries prior to the Merger.*

### Overview

We are a clinical-stage biotechnology company advancing novel, oral, non-systemically absorbed biotherapeutics to transform the care of serious diseases in need of new treatment options. Our late-stage pipeline is focused on rare metabolic diseases, led by labafenogene marselecobac (previously referred to as SYNB1934), currently being studied as a potential treatment for phenylketonuria (PKU) in Synpheny-3, a global, pivotal Phase 3 study. Additional product candidates address diseases including homocystinuria (HCU), enteric hyperoxaluria, gout, and cystinuria. This pipeline is fueled by the Synthetic Biotic platform, which applies precision genetic engineering to well-characterized probiotics based on the principles and techniques of synthetic biology, the application of programming and engineering to biological parts, systems, and organisms.

### Our Drug Candidate Pipeline: Late-Stage Programs Focused on Rare Metabolic Diseases

We are focused on advancing our late-stage drug candidates for rare metabolic diseases, disorders that present a strong biological fit with Synthetic Biotics, and also provide synergies in clinical trial execution and commercialization. Metabolic diseases result from alterations in how bodies break down or produce important metabolites or molecules needed for normal function. In patients with these diseases, the absence of certain enzymes causes metabolites to accumulate in the gut and systemically throughout the body. Our approach enables the design of GI-restricted, oral medicines designed to consume or modify disease-specific metabolites – an approach well suited for PKU and HCU, as well as other disorders in which the disease–specific metabolites transit through the GI tract, providing validated targets for these Synthetic Biotics.

In addition, patients with rare metabolic diseases are typically treated by the same relatively small and well-connected community of medical thought leaders and receive care at the same clinics from the same clinician network. The patient communities themselves are also often connected. These considerations present significant advantages for efficiency in both clinical trial execution and management of multiple programs in different but related diseases, as well as for future product launches and commercialization.

### PKU

Our pipeline is led by labafenogene marselecobac, an orally administered, non-systemically absorbed, potential treatment for PKU, a rare metabolic disease caused by inherited mutations that impair the breakdown of phenylalanine (Phe), an amino acid found in all protein-containing foods. The goal of PKU management is to reduce plasma Phe below neurotoxic levels, reducing risk of neurocognitive complications. Current treatment options for PKU are limited due to safety and efficacy, leaving the majority of people living with PKU without medical management and with uncontrolled Phe. We designed labafenogene marselecobac to target and consume Phe in the GI tract by applying precision genetic engineering to a well-characterized probiotic. Results to date indicate the potential for labafenogene marselecobac to be the first and only orally administered, non-systemically absorbed medical treatment option for FDA available for patients to take alone, or as an adjunct to other medications for PKU. Following successful Phase 2 results, labafenogene marselecobac is currently being evaluated in Synpheny-3, a global, pivotal Phase 3 study. Labafenogene marselecobac has received Orphan Drug Designation, Fast Track designation, and Rare Pediatric Disease Designation (RPDD) from the FDA in addition to orphan designation from the European Medicines Agency (EMA).

### Homocystinuria

HCU is a rare inherited metabolic disorder caused by a genetic defect that causes homocysteine and other toxic chemicals and their byproducts, to build up in the blood and urine. Elevated homocysteine levels are associated with risk of life-threatening acute ischemic stroke as well as multisystem complications such as impairments of the eye (ectopia lentis and/or severe myopia), skeletal system, and neurocognitive impact (development delay and intellectual disability).

The essential amino acid methionine (Met), typically found in dietary protein, is metabolized to homocysteine and the first therapeutic intervention for HCU is often a methionine-restricted diet with the goal of lowering plasma levels of total homocysteine (tHcy) to reduce risk of complications. SYNB1353, our drug candidate for HCU, was designed to leverage this pathway by consuming methionine in the GI tract as a means of reducing systemic levels of tHcy. Like labafenogene marselecobac, SYNB1353 is an orally-administered, non-systemically absorbed investigational biotherapeutic. In November 2022, we announced that proof of mechanism was achieved based on the positive findings from a Phase 1 study in healthy volunteers using a dietary model of homocystinuria, which showed that SYNB1353 reduced plasma methionine by metabolizing methionine and preventing its absorption in the GI tract. To date, the FDA has granted SYNB1353 Fast Track, Orphan Drug, and Rare Pediatric Disease designations as a potential treatment for HCU. Our next step for SYNB1353 is to advance to a Phase 2 study in patients with HCU.

### Additional Clinical Pipeline & Preclinical Research Programs

In 2022, we achieved proof of concept for SYNB8802, in development for enteric hyperoxaluria, a well-recognized cause of recurrent kidney stones. During 2022, we also announced the naming of SYNB2081, a Synthetic Biotic designed to metabolize uric acid as a potential biotherapeutic for gout, which is currently in IND-enabling studies. We believe that both of these product candidates present compelling opportunities to help patients in significant need of new treatment options. We also believe that the programs would be best enabled in partnership with organizations with experience and expertise in their respective, target therapeutic areas, which would be complementary to our own clinical and regulatory expertise with the Synthetic Biotic platform, as we focus on applications in the rare metabolic diseases. We also have ongoing preclinical research activities to advance a Synthetic Biotic for cystinuria, a rare, genetic cause of recurrent kidney stones which is also caused by an underlying metabolic disorder.

In addition, we have continued our preclinical research collaboration with Roche, focused on inflammatory bowel disease (IBD), which began in June of 2021. Current IBD therapeutics focus on immune system modulation and suppressing inflammation, which is associated with systemic immunosuppression, and which includes greater susceptibility to infectious diseases and cancer. Because our approach is based on local delivery to the site of inflammation in the GI tract and not on systemic administration, we anticipate that our Synthetic Biotics may potentially offer an attractive safety profile in this therapeutic category, where safety is a particularly desirable attribute in a product profile compared to options available today.

### Recent Developments

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

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

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

### Business Overview

We currently operate in one reportable business segment—the discovery and development of novel, orally-administered, non-systemically absorbed biotherapeutics for serious diseases based on our Synthetic Biotic product platform. To date, we have dedicated substantially all of our activities to the research and development of our product candidates. We have funded our operations to date primarily with proceeds from the sale of preferred stock, common stock, preferred units, warrants, payments received under the Roche Collaboration and Option agreement, prior collaborations, interest earned on investments, and cash received in the Merger.

We have not generated any revenue to date from product sales and have incurred significant operating losses since our inception. We have incurred net losses of approximately $12.1 million and $42.7 million for the three and nine months ended September 30, 2023, respectively, and $17.9 million and $49.5 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, we had an accumulated deficit of approximately $399.8 million, and we expect to incur losses for the foreseeable future as we develop our product candidates. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:

- complete preclinical studies, initiate and complete clinical trials for product candidates;
- contract to manufacture product candidates or manufacture product candidates internally;
- advance research and development related activities to expand our product pipeline;
- seek regulatory approval for our product candidates;
- maintain, expand and protect our intellectual property portfolio;
- hire additional staff, including clinical, scientific, commercial, and management personnel;
- expand our existing infrastructure and secure space in a facility to support continued growth in our research and development efforts; and
- add operational and finance personnel to support product development efforts.

We do not expect to generate product revenue unless and until we successfully complete clinical development and obtain regulatory approvals for our product candidates, either alone or in collaboration with third parties. Additionally, we expect to utilize third-party contract research organizations (CROs) and contract manufacturing organizations (CMOs) to carry out our clinical development and manufacturing activities, and we do not yet have a commercial organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Accordingly, we anticipate that we will seek to fund our operations through public or private equity or debt financings, collaborations or licenses, finance lease transactions or other available financing transactions. However, we may be unable to raise additional funds through these or other means when needed. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if it will be able to achieve or maintain profitability. Even if we are able to generate product revenue, we may not become profitable.

### Effects of Inflation

We do not believe that inflation has had a material impact on our business or operating results during the periods presented. However, inflation, has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to conduct clinical trials and other operational costs. Inflationary costs could adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.

### Financial Overview

### Revenue

Revenue for the three and nine months ended September 30, 2023 was generated from the Roche Collaboration and Option Agreement. In June 2021, we announced that we entered into the Roche Collaboration and Option Agreement for the discovery of novel Synthetic Biotics for the treatment of IBD. The collaboration agreement contains multiple deliverables, which include an exclusive option for Roche to negotiate a definitive collaboration and license agreement for further development of the Product Candidate (as defined in the Roche Collaboration and Option Agreement) and acquire research and development milestones. See Note 9, *Collaboration Agreements: Roche Collaboration* in the notes to the unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a full discussion of the arrangement.

### Research and Development Expense

Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates, including the conduct of preclinical and clinical studies and product development, which are expensed as they are incurred. These expenses consist primarily of:

- compensation, benefits and other employee related expenses;
- supplies to support our internal research and development efforts;
- research and development related facility and depreciation costs;
- leased manufacturing space; and
- third-party contract costs relating to research, process and formulation development, preclinical and clinical studies and regulatory operations.

The lengthy process of securing regulatory approvals for new drugs requires the expenditure of substantial resources. Any delay or failure to obtain regulatory approvals would materially adversely affect our product candidate development efforts and our business overall. Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty the likelihood, timing or cost of obtaining regulatory approval and marketing our product candidates and thus, when, if ever, our product candidates will generate revenues and cash flows.

The successful development of our product candidates is highly uncertain and subject to a number of risks. Refer to the risk factors under the heading *Risks Related to the Development of Our Product Candidates* in Part II, Item 1A, found elsewhere in this Quarterly Report on Form 10-Q.

We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical data of each product candidate, as well as the competitive landscape and ongoing assessments of such product candidate’s commercial potential. We expect our research and development costs will be substantial for the foreseeable future. We expect costs associated with our drug development candidates to increase as the programs progress through clinical trials and new programs progress toward IND and into development.

We track direct research and development expenses, consisting principally of external costs, such as costs associated with contract research organizations and manufacturing of preclinical and clinical drug product and other outsourced research and development expenses to specific product programs. Costs related to specific product candidates are tracked upon the selection of a product candidate. We do not allocate employee and consulting-related costs, costs associated with our platform and facility expenses, including depreciation or other indirect costs, to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development and, as such, are separately classified.

### General and Administrative Expense

General and administrative expense consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, investor relations, business development and human resource functions. Other general and administrative costs include the legal costs of pursuing patent protection of our intellectual property, facility and information technology infrastructure costs, directors’ and officers’ insurance, and professional fees for accounting, tax, legal and consulting services. We anticipate that our general and administrative expenses will increase in the future as we support our continued research and development and potential commercialization of our product candidates. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

### Other Income (Expense)

Interest and investment income consists of income earned on investments. Interest expense consists of expense related to our finance leases. Other expense consists primarily of gains and losses on foreign currency invoices.

### Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reported periods and related disclosures.

Our critical accounting policies are described in our 2022 Annual Report. During the nine months ended September 30, 2023, there were no new or material changes to our existing critical accounting policies. We believe that these identified policies are critical to fully understanding and evaluating our financial condition and results of operations.

Our estimates and assumptions, including those related to revenue recognition and research and development expenses are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. The estimates and assumptions involved in our revenue recognition policy, particularly (a) assessing the number of performance obligations; (b) determination of transaction price; and (c) determining the pattern over which performance obligations are satisfied, including estimates to complete performance obligations, and those estimates and assumptions involved in our contract research accrual process, particularly estimates of work completed to date, involve a greater degree of judgment, and therefore we consider revenue recognition and research and development expenses to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from our estimates under different assumptions or conditions.

### Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial results.

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

*(in thousands)*

|  | For the Three Months Ended September 30, 2023 | September 30, 2022 | Change $ |
| --- | ---: | ---: | ---: |
| Revenue | $393 | $678 | $(285) |
| Operating expenses: |  |  |  |
| Research and development | 9,616 | 14,610 | (4,994) |
| General and administrative | 3,400 | 4,402 | (1,002) |
| Total operating expenses | 13,016 | 19,012 | (5,996) |
| Loss from operations | (12,623) | (18,334) | 5,711 |
| Other income (expense): |  |  |  |
| Interest and investment income | 549 | 422 | 127 |
| Interest expense | — | (1) | 1 |
| Other income (expense) | (1) | 1 | (2) |
| Total other income, net | 548 | 422 | 126 |
| Loss before income taxes | (12,075) | (17,912) | 5,837 |
| Income tax expense | (3) | — | (3) |
| Net loss | $(12,078) | $(17,912) | $5,834 |

### Revenue

Revenue was $0.4 million for the three months ended September 30, 2023, as compared to $0.7 million for the corresponding period in 2022. Revenue for both periods was related to services performed under the Roche collaboration that we entered into in June 2021.

### Operating Expenses

### Research and Development Expense

Research and development expense was $9.6 million for the three months ended September 30, 2023 compared to $14.6 million in the corresponding period in 2022, a decrease of $5.0 million. The following table summarizes our research and development expense for the three months ended September 30, 2023 and 2022 (in thousands):

| External costs by program: | For the Three Months Ended September 30, 2023 | 2022 | Change $ |
| --- | ---: | ---: | ---: |
| Labafenogene marselecobac (SYNB1934) | $3,057 | $1,734 | $1,323 |
| SYNB1618 | (112) | 1,326 | (1,438) |
| SYNB8802 | (32) | 1,080 | (1,112) |
| SYNB1353 | 48 | 1,207 | (1,159) |
| SYNB1891 | 4 | 28 | (24) |
| External pre-development candidate costs and unallocated costs | 1,010 | 1,850 | (840) |
| Total external costs | 3,975 | 7,225 | (3,250) |
| Internal costs: |  |  |  |
| Employee compensation and benefits (including equity-based compensation expense) | 2,777 | 4,169 | (1,392) |
| Facility and other | 2,864 | 3,216 | (352) |
| Total internal costs | 5,641 | 7,385 | (1,744) |
| Total research and development expense | $9,616 | $14,610 | $(4,994) |

18

The decrease in research and development expense was primarily due to the following:

- A decrease in research and development costs of $3.3 million, which primarily consisted of:
- $3.7 million decrease in clinical, manufacturing and professional costs associated with SYNB1618 (earlier generation for Labafenogene marselecobac) for the Phase 2 Synpheny-1 study, SYNB8802 (achieved proof of concept in 2022), SYNB1353 (demonstrated proof of mechanism in 2022) and SYNB1891 (completed enrollment in November 2021);
- $0.9 million decrease in other early development candidates and unallocated costs; and
- offset by an increase of $1.3 million associated with clinical and manufacturing costs for Labafenogene marselecobac, currently being studied as a potential treatment for PKU in Synpheny-3, a global, pivotal Phase 3 study.
- $1.7 million decrease in internal research and development costs, which was primarily driven by reduced headcount and therefore lower compensation, benefits and other employee-related expenses.

### General and Administrative Expense

General and administrative expense was $3.4 million for the three months ended September 30, 2023, compared to $4.4 million for the corresponding period in 2022. The decrease was primarily attributable to decreased professional services costs and lower compensation, benefits and other employee-related expenses due to reduced headcount.

### Other Income (Expense)

Other income was $0.5 million for the three months ended September 30, 2023, compared to $0.4 million for the corresponding period in 2022. The increase in other income of $0.1 million was due to an increase in income earned on our cash, cash equivalents and short-term investment balances, primarily related to higher interest rates.

### Nine Months Ended September 30, 2023 Compared Nine Months Ended September 30, 2022

*(in thousands)*

|  | For the Nine Months Ended September 30, 2023 | September 30, 2022 | Change $ |
| --- | ---: | ---: | ---: |
| Revenue | $602 | $1,074 | $(472) |
| Operating expenses: |  |  |  |
| Research and development | 33,831 | 38,405 | (4,574) |
| General and administrative | 11,291 | 12,785 | (1,494) |
| Total operating expenses | 45,122 | 51,190 | (6,068) |
| Loss from operations | (44,520) | (50,116) | 5,596 |
| Other income (expense): |  |  |  |
| Interest and investment income | 1,794 | 658 | 1,136 |
| Interest expense | (1) | (3) | 2 |
| Other income (expense) | (9) | 10 | (19) |
| Total other income, net | 1,784 | 665 | 1,119 |
| Loss before income taxes | (42,736) | (49,451) | 6,715 |
| Income tax expense | (12) | — | (12) |
| Net loss | $(42,748) | $(49,451) | $6,703 |

19

### Revenue

Revenue was $0.6 million for the nine months ended September 30, 2023, compared to $1.1 million for the corresponding period in 2022. Revenue for both periods was primarily related to services performed under the Roche collaboration that we entered into in June 2021.

### Operating Expenses

### Research and Development Expense

Research and development expense was $33.8 million for the nine months ended September 30, 2023, compared to $38.4 million in the corresponding period in 2022, a decrease of $4.6 million. The following table summarizes our research and development expense for the nine months ended September 30, 2023 and 2022 (in thousands):

| External costs by program: | For the Nine Months Ended September 30, 2023 | 2022 | Change $ |
| --- | ---: | ---: | ---: |
| Labafenogene marselecobac (SYNB1934) | $8,654 | $2,489 | $6,165 |
| SYNB1618 | 640 | 2,842 | (2,202) |
| SYNB8802 | 976 | 3,138 | (2,162) |
| SYNB1353 | 341 | 1,477 | (1,136) |
| SYNB1891 | (135) | 482 | (617) |
| External pre-development candidate costs and unallocated costs | 3,911 | 5,822 | (1,911) |
| Total external costs | 14,387 | 16,250 | (1,863) |
| Internal costs: |  |  |  |
| Employee compensation and benefits (including equity-based compensation expense) | 10,569 | 12,450 | (1,881) |
| Facility and other | 8,875 | 9,705 | (830) |
| Total internal costs | 19,444 | 22,155 | (2,711) |
| Total research and development expense | $33,831 | $38,405 | $(4,574) |

The decrease in research and development expense was primarily due to the following:

- A decrease in research and development costs of $1.9 million, which primarily consisted of:
- $6.1 million decrease in clinical, manufacturing and professional costs associated with SYNB1618 (earlier generation for Labafenogene marselecobac) for the Phase 2 Synpheny-1 study, SYNB8802 (achieved proof of concept in 2022), SYNB1353 (demonstrated proof of mechanism in 2022) and SYNB1891 (completed enrollment in November 2021);
- $1.9 million decrease in other early development candidates and unallocated costs; and
- offset by an increase of $6.1 million associated with clinical and manufacturing costs for Labafenogene marselecobac, currently being studied as a potential treatment for PKU in Synpheny-3, a global, pivotal Phase 3 study.
- $2.7 million decrease in internal research and development costs, which was primarily driven by reduced headcount and therefore lower compensation, benefits and other employee-related expenses.

### General and Administrative Expense

General and administrative expense was $11.3 million for the nine months ended September 30, 2023, compared to $12.8 million for the corresponding period in 2022. The decrease was primarily attributable to decreased professional services costs, and lower compensation, benefits and other employee-related expenses due to reduced headcount.

### Other Income (Expense)

Other income was $1.8 million for the nine months ended September 30, 2023, compared to $0.7 million for the corresponding period in 2022. The increase in other income of $1.1 million was due to an increase in income earned on our cash, cash equivalents and short-term investment balances, primarily related to higher interest rates.

### Liquidity and Capital Resources

We have incurred losses since our inception on March 14, 2014 and, as of September 30, 2023, we had an accumulated deficit of approximately $399.8 million. We have financed our operations to date primarily through the sale of preferred stock, common stock, preferred units and warrants, payments received under collaboration agreements, including the technology collaboration with Ginkgo, the Roche Collaboration and Option agreement, and prior collaborations, interest earned on investments, and cash received in the Merger. At September 30, 2023, we had approximately $33.4 million in cash and cash equivalents. Our cash and cash equivalents include amounts held in money market funds, commercial paper, and U.S. treasuries, stated at cost plus unrealized gain and loss, which approximates fair market value. During the nine months ended September 30, 2023 our available-for-sale securities include amounts held in commercial paper and U.S. government agency securities and treasuries. We invest cash in excess of immediate requirements in accordance with our investment policy, which limits the amounts we may invest in any one type of investment and requires all investments held by us to maintain minimum ratings from Nationally Recognized Statistical Rating Organizations so as to primarily achieve liquidity and capital preservation.

During the nine months ended September 30, 2023, our cash, cash equivalents and short-term marketable securities balance decreased by approximately $44.2 million. This decrease was primarily due to the cash used to operate our business, including payments related to, among other things, research and development and general and administrative expenses as we continue to invest in our primary drug candidates and support the development of our proprietary platform.

The following table sets forth the major sources and uses of cash, cash equivalents and restricted cash for each of the periods below (in thousands):

*(in thousands)*

| Net cash, cash equivalents and restricted cash provided by (used in) | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(46,086) | $(44,495) |
| Investing activities | 53,397 | 43,490 |
| Financing activities | 1,364 | 189 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $8,675 | $(816) |

### Cash Flows from Operating Activities

Net cash, cash equivalents and restricted cash used in operating activities was approximately $46.1 million for the nine months ended September 30, 2023. The primary use of cash was our net loss of $42.7 million, changes in our assets and liabilities of $8.9 million, partially offset by $5.5 million of non-cash items primarily including depreciation, equity-based compensation, and the right of use asset. The changes in our assets and liabilities include increases in prepaid research and development expenses, increases in prepaid expenses and other current assets, and decreases in the operating lease liability, accounts payable and accrued expenses, and deferred revenue. Net cash, cash equivalents and restricted cash used in operating activities for future periods are expected to be lower than the amounts reported for the three and nine months ended September 30, 2023, primarily due to the Company's prioritization of resources on it's PKU program.

Net cash, cash equivalents and restricted cash used in operating activities was approximately $44.5 million for the nine months ended September 30, 2022. The primary use of cash was our net loss of $49.5 million, changes in our assets and liabilities of $1.7 million, partially offset by $6.7 million of non-cash items primarily including depreciation, equity-based compensation, and the right of use asset. The changes in our assets and liabilities include decreases in prepaid research and development expenses, as a result of the work being completed on the Ginkgo collaboration, decreases in the operating lease liability, decreases in prepaid expenses and other current assets, increases in accounts receivable as a result of having earned a milestone with the Roche collaboration in August 2022, increases in accounts payable and accrued expenses, and increases in deferred revenue.

### Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2023 was $53.4 million and resulted primarily from the proceeds from maturity of marketable securities of $62.4 million. This was offset by the purchases of marketable securities of $8.8 million and of property and equipment of $0.2 million.

Net cash provided by investing activities for the nine months ended September 30, 2022 was $43.5 million and resulted primarily from the proceeds from maturity of marketable securities of $110.4 million. This was offset by the purchases of marketable securities of $66.2 million and property and equipment of $0.7 million.

### Cash Flows from Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 totaled $1.4 million, primarily related to net proceeds of $1.2 million from the sale of our common stock in the ATM offering program and $0.2 million from ESPP contributions.

Net cash provided by financing activities for the nine months ended September 30, 2022 totaled $0.2 million, primarily related to ESPP contributions.

### Funding Requirements

To date, we have not commercialized any products and have not achieved profitability. We anticipate that we will continue to incur substantial net losses for the next several years as we further develop our product candidates, invest in our proprietary platform technology and operate as a publicly traded company.

We are currently generating revenue from our Roche collaboration and have historically generated revenue from previous collaborations, but have not generated any product revenue since our inception and do not expect to generate any product revenue unless we receive regulatory approval for our product candidates. Inclusive of the net cash proceeds received in October 2023 from the sale of the Company's common stock, as further described in Note 14, *Subsequent Events*, we believe that our cash and cash equivalents will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of this filing. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q. We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Due to the numerous risks and uncertainties associated with the development of our product candidates, we are unable to estimate precisely the amounts of capital outlays and operating expenditures necessary to complete the development of, and to obtain regulatory approval for, our product candidates. Our funding requirements will depend on many factors, including, but not limited to, the following:

- the success of our research and development efforts;
- the initiation, progress, timing, costs and results of clinical trials for our product candidates;
- the time and costs involved in obtaining regulatory approvals for our product candidates;
- the progress, timing and costs involved in developing manufacturing processes and agreements with third-party manufacturers;
- the rate of progress and cost of our commercialization activities;
- the expenses we incur in marketing and selling our product candidates;
- the revenue generated by sales of our product candidates;
- the emergence of competing or complementary technological developments;
- the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
- the terms and timing of any additional collaborative, licensing or other arrangements that we may establish;
- the acquisition of businesses, products and technologies;
- our need to implement additional infrastructure and internal systems;
- our need to add personnel and financial and management information systems to support our product development and potential future commercialization efforts, and to enable us to operate as a public company; and
- the extent to which our business is adversely impacted by the effects of the coronavirus outbreak or by other health epidemics or pandemics; and
- other risks and uncertainties, including those listed under Part II, Item IA. “Risk Factors”.

As a clinical-stage company, we are subject to a number of risks common to other life science companies, including, but not limited to, the ability to raise additional capital, development by our competitors of new technological innovations, risk of failure in preclinical studies, the safety and efficacy of our product candidates in clinical trials, the regulatory approval process, the ability to efficiently manufacture our products, market acceptance of our products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology. Our therapeutic programs are currently pre-commercial, spanning discovery through early development and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of any product candidates. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. There can be no assurance that our research and development will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary regulatory approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate revenue from product sales. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital or obtain financing from other sources, such as strategic collaborations or partnerships. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected.

### Contractual Commitments and Obligations

There have been no material changes to our contractual obligations and commitments set forth under the heading “*Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations and Commitments”* in our 2022 Annual Report.

### Related Party Transactions

For a description of transactions with related parties which may fall outside of the reporting period of this section, please see the section entitled “*Certain Relationships and Related Person Transactions”* in our proxy statement filed with the SEC on May 1, 2023.

### Recently Issued Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2, *Summary of Significant Accounting Policies* in the notes to the unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 154 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide this information required under this item.

## Controls and procedures

As filed, 2,788 characters.

### Definition and limitations of disclosure controls

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluates these controls and procedures on an ongoing basis.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance, but not absolute assurance, of achieving their objectives.

### Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control

There have not been any changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of such internal control that occurred during our fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-061493. Last ingested by Listed: Nov 5, 2026, 12:32 ET. No prices; not investment advice.