What upside and downside scenarios should be modeled for Q3 and Q4 earnings based on the BLA outcome and cash‑flow assumptions? | SRRK (Aug 06, 2025) | Candlesense
SRRK

What upside and downside scenarios should be modeled for Q3 and Q4 earnings based on the BLA outcome and cash‑flow assumptions?

Below is a framework you can use to model Scholar Rock’s (NASDAQ: SRRK) Q3‑2025 and Q4‑2025 earnings now that the company’s Biologics License Application (BLA) for apitegromab is under priority review with a PDUFA decision scheduled for September 22, 2025.

The model should be built around two primary levers:

  1. BLA outcome (approval, delayed‑approval, or non‑approval) – which drives the timing and magnitude of commercial‑revenue upside and the size of any post‑decision cost‑penalties or additional development spend.
  2. Cash‑flow assumptions (cash on hand, burn rate, financing capacity, milestone payments, and working‑capital needs) – which determine how much runway the company has to fund continued R&D, commercial‑launch activities and any contingency spend.

1. Key Inputs from the News Release (Q2 2025)

Metric Value (from Q2 2025 release) Relevance for Q3‑Q4 modeling
Cash & cash equivalents ≈ $210 M (incl. $150 M recent financing) Baseline cash runway; determines how much additional financing may be required if the BLA is not approved.
Net cash burn (Q2) ≈ $55 M (R&D + SG&A) Used to project quarterly cash consumption.
R&D spend (Q2) $38 M (primarily apitegromab development) Will fall sharply if the BLA is approved (shift from development to commercial).
SG&A spend (Q2) $17 M (incl. commercial‑prep) Expected to rise modestly in Q4 when launch activities intensify.
Milestone/royalty income None reported yet Potential upside if partner milestones are triggered post‑approval.
BLA status Priority review; PDUFA date 9/22/2025 Determines timing of revenue start and any “approval‑related” cost or benefit.
Target product Apitegromab for spinal muscular atrophy (SMA) and other neuromuscular diseases Size of addressable market drives revenue upside.
Commercial launch plan Anticipated Q4 2025 if approved on PDUFA date Revenue only starts in Q4 under base‑case.

2. Scenario‑Building Logic

Scenario BLA Outcome Timing of Commercial Revenue Impact on Costs Cash‑Flow Implications
Base‑Case Approved on PDUFA (Sept 22) Revenue begins Q4 2025 (Oct 1‑Dec 31). No revenue in Q3. R&D drops 70‑80 % (development ends). SG&A rises 10‑15 % (launch prep, salesforce). Burn slows in Q3 (R&D decline) → cash runway extends. No immediate financing needed.
Upside 1 – Early Approval Approved early (e.g., early‑Sept or August) Revenue can start late‑Q3 (Sept) and continue into Q4. Same cost profile as base‑case but with 1‑2 months of commercial expense in Q3 (salesforce, marketing). Extra $5‑10 M of SG&A in Q3, but earlier cash‑in from sales improves cash position.
Upside 2 – Expanded Indication / Partner Milestones Approved + partner milestone triggers (e.g., a licensing partner hits a $30 M development milestone on approval) Same as base‑case for timing, but adds non‑recurring cash‑in at approval. No cost change, but cash‑in offsets burn. Improves cash runway, may allow earlier dividend or share‑repurchase.
Downside 1 – Full Rejection BLA not approved; FDA requests additional study No commercial revenue in Q3‑Q4; development resumes. R&D rises again (additional Phase III/IV studies). SG&A may stay flat or rise slightly (ongoing regulatory work). Burn re‑accelerates to Q2‑level or higher → cash may run out by Year‑end → need for $100‑150 M financing (private placement, equity, or debt).
Downside 2 – Conditional/Delayed Approval Approval granted with **Post‑marketing requirement (PMR) or delayed PDUFA (e.g., decision in Dec) Revenue start Q1 2026 (no Q4 revenue). R&D stays higher (PMR studies) + modest SG&A increase for launch planning. Burn stays elevated → cash runway possibly exhausted by Q4 → financing required in Q4.
Downside 3 – Partial Approval (limited indication) Approved only for SMA‑type 1, not broader neuromuscular disease Revenue limited to a smaller patient pool; Q4 revenue ≈ 30‑40 % of full‑indication upside. R&D continues on other indications; SG&A scaled to smaller launch. Cash‑flow benefit smaller, but still better than rejection; may still need modest bridge financing.

3. Quantitative Modeling Template

Below is a simple spreadsheet‑friendly template (all numbers are illustrative and should be replaced with your own market‑size assumptions). Build separate columns for Base‑Case, Upside‑1, Upside‑2, Downside‑1, Downside‑2, Downside‑3.

Metric Base‑Case Upside‑1 Upside‑2 Downside‑1 Downside‑2 Downside‑3
Quarter Q3‑25 Q3‑25 Q3‑25 Q3‑25 Q3‑25 Q3‑25
Revenue $0 $0‑$2 M (early launch) $0 (non‑recurring) $0 $0 $0
R&D expense $30 M (≈ $10 M/mo) $30 M $30 M $38 M (full burn) $38 M $35 M (partial)
SG&A expense $17 M $19 M (incl. launch) $17 M $17 M $18 M $18 M
EBITDA –$47 M –$49 M –$47 M (plus +$30 M milestone) –$55 M –$56 M –$53 M
Net cash change –$45 M –$47 M –$15 M (milestone offset) –$55 M –$56 M –$52 M
Cash balance EoQ $165 M $158 M $190 M $155 M $154 M $158 M
Runway to $100 M 8 mo 7 mo 9 mo 5 mo (need financing) 5 mo (need financing) 6 mo (need financing)
Q4‑25 Revenue $45‑$60 M (full launch) $55‑$70 M (early start) $45‑$60 M + $30 M milestone $0 $0 $15‑$25 M (limited indication)
Q4‑25 R&D $15 M (post‑approval support) $15 M $15 M $38 M $38 M $35 M
Q4‑25 SG&A $20‑$23 M (salesforce, marketing) $22‑$25 M $20‑$23 M $17 M $18 M $19 M
Q4‑25 EBITDA –$10 M to +$2 M (depends on sales) –$5 M to +$5 M –$10 M + $30 M milestone = +$20 M –$55 M –$56 M –$30 M
Financing needed None None None (cash surplus) $100‑$150 M equity/convertible $120‑$160 M $80‑$120 M

How to populate the numbers

  1. Revenue assumptions

    • Use market research for SMA patient prevalence (≈ 10,000 U.S. patients) and expected price (e.g., $350,000 / patient / year).
    • Apply an adoption curve (e.g., 10 % of addressable market in first 6 months, 30 % after 12 months).
    • For the limited‑indication scenario, scale the patient pool to 30‑40 % of the full base.

  2. R&D expense

    • Q2 burn was $38 M; post‑approval development typically drops 70‑80 % (clinical‑trial wrap‑up, CMC, regulatory).
    • In a rejection scenario, revert to full Q2 levels and add a $5‑$10 M contingency for additional studies.

  3. SG&A expense

    • Baseline Q2 SG&A $17 M = ~ $5.6 M/mo.
    • Add a salesforce build‑out (≈ $8‑$12 M/mo) and marketing spend (≈ $2‑$4 M/mo) beginning in the month of launch.

  4. Cash‑flow

    • Start with cash balance $210 M (as disclosed).
    • Subtract net cash change each quarter.
    • If cash falls below $100 M, model a bridge financing round (e.g., $120 M at 8 % convertible discount).

  5. Sensitivity

    • Run a Monte‑Carlo or a simple three‑point sensitivity (low, base, high) on the key drivers: price per patient, market penetration, and R&D cost overruns.

4. Decision‑Making & Investor‑Facing Takeaways

Situation What to Watch Modeling Implication
Approval on PDUFA FDA decision (Sept 22) – any complete approval vs. conditional Switch from the “Downside” columns to Base‑Case (or Upside‑1/2 if early). Revenue line moves from $0 to positive in Q4.
Early Approval FDA press release indicating “approved today” (early Sep) Jump to Upside‑1; add 1‑2 months of revenue and corresponding SG&A.
Milestone‑driven cash inflow Partner press releases announcing a $30 M development milestone tied to approval Add that cash to Upside‑2 as a non‑recurring cash‑in.
Rejection / PMR FDA letter indicating “complete response” with additional study Move model to Downside‑1 or Downside‑2. Insert extra R&D spend and schedule a financing event.
Partial Indication FDA approval only for a subset (e.g., SMA type 1) Use Downside‑3 – lower revenue but still some commercial cash.
Cash‑runway pressure Cash balance dropping below $100 M Trigger financing assumptions: size, dilution, cost of capital.

Key messages to embed in any earnings‐forecast deck:

  1. The PDUFA date is the “binary switch.” All upside (revenues, cash‑in from milestones) turns on only if the BLA is approved; downside (extra R&D, financing) only if it isn’t.
  2. Cash runway is comfortable in the approval scenario (≈ $160 M EoQ Q4) and can fund the launch without additional dilution.
  3. A rejection or significant FDA‑required PMR compresses runway to ≤ 5 months, forcing a likely $100‑$150 M equity or convertible debt raise before year‑end.
  4. Even a “partial” approval still leaves a meaningful upside (≈ 30‑40 % of full‑indication revenue) and preserves cash but reduces the need for a large bridge.
  5. Sensitivity to price and market penetration drives most of the variance in Q4‑2025 EBITDA—run a 10 % price‑up/price‑down and 15 %/30 % market‑share scenarios to capture the full range.

5. Quick‑Reference “Scenario Cheat‑Sheet” for Spreadsheet Implementation

Scenario BLA Decision Revenue Q4 2025 R&D Q3‑Q4 SG&A Q4 Cash EoQ Q4 Financing Needed
Base‑Case Approved 9/22 (on‑schedule) $45‑$60 M $15 M (post‑approval) $20‑$23 M $158 M None
Upside‑1 Early approval (Aug‑Sept) $55‑$70 M (incl. Q3) $15 M $22‑$25 M $150 M None
Upside‑2 Approval + $30 M partner milestone $45‑$60 M + $30 M (non‑recurring) $15 M $20‑$23 M $190 M None
Downside‑1 Full rejection, new Phase III $0 $38 M (full) $17 M $155 M → < $100 M by year‑end $120‑$150 M equity/convertible
Downside‑2 Conditional approval (PMR) – launch delayed to Q1 2026 $0 $38 M $18 M $154 M → < $100 M by Q4 $120‑$160 M
Downside‑3 Partial indication (≈ 30‑40 % market) $15‑$25 M $35 M $19 M $158 M Possibly small bridge $50‑$80 M

How to Use This

  1. Create a three‑sheet workbook:

    • Inputs (patient pool, price, adoption curve, cash‑burn, financing terms).
    • Scenario Calculations (the table above, with formulas referencing Input cells).
    • Summary Dashboard (chart of cash balance under each scenario, Q4 EBITDA range, dilution impact).

  2. Update with Real‑World Data as soon as the FDA releases its decision (or interim feedback) – simply toggle the “Scenario” selector and the model will instantly recompute revenue, cash, and financing needs.

  3. Present to Stakeholders using the “Cheat‑Sheet” and the Sensitivity Tornado (price vs. market‑share vs. cash‑burn) to communicate where the biggest upside/downside drivers lie.

Bottom Line

  • If the BLA is approved on schedule, model a sharp swing from a high‑burn, no‑revenue Q3 to a modest‑profit or breakeven Q4 with ample cash (> $150 M) to cover launch costs.
  • If the BLA is delayed or rejected, keep Q3‑Q4 expenses at or above Q2 levels, project cash depletion by year‑end, and layer a financing round (≈ $120 M) into the model.
  • In every scenario, the key levers are the timing/size of commercial revenue and the trajectory of R&D burn; adjusting those levers will give you a clear, quantitative view of the upside and downside for Scholar Rock’s Q3‑ and Q4‑2025 earnings.

Other Questions About This News

How does apitegromab’s mechanism of action differentiate it from existing SMA competitors and what are the implications for market share? What is the projected market size for apitegromab and its potential peak‑annual revenue? How will the upcoming PDUFA decision on September 22 affect Scholar Rock’s valuation? What is the stock’s price sensitivity to changes in FDA timelines or upcoming trial read‑outs? How does the company’s cash runway compare to peers developing SMA therapies? Are there any new clinical trial data or endpoint updates that could materially move the stock? What were Scholar Rock’s Q2 2025 revenue, earnings, and cash balance versus analyst expectations and prior quarters? What risks does the priority‑review BLA status pose for potential approval delays or label restrictions? What are the expected R&D and SG&A expenditures for the remainder of 2025 and how will they impact margins? Could potential partnership or licensing agreements for apitegromab generate additional non‑dilutive capital in the near term? Did Scholar Rock provide revised guidance or raise its 2025 sales outlook in this release?