Scholar Rock Holding Corp
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
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FY2024 · Filed Feb 27, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Scholar Rock Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Scholar Rock Holding Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
External Prepaid and Accrued Research and Development Expenses
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| Description of the Matter | As shown in Notes 5 and 7 to the financial statements, the Company’s external prepaid research and development expenses and accrued research and development expenses totaled $7.7 million and $12.1 million, respectively, at December 31, 2024. As discussed in Note 2 to the consolidated financial statements, the Company’s accrued and prepaid external research and development expenses are recognized based on various inputs, including an evaluation of the progress achieved to complete specific tasks based on communication with internal and external personnel, open contracts and purchase orders, invoices received, contracted costs, and other information provided to the Company by its service providers based on their actual costs |
| incurred. Payments for these activities are due based on the terms of individual arrangements, which may differ from the pattern of costs incurred. Accrued expenses are reflected on the consolidated balance sheet when costs incurred exceed payments made while prepaid expenses are reflected on the consolidated balance sheet when payments made exceed the costs incurred. | ||
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| | | Auditing the Company’s accrued and prepaid external research and development expenses is especially challenging in the context of our audit due to the estimation uncertainty associated with services provided but not yet invoiced. Specifically, the amount of research and development expenses incurred is sensitive to estimates of the progress of the studies, clinical trials or other activities and the associated cost of such services. Additionally, due to the duration of certain of the Company’s ongoing research and development activities and the timing of invoicing received from third parties, the actual amounts incurred may not be known at the time the financial statements are issued, further adding to the estimation uncertainty. |
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| How We Addressed the Matter in Our Audit | | To test accrued and prepaid external research and development expenses, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used to calculate accrued and prepaid external research and development expenses, as well as evaluating the assumptions and estimates used by management to measure progress of studies, clinical trials or other activities. To assess the extent of services incurred, we assessed the progress of clinical trials with the Company’s research and development personnel that oversee the clinical trials and obtained information from service providers regarding costs incurred to date. We also tested subsequent invoices received and inspected the Company’s contracts with service providers and any pending change orders to assess the effect on the accrued or prepaid external research and development expenses. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
February 27, 2025
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