Breaking Down Surrozen, Inc. (SRZN) Financial Health: Key Insights for Investors

Understanding Surrozen, Inc. (SRZN) Revenue Streams

Understanding Surrozen, Inc.’s Revenue Streams

Surrozen, Inc. reported a significant increase in collaboration and license revenue for the nine months ended September 30, 2024, totaling $10 million, compared to $0 in the same period of 2023. This increase is attributed to the recognition of a milestone achieved under their collaboration and license agreement (CLA) in September 2024.

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for Surrozen, Inc. is remarkable, showing a 100% increase in collaboration and license revenue from $0 in 2023 to $10 million in 2024.

Contribution of Different Business Segments to Overall Revenue

For the nine months ended September 30, 2024, the breakdown of revenue sources is as follows:

Analysis of Significant Changes in Revenue Streams

The most significant change in revenue streams for Surrozen, Inc. is the transition from no collaboration and license revenue in 2023 to $10 million in 2024. This shift indicates effective progress in their clinical development and strategic partnerships, marking a pivotal moment in their financial health.

The following table summarizes the financial performance for Surrozen, Inc. for the nine months ended September 30, comparing 2024 to 2023:

A Deep Dive into Surrozen, Inc. (SRZN) Profitability

A Deep Dive into Surrozen, Inc. Profitability

Gross Profit Margin: As of September 30, 2024, the company reported a gross profit margin of 100% due to the recognition of collaboration and license revenue of $10 million without any cost of goods sold.

Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was -63%, calculated from a loss from operations of ($16.9 million) against total revenues of $26.9 million.

Net Profit Margin: The net profit margin for the same period showed a net loss margin of -355% with a net loss of ($35.5 million) compared to total revenues of $10 million.

Trends in Profitability Over Time

Over the past year, the company has shown significant fluctuations in profitability metrics:

• Net loss increased from ($34.1 million) in 2023 to ($35.5 million) in 2024 for the nine-month period.
• Operating losses improved from ($36.1 million) in the previous year to ($16.9 million) in 2024, indicating a decrease of 53%.

Comparison of Profitability Ratios with Industry Averages

Analysis of Operational Efficiency

The operational efficiency of the company has seen some changes:

• Research and Development Expenses: Total R&D expenses decreased by 25% to $15.8 million from $21.1 million in the prior year.
• General and Administrative Expenses: These expenses also reduced by 9% to $11.2 million compared to $12.2 million in the previous year.
• Total Operating Expenses: Total operating expenses dropped from $36.1 million to $26.9 million, indicating improved cost management.

As of September 30, 2024, the company had cash and cash equivalents of $31 million and an accumulated deficit of $257.2 million.

Debt vs. Equity: How Surrozen, Inc. (SRZN) Finances Its Growth

Debt vs. Equity: How Surrozen, Inc. Finances Its Growth

As of September 30, 2024, Surrozen, Inc. reported total liabilities of $42.3 million, which includes current liabilities of $6.1 million and non-current liabilities primarily related to warrant liabilities of $36.2 million.

Overview of the Company's Debt Levels

Surrozen's debt structure is primarily characterized by warrant liabilities. As of September 30, 2024, the company had no significant long-term debt obligations, reflecting a strategy focused on equity financing rather than accumulating traditional debt. The total current liabilities are comprised of:

• Accounts payable: $276,000
• Accrued and other liabilities: $4.3 million
• Lease liabilities (current portion): $1.5 million

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, Surrozen's total stockholders' equity was reported at $5.7 million. Given the total liabilities of $42.3 million, the debt-to-equity ratio can be calculated as follows:

Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity = $42.3 million / $5.7 million = 7.43

This ratio significantly exceeds the biotechnology industry average, which typically ranges from 0.5 to 2.0, indicating a high reliance on equity financing and warrant liabilities rather than traditional debt.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

Surrozen has not engaged in substantial traditional debt issuance. Instead, it has primarily utilized equity financing through the issuance of common stock and warrants. In April 2024, the company closed a private placement, resulting in net proceeds of approximately $16 million. This issuance included:

• 1,091,981 shares of common stock
• Pre-funded warrants for up to 40,000 shares
• Warrants to purchase 11,136,106 shares

How the Company Balances Between Debt Financing and Equity Funding

Surrozen's strategy has favored equity funding, particularly through private placements and collaboration agreements. The company has not reported any bank loans or traditional debt instruments. This approach helps maintain liquidity while minimizing interest obligations, albeit at the cost of higher equity dilution. The company has indicated that it may seek to raise additional capital through various means, including equity offerings and collaboration agreements, as it continues to navigate its clinical development and operational expenses.

Assessing Surrozen, Inc. (SRZN) Liquidity

Assessing Surrozen, Inc.'s Liquidity

Current and Quick Ratios

The current ratio for Surrozen, Inc. as of September 30, 2024, is calculated as follows:

The quick ratio, which excludes inventory from current assets, is similarly strong, indicating robust liquidity.

Analysis of Working Capital Trends

As of September 30, 2024, Surrozen, Inc. has a working capital of:

This reflects an improvement compared to the previous year, demonstrating the company's ability to cover short-term liabilities with its short-term assets.

Cash Flow Statements Overview

For the nine months ended September 30, 2024, the cash flow from operations, investing, and financing activities are summarized below:

Potential Liquidity Concerns or Strengths

As of September 30, 2024, Surrozen, Inc. has:

• Cash and cash equivalents of $31,012,000.
• Accumulated deficit of ($257,220,000).
• Total liabilities of $42,331,000.

The company expects to continue incurring losses, indicating a potential need for additional capital to sustain operations. However, the recent milestone payment of $10,000,000 received in October 2024 enhances its liquidity position.

Is Surrozen, Inc. (SRZN) Overvalued or Undervalued?

Valuation Analysis

The valuation analysis of the company includes a closer look at key financial ratios, stock performance, and analyst assessments to determine whether the stock is overvalued or undervalued.

Price-to-Earnings (P/E) Ratio

The current P/E ratio cannot be calculated as the company reported a net loss of $35.5 million for the nine months ended September 30, 2024 . This indicates that the company is currently not generating profits, making the P/E ratio irrelevant at this time.

Price-to-Book (P/B) Ratio

As of September 30, 2024, the company's total stockholders’ equity was $5.67 million with total liabilities of $47.998 million . The book value per share is calculated as follows:

• Book Value per Share = Total Stockholders' Equity / Shares Outstanding
• Total Stockholders' Equity = $5.67 million
• Shares Outstanding = 3,249,798
• Book Value per Share = $5.67 million / 3,249,798 = $1.74

Assuming the current stock price is $2.00, the P/B ratio would be:

• P/B Ratio = Stock Price / Book Value per Share = $2.00 / $1.74 = 1.15

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EBITDA for the nine months ended September 30, 2024, is not explicitly provided; however, the company reported a loss from operations of $16.947 million . Without a positive EBITDA, the EV/EBITDA ratio cannot be calculated meaningfully.

Stock Price Trends

Over the last 12 months, the stock has experienced significant volatility. The stock price was approximately $1.50 a year ago and has increased to around $2.00. The following table summarizes the stock price movement:

Dividend Yield and Payout Ratios

The company currently does not pay dividends, hence the dividend yield is 0% .

Analyst Consensus

As of the latest reports, the consensus among analysts is mixed. Some analysts rate the stock as a buy, citing potential growth in collaboration revenues, while others suggest a hold due to ongoing operational losses and need for additional capital .

Key Risks Facing Surrozen, Inc. (SRZN)

Key Risks Facing Surrozen, Inc.

Surrozen, Inc. faces a variety of internal and external risks that could significantly impact its financial health and operational stability. Understanding these risks is crucial for investors.

Industry Competition

The biotechnology sector is highly competitive, with numerous companies vying for market share. Surrozen's ability to advance its product candidates, such as SZN-043 and SZN-1326, is essential for maintaining its competitive edge. The company reported a net loss of $35.5 million for the nine months ended September 30, 2024, compared to a $34.1 million loss for the same period in 2023.

Regulatory Changes

Regulatory approvals are critical for Surrozen’s product candidates. Delays in FDA reviews or changes in regulatory policies could adversely affect the company. Disruptions at the FDA, such as government shutdowns, could slow the review process for product candidates, impacting the timeline for market entry.

Market Conditions

The market dynamics can significantly influence the company’s stock price and ability to raise funds. For instance, fluctuations in the biotechnology sector can lead to volatility in stock prices, potentially resulting in investor losses.

Operational Risks

Operational risks, including the need for significant capital to fund research and development, pose a threat. As of September 30, 2024, Surrozen had cash and cash equivalents of $31.0 million and an accumulated deficit of $257.2 million. Continued losses necessitate additional funding, which may not be available on favorable terms.

Financial Risks

Surrozen's financial health is further challenged by its reliance on external funding sources. The company has entered into an at-the-market sales agreement with Guggenheim Securities, allowing it to issue up to $23.0 million in common stock. However, if the market conditions deteriorate, accessing these funds may become difficult.

Strategic Risks

Strategic decisions regarding the advancement of product candidates also carry risks. The company has discontinued the clinical development of SZN-1326, which could impact future growth and revenue. Additionally, the ability to secure collaborations and partnerships is essential for funding and advancing product development.

Mitigation Strategies

To address these risks, Surrozen has implemented several strategies:

• Focus on advancing key product candidates through clinical trials to secure regulatory approvals.
• Maintain a strong cash position to support ongoing operations and research efforts.
• Engage in strategic collaborations to enhance research capabilities and share financial burdens.

Financial Data Overview

These insights reflect the critical risks that Surrozen, Inc. faces as it navigates the complex landscape of biotechnology development and commercialization.

Future Growth Prospects for Surrozen, Inc. (SRZN)

Future Growth Prospects for Surrozen, Inc.

Analysis of Key Growth Drivers

The growth potential for the company is significantly influenced by its product innovations and market expansions. As of September 30, 2024, the company reported collaboration and license revenue of $10 million, marking a notable increase from the previous year. This revenue growth is attributed to a milestone achieved under its collaboration agreement in September 2024.

Future Revenue Growth Projections and Earnings Estimates

In the nine months ended September 30, 2024, the company incurred a net loss of $35.5 million, compared to a loss of $34.1 million in the same period in 2023. However, total operating expenses decreased by 25%, from $36.1 million to $26.9 million, indicating improved operational efficiency.

For the remainder of 2024 and into 2025, analysts project that revenue may continue to increase as the company advances its clinical development and potentially expands its pipeline. The anticipated revenue growth is tied to the successful completion of ongoing clinical trials and new product introductions.

Strategic Initiatives or Partnerships That May Drive Future Growth

The company is actively seeking to enhance its strategic partnerships. In April 2024, it entered a private placement that raised approximately $16 million through the issuance of stock and warrants. This influx of capital is expected to support ongoing research and development efforts. Furthermore, the company has established a research collaboration agreement, which allows for shared resources and expertise, potentially accelerating product development timelines.

Competitive Advantages That Position the Company for Growth

One of the key competitive advantages for the company lies in its proprietary Wnt therapeutics platform, which focuses on tissue repair mechanisms. As of September 30, 2024, the company had $31 million in cash and cash equivalents, providing a solid financial foundation for ongoing projects. Additionally, the company has a robust intellectual property portfolio that protects its innovative therapies, enhancing its market position and attractiveness to potential partners.

Conclusion

Overall, the company’s focus on innovation, strategic partnerships, and a solid financial position positions it well for future growth amid ongoing challenges in the biotech industry.

Updated on 16 Nov 2024

Resources:

1. Surrozen, Inc. (SRZN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Surrozen, Inc. (SRZN)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Surrozen, Inc. (SRZN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.