The restructuring announced today is the result of a strategic decision to increase focus on three key areas: Nav 1.7 and Prion as cornerstones to the neurology epigenetic regulation portfolio; Fabry Phase 3 readiness; and the TX200 CAR-Treg clinical study, alongside a broader rightsizing of resources and investments across the company. Additionally, Sangamo expects to significantly reduce its internal manufacturing and allogeneic research footprints in California. As a result of this restructuring, Sangamo is reducing its US workforce by approximately 27%, or approximately 120 roles. These actions are in addition to the previously announced portfolio prioritization which resulted in the decision to seek a partner for our sickle cell disease program. In addition, R. Andrew Ramelmeier, Ph.D., Executive Vice President, Technical Operations will be leaving the company on July 10, 2023. Phillip Ramsey, currently serving as Vice President, Technical Development, has been appointed as Head of Technical Operations effective May 29, 2023.
The restructuring plus other planned cost reduction initiatives are expected to result in annualized savings of approximately $31 million. Sangamo believes its available cash, cash equivalents and marketable securities as of March 31, 2023, in combination with the other expected cost reductions, will be sufficient to fund its planned operations for at least the next 12 months. Sangamo expects to incur approximately $5 million - $7 million in one-time restructuring costs in the second and third quarters of 2023. Sangamo is assessing ways to further reduce annual operating expenses, consistent with the prioritized objectives and progress of the company.
2Q23 updated guidance
GAAP operating expenses, including impairment of goodwill, indefinite-lived intangible assets, and long-lived assets, and stock-based compensation expense, are now estimated to be in the range of approximately $378 million to $398 million, reflecting the additional non-cash impairment charges. The previous GAAP operating expenses guidance provided on April 26, 2023 was in the range of approximately $315 million to $335 million.
We continue to estimate non-GAAP operating expenses to remain unchanged from the last update on April 26, 2023 and to be in the range of approximately $240 million to $260 million. Estimated non-GAAP operating expenses exclude estimated impairment of goodwill of $38.1 million, impairment of indefinite-lived intangible assets of $51.3 million, impairment of long-lived assets of $20.4 million and stock-based compensation expense of $28 million.
2Q23 10Q Liquidity
As of June 30, 2023, the Company had capital resources of $182.1 million consisting of cash, cash equivalents, and marketable securities. Management believes that the Company’s existing cash, cash equivalents, and marketable securities, in combination with other planned cost reduction initiatives, will be sufficient to fund its operations for at least the next 12 months from the date these Condensed Consolidated Financial Statements are issued. i.e. Aug 8 2024
Under Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern (“ASC Topic 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the Condensed Consolidated Financial Statements are issued. As required under ASC Topic 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the Condensed Consolidated Financial Statements are issued.
Consideration of Management’s Plans
In performing the second step of this assessment, the Company is required to evaluate whether it is probable that its plans will be effectively implemented within one year after the Condensed Consolidated Financial Statements are issued and whether it is probable those plans will alleviate the substantial doubt about its ability to continue as a going concern. The Company initiated a number of cost reduction measures in the quarter ended June 30, 2023, including a reduction in force, reduction of its manufacturing and allogeneic research footprints, reduction of new hires, and reduction in capital and ancillary expenditures. The Company has also identified several further potential actions that could be initiated in a timely manner to address the Company’s liquidity needs over the twelve-month period from the date the Condensed Consolidated Financial Statements are issued, as follows:
· Deferral and reprioritization of certain additional research and development programs that would involve reduced program and headcount spend
· Further reduction in force intended to extend the cash runway necessary to fund operations
· Realignment of operating infrastructure including closing or downsizing facilities
· Reduction in ancillary expenses such as travel and recruitment expenses
· Further reduction in non-critical capital and discretionary operating expenditures including personnel costs, additional equipment, lab improvements, efficiency projects, and business support spend
Management Assessment of Ability to Continue as a Going Concern
The Company believes management’s plans, as described more fully above, will provide sufficient liquidity to meet its financial obligations and maintain levels of liquidity over the twelve-month period from the date the Condensed Consolidated Financial Statements are issued. Therefore, management has concluded these plans alleviate the substantial doubt that was raised about the Company’s ability to continue as a going concern for at least twelve months from the date that the Condensed Consolidated Financial Statements are issued. Determining the extent to which conditions or events raise substantial doubt about the Company’s ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by the Company. The Company makes assumptions that management’s plans will be effectively implemented and alleviate substantial doubt and its ability to continue as a going concern. The Company believes that the estimated values used in its going concern analysis are based on reasonable assumptions. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates.
The accompanying Condensed Consolidated Financial Statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.