SIGILON THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and notes included in Item 8 of this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, including, but not limited to, those set forth in "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors."
Overview
We are a clinical stage biotechnology company pioneering a new class of therapeutics and seeking to develop functional cures for patients with chronic diseases by providing stable and durable levels of therapeutic molecules to patients. We have developed our Shielded Living Therapeutics, or SLTx, platform, which combines advanced cell engineering with cutting-edge innovations in biocompatible materials and enables our product candidates to produce a wide range of therapeutic molecules that may be missing or deficient, such as proteins (including therapeutic proteins and antibodies) and hormones. We are designing our product candidates to be off-the-shelf, durable, controllable and redosable, without requiring modification of the patient's genes or complete suppression of the patient's immune system.
Since our inception, we have devoted substantially all of our efforts to raising
capital, obtaining financing, filing and prosecuting patent applications,
organizing and staffing our company and incurring research and development costs
related to advancing our biomedical platform. We do not have any products
approved for sale and have not generated any revenue from product sales. To
date, we have funded our operations primarily with proceeds from sales of common
stock and convertible preferred stock, payments received under our collaboration
agreement with Lilly and proceeds from borrowings under our credit facilities.
Through
We have incurred significant operating losses since our inception. Our ability
to generate any product revenue sufficient to achieve profitability will depend
on the successful development and eventual commercialization of one or more of
our product candidates. We reported net losses of
investigate the preliminary results from our Phase 1/2 clinical trial for
? SIG-001, including the finding of spheres covered in pericapsular fibrotic
overgrowth, or PFO, and the reported serious adverse event, or SAE;
incur the cost of patient treatment for medical events related to the SAE
? reported in our Phase 1/2 clinical trial for SIG-001 if we are asked to pay for
such treatments;
? initiate clinical trials of SIG-005 or any other product candidates;
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? continue our current research programs and our preclinical development of
product candidates from our current research programs;
? seek to identify additional research programs and additional product
candidates;
? comply with regulatory requirements established by the FDA, EMA or MHRA and
other comparable foreign regulatory authorities;
? conduct preclinical studies for our product candidates;
? seek marketing approvals for any of our product candidates that successfully
complete clinical trials;
? ultimately establish a sales, marketing, and distribution infrastructure to
commercialize any medicines for which we may obtain marketing approval;
? further develop our SLTx platform;
? hire additional research, development and manufacturing personnel;
? continue to hire clinical and hire commercial personnel;
add operational, financial, corporate development and management information
? systems and legal personnel, including personnel to support our product
development and planned future commercialization efforts;
? expand our facilities;
? acquire or in-license product candidates, intellectual property and
technologies;
develop an automated encapsulation system for future commercial scale
? manufacturing our SLTx platform or otherwise build or expand our manufacturing
capabilities or capacity, including future manufacturing facilities;
file, prosecute, defend, and enforce our patent claims and other intellectual
? property rights, including patent infringement actions brought by third parties
against us regarding our investigational medicines or actions by us challenging
the patent or intellectual property rights of others; and
? operate as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. Further, we expect to continue to incur additional costs associated with operating as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, or other capital sources, including collaborations with other companies and other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or 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 and commercialization of one or more of our product candidates.
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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate 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.
Impact of COVID-19
The COVID-19 pandemic has impacted and may continue to impact the clinical sites and startup activities for our Phase 1/2 clinical trials, including the operations of our third-party manufacturing and logistics providers, which has disrupted our clinical supply chain and the availability or cost of materials, and it may affect our ability to timely complete our clinical trials and delay the initiation and/or enrollment of any future clinical trials, disrupt regulatory activities or have other adverse effects on our business and operations.
We are monitoring the potential impact of the COVID-19 pandemic on our business and financial statements. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and prospects. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, financial condition and liquidity, including planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, the effects of any variants as new strains evolve, vaccination efforts, and the duration and intensity of the related effects.
Components of Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. Substantially all of our revenue to date has been derived from the collaboration agreement with Lilly, which we entered into in 2018.
If our development efforts for our product candidates are successful and result in regulatory approval or if we enter into license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from license or collaboration agreements that we may enter into with third parties, or any combination thereof. We expect that our revenue for the next several years will be derived primarily from our collaboration agreement with Lilly as well as any additional collaborations that we may enter into in the future. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.
Collaboration Revenue
In
We evaluated the 2018 Lilly Agreement under ASC 606 and concluded at the outset
that there were two performance obligations under the arrangement: (1) exclusive
license to research, develop, manufacture and commercialize licensed products,
initial technology transfer, research activities (including pre-IND supply),
cell line development and supply and product trademark election, or the Combined
Performance Obligation; and (2) requirement to supply Lilly with the licensed
product related to Phase 1 clinical trial, or Phase 1 Supply. We determined that
the
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outset of the arrangement. We allocated
We reevaluate the transaction price and our total estimated costs expected to be incurred at the end of each reporting period and as uncertain events, such as changes to the expected timing and cost of certain research, development and manufacturing activities that we are responsible for, are resolved or other changes in circumstances occur, and, if necessary, we will adjust our estimate of the transaction price or our total estimated costs expected to be incurred.
Additional information regarding the 2018 Lilly Agreement can be found in Note 10 to our financial statements in this Annual Report on Form 10-K.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our platform and product candidates. We expense research and development costs as incurred, which include:
employee-related expenses, including salaries, bonuses, benefits, stock-based
? compensation, other related costs for those employees involved in research and
development efforts;
expenses incurred in connection with the preclinical development of our product
? candidates and research programs, including under agreements with third
parties, such as consultants, contractors, and CROs;
the cost of raw materials and developing and scaling our manufacturing process
? and manufacturing product candidates for use in our research and preclinical
studies, including under agreements with third parties, such as consultants,
contractors, and CMOs;
? laboratory supplies and research materials;
? facilities, depreciation, and other expenses, which include direct and
allocated expenses for rent and maintenance of facilities and insurance; and
? payments made under third-party licensing agreements.
We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
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Our direct external research and development expenses are tracked on a program-by-program basis, including our early-stage programs, and consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, contract manufacturing organizations or CMOs, and contract research organizations or CROs, in connection with our preclinical and manufacturing activities. Except for personnel expenses related to SIG-002, we do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform and, as such, are not separately classified. The personnel expenses allocated to SIG-002 do not include stock-based compensation expense.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:
? investigation of the preliminary results from our Phase 1/2 clinical trial for
SIG-001, including the finding of spheres with PFO and the reported SAE;
? the timing and progress of preclinical and clinical development activities;
? the number and scope of preclinical and clinical programs we decide to pursue;
? raising additional funds necessary to complete preclinical and clinical
development of and commercialize our product candidates;
? the progress of the development efforts of parties with whom we may enter into
collaboration arrangements;
? our ability to maintain our current research and development programs and to
establish new ones;
? our ability to establish new licensing or collaboration arrangements;
the successful initiation and completion of clinical trials with safety,
? tolerability and efficacy profiles that are satisfactory to the FDA, or any
comparable foreign regulatory authority;
? the receipt and related terms of regulatory approvals from applicable
regulatory authorities;
? the availability of raw materials for use in production of our product
candidates;
? our ability to consistently manufacture our product candidates for use in
clinical trials;
? our ability to establish and operate a manufacturing facility, or secure
manufacturing supply through relationships with third parties;
? our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in
? our ability to protect our rights in our intellectual property portfolio;
? the commercialization of our product candidates, if and when approved;
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? obtaining and maintaining third-party insurance coverage and adequate
reimbursement;
? the acceptance of our product candidates, if approved, by patients, the medical
community and third-party payors;
? competition with other products; and
? a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of these product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel expenses, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of that product candidate.
Other Income (Expense)
Change in Fair Value of Preferred Stock Warrant Liability
In connection with our 2020 and 2019 Credit Facilities, we issued warrants to purchase Series A, Series B and Series B-1 convertible preferred stock, which subsequently converted to common stock in conjunction with the IPO. We classified these warrants as a liability on our balance sheet that we remeasure to fair value at each reporting date, and we recognize changes in the fair value of the warrant liability as a component of other income (expense) in our statements of operations and comprehensive loss. We continued to recognize changes in the fair value of the warrant liability until the warrants became equity classified, which occurred when the warrants converted into warrants to purchase common stock.
Loss on Extinguishment of Debt
In connection with the extinguishment of our prior debt facility a loss was
recognized equal to the unamortized debt discount and extinguishment fees in the
amount of
Interest Income
Interest income consists of interest earned on our cash, cash equivalents and marketable securities balances. We expect our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for our platform development and ongoing business operations.
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Interest Expense
Interest expense consists of interest expense on outstanding borrowings under our loan and security agreements as well as amortization of debt discount and deferred financing costs.
Other Expense
Other expense consists primarily of losses on the disposal of fixed assets and net foreign exchange losses.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net operating losses we have incurred in each year or for our earned research and development tax credits generated in each period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credit carryforwards will not be realized. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted
accounting principles in
While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in 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 financial statements.
Revenue Recognition
To date, our revenues have consisted primarily of payments received related to the 2018 Lilly Agreement. We follow the provisions of ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), for all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
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 promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are
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distinct in the context of the contract; (iii) measurement of the transaction price, including the assessment of the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as we satisfy each performance obligation. As part of the accounting for arrangements under ASC 606, we must use significant judgment to determine: a) the performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; and c) the standalone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. We also use judgment to determine whether milestones or other variable consideration, except for royalties and sales-based milestones, should be included in the transaction price as described below. The transaction price is allocated to each performance obligation based on the relative stand-alone selling price of each performance obligation in the contract, and we recognize revenue based on those amounts when, or as, the performance obligations under the contract are satisfied.
The standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. Management estimates the standalone selling price of each of the identified performance obligations in our customer contracts, maximizing the use of observable inputs. Because we have not sold the same goods or services in our contracts separately to any customers on a standalone basis and there are no similar observable transactions in the marketplace, we estimate the standalone selling price of each performance obligation in our customer arrangements based on our estimate of costs to be incurred to fulfil our obligations associated with the performance, plus a reasonable margin.
In assessing whether a license is distinct from the other promises, we consider relevant facts and circumstances of each arrangement, including the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the collaboration partner can benefit from the license for its intended purpose without the receipt of the remaining promises, whether the value of the license is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises. We determined there were two distinct performance obligations at the outset of the 2018 Lilly Agreement, the Combined Performance Obligation and the Phase 1 Supply performance obligation.
For performance obligations which consist of licenses combined with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and the resulting periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the arrangement, which are subject to review by JRC. Such a change could have a material impact on the amount of revenue we record in future periods. We concluded that the transfer of control to the customer for the Combined Performance Obligation occurs over the time period that the research and development services are provided by us. We recognize revenue for the Combined Performance Obligation as those services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy the Combined Performance Obligation. The cost-to-cost method is, in management's judgement, the best measure of progress towards satisfying the performance condition.
For the Phase 1 Supply performance obligation, which was determined to be a material right, the standalone selling price was estimated using the expected cost-plus margin approach. We determined that the Phase 1 Supply will be satisfied at a point in time when the customer obtains control of each unit of product. Therefore, we will recognize revenue as shipments of the Phase 1 Supply are made to Lilly.
At the inception of each arrangement that includes research, development or regulatory milestone payments, we evaluate whether the milestones are considered likely to be met and estimate the amount to be considered for inclusion in the transaction price using the most-likely-amount method. If it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur, the associated milestone value is included in the transaction price. For milestone payments due upon events that are not within the control of us or the licensee, such as regulatory approvals, we are not able to assert that it is likely that the regulatory approval will be granted and that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur until those approvals are received. In making this assessment, we evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone. There is considerable judgment involved in determining whether it is
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probable that a significant reversal in the amount of cumulative revenue
recognized would not occur. At the end of each subsequent reporting period we
reevaluate the probability of achievement of all milestones subject to
constraint and, if necessary, adjust our estimate of the overall transaction
price of the arrangement. Any such adjustments are recorded on a cumulative
catch-up basis, which would affect the amount of revenue and earnings in the
period of adjustment. As of
We reevaluate the transaction price and our total estimated costs expected to be incurred at the end of each reporting period and as uncertain events, such as changes to the expected timing and cost of certain research, development and manufacturing activities that we are responsible for, are resolved or other changes in circumstances occur. If necessary, we will adjust our estimate of the transaction price or our total estimated costs expected to be incurred.
During the year ended
We determined that our only contract liability under ASC 606 is deferred revenue. Amounts received prior to revenue recognition are recorded as deferred revenue in the balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion in the balance sheets. Amounts are recorded as accounts receivable when our right to consideration is unconditional.
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of 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 advance payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:
? Vendors in connection with discovery and preclinical development activities;
? CROs in connection with preclinical studies and testing; and
? CMOs in connection with the process development and scale up activities and the
production of materials.
We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development, and manufacturing activities; invoicing to date under contracts; communication from the CROs, CMOs and other companies of any actual costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. The financial terms of these agreements are subject to
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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 service 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 the estimate, we adjust the accrual or the 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 may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation
We measure all stock-based awards granted to employees and directors based on their fair value on the date of the grant using the Black-Scholes option-pricing model for options or the difference, if any, between the purchase price per share of the award and the fair value of our common stock for restricted common stock awards. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award for the employees and directors.
We use the straight-line method to record the expense of awards with only service-based vesting conditions. We record the expense of awards with performance-based vesting when we conclude that it is probable the performance condition will be achieved. The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
Compensation expense for purchases under the Employee Stock Purchase Plan is recognized based on the fair value of the common stock estimated based on the closing price of our common stock as reported on the date of offering, less the purchase discount percentage provided for in the plan.
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Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2021 and 2020: Year Ended December 31, Increase 2021 2020 (Decrease) (in thousands) Revenue Collaboration revenue$ 9,599 $ 13,374 $ (3,775) Operating expenses: Research and development 65,069 53,488 11,581 General and administrative 20,166 12,528 7,638 Total operating expenses 85,235 66,016 19,219 Loss from operations (75,636) (52,642) (22,994) Other income (expense): Interest income 258 312 (54) Interest expense (1,988) (1,202) (786) Other income (expense): 55 (89) 144 Change in fair value of preferred stock warrant liability - (644) 644 Loss on extinguishment of debt - (343) 343 Total other expense, net (1,675) (1,966) 291 Net loss$ (77,311) $ (54,608) $ (22,703) Revenue
Revenue was
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Research and Development Expenses
The following table summarizes our research and development expenses for
the years ended
Year Ended
December 31, Increase
2021 2020 (Decrease)
(in thousands)Direct research and development expenses by program: SIG001
$ 9,037 $ 9,083 $ (46) SIG002 8,532 12,250 (3,718) SIG005 6,324 - 6,324 SIG007 2,678 - 2,678 Platform and pipeline development 18,138 16,995 1,143 Unallocated expenses Personnel expenses (including stockbased compensation) 15,822 12,175 3,647 Facility related and other 4,538 2,985 1,553 Total research and development expenses$ 65,069 $ 53,488 $ 11,581
Research and development expenses were
General and Administrative Expenses
General and administrative expenses for the year ended
Other Income (Expense)
Other income (expense) primarily consists of interest income, interest expense,
the change in fair value of the preferred stock warrant liability and loss on
extinguishment of debt. Other expense for the year ended
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on the outstanding borrowings under our 2020 Credit Facility and the repayment of our prior debt facility, the loss on the extinguishment of our prior debt facility and loss on the revaluation of the preferred stock warrant liability in 2020.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant operating losses. We have not
yet commercialized any of our product candidates and we do not expect to
generate revenue from sales of any product candidates for the foreseeable
future, if at all. To date, we have funded our operations primarily with
proceeds from sales of common stock and convertible preferred stock, payments
received under our collaboration agreement with Lilly and proceeds from
borrowings under our credit facilities. Through
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Year Ended
December 31,
2021 2020
(in thousands)
Net cash used in operating activities $ (78,405) $ (61,648)
Net cash used in investing activities (18,060) (972)
Net cash provided by financing activities 1,554 189,397
Net (decrease) increase in cash and restricted cash
Operating Activities
During the year ended
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During the year ended
Investing Activities
During the year ended
During the year ended
Financing Activities
During the year ended
During the year ended
Loan and security agreement
In
Borrowings under the 2020 Credit Facility are collateralized by substantially
all of our personal property, other than our intellectual property. There are no
financial covenants associated with the 2020 Credit Facility; however, we are
subject to certain affirmative and negative covenants to which we will remain
subject until maturity. These covenants include limitations on dispositions,
mergers or acquisitions; encumbering our intellectual property; incurring
indebtedness or liens; paying dividends; making certain investments; and
engaging in certain other business transactions. In addition, we are required
to, among other things, on an annual basis to deliver
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statements. Obligations under the 2020 Credit Facility are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition.
As of
As of
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. In addition, we expect to incur additional cost associated with operating as a public company. The timing and amount of our operating and capital expenditures will depend largely on:
the costs of our investigation of the SAE reported in and our finding of PFO
? covering spheres recovered from a patient in our Phase 1/2 clinical trial for
SIG-001 in Hemophilia A and the costs of additional preclinical or clinical
studies as may be requested by the FDA;
the cost of patient treatment for medical events related to the SAE reported in
? our Phase 1/2 clinical trial for SIG-001 if and when we are asked to pay for
such treatments;
the costs of continuing to develop our SLTx platform, including the cost of any
? changes to our cells, spheres or manufacturing processes and the costs of any
additional preclinical studies we may conduct as a result of our ongoing
investigation into the results of our Phase 1/2 clinical trial of SIG-001;
? the costs of acquiring licenses for the components and engineered cell lines
that will be used with our current and future product candidates;
the scope, progress, results, and costs of discovery, preclinical development,
? formulation development, and clinical trials for our current and future product
candidates;
the costs of preparing, filing, and prosecuting patent applications,
? maintaining and enforcing our intellectual property and proprietary rights, and
defending intellectual property-related claims;
? the costs, timing, and outcome of regulatory review of SIG-005 or any other
product candidates;
the costs of future activities, including product sales, medical affairs,
? marketing, manufacturing, distribution, coverage and reimbursement for SIG-005
or any other product candidates for which we receive regulatory approval;
the cost of developing and expanding our manufacturing capabilities and
? advancing these manufacturing capabilities to manufacture product candidates
that are commercially viable;
? the potential additional expenses attributable to adjusting our development
plans (including any supply-related matters) due to the COVID-19 pandemic;
? our ability to establish and maintain additional collaborations on favorable
terms, if at all;
? the success of any collaborations that we may establish and of our license
agreements;
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? the achievement of milestones or occurrence of other developments that trigger
payments under any additional collaboration agreements we obtain; and
? the extent to which we acquire or in-license product candidates, intellectual
property and technologies.
We believe that our existing cash will enable us to fund our operating expenses and capital expenditure requirements into 2024. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, 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 through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or 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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