Sio Gene Therapies Inc. (NASDAQ:SIOX) is a clinical-stage biotechnology company that has recently made the strategic decision to pursue dissolution and liquidation of the company. After extensive evaluation of potential strategic alternatives, the company's Board of Directors unanimously concluded that dissolving the company would be in the best interests of Sio Gene Therapies Inc.'s stockholders.
Business Overview
Historically, Sio Gene Therapies Inc. was focused on developing gene therapies to treat neurodegenerative diseases. The company's pipeline included AXO-AAV-GM1 for the treatment of GM1 gangliosidosis, AXO-AAV-GM2 for the treatment of GM2 gangliosidosis (including Tay-Sachs and Sandhoff diseases), and AXO-Lenti-PD for the treatment of Parkinson's disease. However, during the fiscal year covered by this report, the company wound down these programs.
In parallel with the decision to terminate its clinical programs, in April 2022, Sio Gene Therapies Inc.'s Board of Directors approved and the company announced the strategic decision to explore and review a range of strategic alternatives focused on maximizing stockholder value from its existing cash and cash equivalents, including a potential sale, merger, business combination or similar transaction. As part of this process, the company began implementing a significant headcount reduction, which concluded in August 2022.
Financials
Sio Gene Therapies Inc.'s financial performance has been challenging in recent years. For the fiscal year ended March 31, 2022, the company reported an annual net loss of $71.9 million, with no revenue generated. The company's annual operating cash flow was -$60.3 million, and its annual free cash flow was -$61.0 million.
During the nine months ended December 31, 2022, Sio Gene Therapies Inc. continued to incur significant losses, reporting a net loss of $15.5 million. The company's research and development expenses decreased significantly from the prior-year period, from $40.8 million to $7.8 million, as the company wound down its clinical programs. General and administrative expenses also decreased, from $17.7 million to $8.5 million, primarily due to a reduction in stock-based compensation expense.
Liquidity
As of December 31, 2022, Sio Gene Therapies Inc. had $46.1 million in cash and cash equivalents, which the company believes will enable it to fund its current operating plan beyond the twelve-month period following the date of the latest financial statements. However, the precise timing and amount of any future liquidating distributions to stockholders will depend on a variety of factors, including the company's ability to sell its remaining non-cash assets, the settlement of claims and liabilities, and the adequacy of reserves established for contingencies.
Dissolution and Liquidation
In December 2022, following its assessment of potential strategic alternatives, Sio Gene Therapies Inc.'s Board of Directors approved the dissolution and liquidation of the company, subject to stockholder approval. The company intends to file proxy materials with the SEC and hold a special meeting of stockholders as soon as practicable to obtain approval for the dissolution.
If the dissolution is approved, Sio Gene Therapies Inc. will be authorized to cease operations, sell or otherwise dispose of its non-cash assets, and dissolve the company and its subsidiaries without further approval of the stockholders, unless required to obtain such approval under Delaware law. The company will continue to exist for three years after the filing of the certificate of dissolution or for such longer period as the Delaware Court of Chancery shall direct, for the purpose of prosecuting and defending suits, enabling the company to gradually close its business, dispose of its property, discharge its liabilities, and distribute any remaining assets to stockholders.
Risks and Challenges
The dissolution and liquidation process is subject to numerous uncertainties, and the amount that Sio Gene Therapies Inc.'s stockholders will ultimately receive in liquidating distributions is difficult to predict. Factors that could impact the final distribution amount include the accuracy of the company's estimates regarding outstanding liabilities and expenses, the emergence of any unforeseen claims or liabilities, and the company's ability to sell its remaining non-cash assets at favorable prices.
Additionally, Sio Gene Therapies Inc.'s common stock may be delisted from the Nasdaq Capital Market in March 2023 if the company does not regain compliance with the minimum bid price requirement. Once the stock is delisted, the ability of stockholders to trade or transfer the shares will be significantly impacted, as the company intends to close its stock transfer books on the date the certificate of dissolution is filed.
Outlook
Sio Gene Therapies Inc.'s decision to pursue dissolution and liquidation represents a challenging but necessary step for the company, given the lack of viable strategic alternatives and the depletion of its cash resources. While the ultimate distribution to stockholders remains uncertain, the company is committed to an orderly wind-down process that aims to maximize value for its shareholders. Investors should closely monitor the company's progress and be prepared for potential delays or changes in the dissolution timeline as Sio Gene Therapies Inc. navigates the complexities of this process.