# Foghorn Therapeutics Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Foghorn Therapeutics Inc.](/companies/fhtx.md) (CIK 1822462)
- Form: 10-Q
- Filed: 2022-05-09
- Accepted by EDGAR: May 9, 2022, 20:22 ET
- Period: 2022-03-31
- Accession: 0001628280-22-013333
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1822462/000162828022013333/fhtx-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1822462/000162828022013333/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $3.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2022-01-01 to 2022-03-31 | $24.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$27.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:InterestExpense |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$26.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.65 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.65 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 41,370,186 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $271.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $247.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $213.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $429.8m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $488.3m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $48.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $415.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-03-31 | $72.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,717 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.*

### Overview

We are a clinical stage biotechnology company pioneering a new class of medicines that modulate gene expression through selectively targeting the chromatin regulatory system, an untapped opportunity for therapeutic intervention. Our proprietary Gene Traffic Control platform gives us an integrated, mechanistic understanding of how the various components of the chromatin regulatory system interact, allowing us to identify, validate and potentially drug targets within the system. Breakdowns in the chromatin regulatory system are associated with over 50 percent of all cancers. Addressing these breakdowns could potentially provide therapies for over 2.5 million patients globally. Consequently, we are initially focused in oncology. We are developing FHD-286, a selective, allosteric ATPase inhibitor that is currently being evaluated in two separate Phase 1 studies in (i) metastatic uveal melanoma and (ii) relapsed and/or refractory acute myeloid leukemia, or AML and myelodysplastic syndrome, or MDS. We are developing FHD-609, a targeted protein degrader that is currently being evaluated in a Phase 1 study in synovial sarcoma. Our vision is to use our Gene Traffic Control platform to discover and develop drugs in oncology and other therapeutic areas, including virology, autoimmune disease and neurology.

Since our inception in October 2015, we have focused substantially all of our resources on building our Gene Traffic Control platform, organizing and staffing our company, business planning, raising capital, conducting discovery and research activities, protecting our trade secrets, filing patent applications, identifying potential product candidates, undertaking preclinical studies and clinical trial activities, establishing arrangements with third parties for the manufacture of initial quantities of our product candidates and component materials and initiating two strategic collaborations. We do not have any products approved for sale and have not generated any revenue from product sales.

On October 27, 2020, we completed our initial public offering, or IPO, pursuant to which we issued and sold 7,500,000 shares of our common stock at a public offering price of $16.00 per share, resulting in net proceeds of $107.9 million, after deducting underwriting discounts and commissions and other offering expenses. On November 19, 2020, we issued and sold an additional 951,837 shares of common stock at the IPO price of $16.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $14.2 million after deducting underwriting discounts and commissions. Prior to our IPO, we funded our operations with proceeds from sales of preferred stock, term loans and an upfront payment of $15.0 million we received in July 2020 under our collaboration agreement with Merck Sharp & Dohme Corp., or Merck.

On December 10, 2021, we entered into a collaboration agreement, or the Lilly Collaboration Agreement, with Eli Lilly and Company, or Lilly, for which we received an upfront payment of $300.0 million in January 2022 (see Note 8 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). Concurrent with the Lilly Collaboration Agreement, we also entered into the Lilly SPA and issued and sold Lilly 4,000,000 shares of our common stock at a price of $20.00 per share, resulting in net proceeds of $80.0 million, of which $42.2 million was allocated to equity upon the issuance of the Company’s common stock.

We have incurred significant operating losses since our inception. For the three months ended March 31, 2022 and the year ended December 31, 2021, we reported net losses of $26.9 million and $101.3 million, respectively. As of March 31, 2022, we had an accumulated deficit of $291.2 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more product candidates we are developing and may develop.

We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

- advance our FHD-286 and FHD-609 product candidates and continue our preclinical development of product candidates from our current research programs;
- identify additional research programs and additional product candidates;
- initiate preclinical testing for any new product candidates we identify and develop;
- obtain, maintain, expand, enforce, defend and protect our trade secrets and intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio;
- hire additional research and development personnel;
- add operational, legal, compliance, financial and management information systems and personnel to support our research, product development and operations;
- expand the capabilities of our platform;
- acquire or in-license product candidates, intellectual property and technologies;
- operate as a public company;
- seek marketing approvals for any product candidates that successfully complete clinical trials; and
- ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval.

We will not generate revenue from product sales unless and until we successfully commercialize one of our product candidates, after completing clinical development and obtaining regulatory approval. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution. Further, we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and collaborations or licensing arrangements and our collaboration agreements with Merck and Lilly. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back our development or commercialization plans for one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

### COVID-19

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization, and to date the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and are difficult to predict. While we continue to conduct our research and development activities, the COVID-19 pandemic may cause disruptions that affect our ability to initiate and complete preclinical studies, ongoing and future clinical trials or to procure items that are essential for our research and development activities.

We plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our business operations. In an effort to provide a safe work environment for our employees, we have, among other things, increased the cadence of sanitization of our office and lab facilities, implemented various social distancing measures in our office and labs including replacing in-person meetings with virtual interactions, and are providing personal protective equipment for our employees present in our office and lab facilities. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.

### Components of Our Results of Operations

### Collaboration Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or licenses with third parties, we may generate revenue in the future from product sales, milestone payments under our existing collaboration agreements or payments from other license agreements that we may enter into with third parties.

In December 2021, we entered into a strategic collaboration with Loxo Oncology at Lilly, a research and development group of Eli Lilly and Company, to create novel oncology medicines by applying Foghorn’s proprietary Gene Traffic Control platform. The collaboration includes a co-development and co-commercialization agreement for the aforementioned selective BRM oncology program and an additional undisclosed oncology target. In addition, the collaboration includes three additional discovery programs using Foghorn’s proprietary Gene Traffic Control platform. Under the terms of the collaboration, Foghorn received upfront consideration of $300.0 million in cash pursuant to the Lilly Collaboration Agreement, together with an equity investment by Lilly of $80.0 million in shares of Foghorn common stock pursuant to the Lilly SPA.

For the BRM-selective program and the additional undisclosed target program, Foghorn will lead discovery and early research activities, while Lilly will lead development and commercialization activities with participation from Foghorn in operational activities and cost sharing. Foghorn and Lilly will share 50/50 in the U.S. economics, and Foghorn is eligible to receive royalties on ex-U.S. sales starting in the low double-digit range and escalating into the twenties based on revenue levels.

For the additional discovery programs, Foghorn will lead discovery and early research activities. Foghorn may receive up to a total of $1.3 billion in potential development and commercialization milestones. Additionally, Foghorn will have an option to participate in a percentage of the U.S. economics and is eligible to receive tiered royalties from the mid-single digit to low-double digit range on sales outside the U.S. that may be exercised after the successful completion of the dose-finding toxicity studies.

We cannot provide assurances as to the timing of future milestones, royalty payments and economics associated with the strategic collaboration with Loxo Oncology at Lilly.

We recognized total deferred revenue of $337.8 million related to the Lilly Collaboration Agreement and the Lilly SPA, which included the $300.0 million upfront payment as well as $37.8 million allocated to deferred revenue from the gross proceeds of the Lilly SPA to be recognized over the performance period. During the three months ended March 31, 2022, we recognized $3.8 million of revenue under the Lilly Collaboration Agreement and, as of March 31, 2022, we had $333.3 million of deferred revenue related to the above mentioned upfront payment and revenue allocation from the Lilly SPA remaining on our condensed consolidated balance sheets.

In July 2020, we entered into a strategic research collaboration and license agreement, or the Merck Collaboration Agreement, with Merck, pursuant to which we will apply our proprietary Gene Traffic Control platform to discover and develop novel therapeutics. Under the Merck Collaboration Agreement, we granted Merck exclusive global rights to develop and commercialize drugs that target dysregulation of a single transcription factor. Under the terms of the Merck Collaboration Agreement, we received a nonrefundable upfront payment of $15.0 million from Merck, and are eligible to receive up to $245.0 million upon achievement of specified research, development and regulatory milestones by any product candidate generated by the collaboration, and up to $165.0 million upon achievement of specified sales-based milestones per approved product from the collaboration, if any, as well as royalties on sales of any approved product from the collaboration. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.

We record revenue over the research term as we satisfy our performance obligation under the Merck Collaboration Agreement. Accordingly, the upfront payment of $15.0 million is being recognized as revenue using the cost-to-cost method, which we believe best depicts the transfer of control to the customer over time. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified single performance obligation. We expect revenue to fluctuate as the achievement of milestones becomes probable and as our efforts to satisfy our performance obligation vary from period to period. In estimating the total costs to satisfy our performance obligation pursuant to the Merck Collaboration Agreement, we are required to make significant estimates including an estimate of the number of transcription factor substitutions and the expected time and expected costs to fulfill the performance obligation. The cumulative effect of revisions to the total estimated costs to complete our performance obligation will be recorded in the period in which the changes are identified, and amounts can be reasonably estimated. While such revisions will have no impact on our cash flows, a significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. In June 2021, we re-evaluated our estimates related to the Merck Collaboration Agreement resulting in a reclassification of $1.9 million from short-term deferred revenue to long-term deferred revenue, net of current portion on the Company's condensed consolidated balance sheets. During the three months ended March 31, 2022 and 2021, we recognized $0.1 million and $0.3 million, respectively, of revenue under the Merck Collaboration Agreement and, as of March 31, 2022, we had $13.8 million of deferred revenue related to the upfront payment remaining on our condensed consolidated balance sheets.

### Operating Expenses

Our operating expenses are comprised of research and development expenses and general and administrative expenses.

#### Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and progressing our programs, which include:

- personnel-related costs, including salaries, benefits and stock-based compensation expense, for employees engaged in research and development functions;
- expenses incurred in connection with our research programs and preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants and contractors and contract research organizations, or CROs;
- the cost of manufacturing drug substance and drug product for use in our research and preclinical studies and clinical trials under agreements with third parties, such as consultants and contractors and contract development and manufacturing organizations, or CDMOs;
- laboratory supplies and research materials;
- facilities, depreciation and amortization and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and
- payments made under third-party licensing agreements.

We track our direct external research and development expenses on a program-by-program basis. These consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, CDMOs, and CROs in connection with our preclinical, clinical and manufacturing activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform and, as such, are not separately classified.

We expect that our research and development expenses will increase substantially as we advance our programs into clinical development and expand our discovery, research and preclinical activities in the near term and in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any product candidates we may develop. A change in the outcome of any number of variables with respect to product candidates we may develop could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidates we may develop.

#### General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for employees engaged in executive, legal, finance and accounting and other administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, investor and public relations and accounting and audit services as well as direct and allocated facility-related costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our programs and platform. We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs and investor and public relations expenses associated with operating as a public company.

### Other Income (Expense)

#### Interest Expense

Interest expense consists of interest expense associated with outstanding borrowings under our loan agreements as well as the amortization of debt discount associated with such agreements.

#### Interest Income and Other Income (Expense), Net

Interest income consists of interest earned on our invested cash balances. Other income (expense) consists of sublease income and miscellaneous expense unrelated to our core operations.

### Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

As of December 31, 2021, we had federal and state net operating loss carryforwards of $228.9 million and $206.0 million, respectively, which may be available to offset future taxable income. The federal net operating loss carryforwards include $12.5 million which expire at various dates beginning in 2035 and $216.4 million which carryforward indefinitely but in some circumstances may be limited to offset 80% of annual taxable income. The state net operating loss carryforwards expire at various dates beginning in 2036. As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $6.1 million and $4.1 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2036 and 2031, respectively. Due to our history of cumulative net losses since inception and uncertainties surrounding our ability to generate future taxable income, we have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

### Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as well as elsewhere in this Quarterly Report on Form 10-Q, we believe that revenue recognition and accrued research and development expenses are those most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements. There have been no material changes to our critical accounting policies and estimates detailed in the C*ritical Accounting Policies and Significant Judgements* section of *Item 7. Managements Discussion and Analysis of financial Condition and Results of Operations* in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

### Results of Operations

### Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

*(in thousands)*

|  | Three Months Ended March 31, 2022 | 2021 | Change |
| --- | ---: | ---: | ---: |
| Collaboration revenue | $3,920 | $286 | $3,634 |
| Operating expenses: |  |  |  |
| Research and development | 24,508 | 18,726 | 5,782 |
| General and administrative | 7,216 | 4,690 | 2,526 |
| Total operating expenses | 31,724 | 23,416 | 8,308 |
| Loss from operations | (27,804) | (23,130) | (4,674) |
| Other income (expense): |  |  |  |
| Interest expense | — | (486) | 486 |
| Interest income and other income (expense), net | 890 | 630 | 260 |
| Total other income, net | 890 | 144 | 746 |
| Net loss | $(26,914) | $(22,986) | $(3,928) |

#### Collaboration Revenue

Collaboration revenue was $3.9 million for the three months ended March 31, 2022, compared to $0.3 million for the three months ended March 31, 2021. The increase in collaboration revenue is attributed to the following:

- an increase in Lilly collaboration revenue recognition of $3.8 million due to work performed pursuant to the Lilly Collaboration Agreement entered into in December 2021; partially offset by
- a decrease in Merck collaboration revenue recognition of $0.2 million due primarily to more work completed under the Merck Collaboration Agreement in March 31, 2021 compared to the work completed in March 31, 2022.

#### Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021:

*(in thousands)*

| Research and development program expenses: | Three Months Ended March 31, 2022 | 2021 | Change |
| --- | ---: | ---: | ---: |
| FHD-286 | $4,475 | $1,938 | $2,537 |
| FHD-609 | 2,319 | 1,398 | 921 |
| Platform, research and discovery, and unallocated expenses: |  |  |  |
| Platform and other early stage research external costs | 5,164 | 4,458 | 706 |
| Personnel related (including stock-based compensation) | 7,911 | 6,224 | 1,687 |
| Facility related and other | 4,639 | 4,708 | (69) |
| Total research and development expenses | $24,508 | $18,726 | $5,782 |

Research and development expenses were $24.5 million for the three months ended March 31, 2022, compared to $18.7 million for the three months ended March 31, 2021. The increase is attributed to the following:

- an increase in FHD-286 program costs of $2.5 million as the Company initiated enrollment in its Phase 1 clinical trials in uveal melanoma and AML during the second quarter of 2021;
- an increase in personnel-related costs of $1.7 million, including a $0.5 million increase in stock-based compensation expense, due primarily to increased headcount in our research and development function;
- an increase in our FHD-609 program costs of $0.9 million as the Company initiated enrollment in a Phase 1 clinical trial in the second half of 2021 in Synovial Sarcoma;
- an increase in platform and other early stage research costs of $0.7 million, which was due to continued investment and development of our platform and early research pipeline.

#### General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2022 and 2021:

*(in thousands)*

|  | Three Months Ended March 31, 2022 | 2021 | Change |
| --- | ---: | ---: | ---: |
| Personnel related (including stock-based compensation) | $4,070 | $2,483 | $1,587 |
| Professional and consulting | 1,712 | 1,099 | 613 |
| Facility related and other | 1,434 | 1,108 | 326 |
| Total general and administrative expenses | $7,216 | $4,690 | $2,526 |

General and administrative expenses were $7.2 million for the three months ended March 31, 2022, compared to $4.7 million for the three months ended March 31, 2021. The increase is attributed to the following:

- an increase in personnel-related costs of $1.6 million, including a $0.9 million increase in stock-based compensation expense, which was a result of an increase in headcount in our general and administrative function to support our business;
- an increase in professional and consulting costs of $0.6 million, which was due to increased audit, tax, and consulting services associated with being a publicly traded company; and
- an increase in facility related and other expense of $0.3 million which was primarily due to increased corporate expenses, maintenance, and non-capital equipment;

#### Other Income (Expense)

The company did not record any interest expense for the three months ended March 31, 2022, compared to $0.5 million for the three months ended March 31, 2021. The decrease in interest expense as of March 31, 2022 was due to the payoff of the Oxford debt in December 2021, resulting in no interest expense compared to March 31, 2021.

Interest income and other income (expense), net was $0.9 million, compared to $0.6 million for the three months ended March 31, 2022. The increase in interest and other income (expense), net as of March 31, 2022 was due to an increase of $0.2 million of interest income and an increase of $0.1 million sublease income compared to March 31, 2021.

### Liquidity and Capital Resources

Since our inception in October 2015, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we support our continued research activities and development of our programs and platform. Through March 31, 2022, we have funded our operations with proceeds from our IPO in October 2020, sales of preferred stock, term loans, an upfront payment of $15.0 million we received in July 2020 under the Merck Collaboration Agreement, proceeds we received in December 2021 under the Lilly SPA of $80.0 million and an upfront payment of $300.0 million we received from the Lilly Collaboration Agreement. As of March 31, 2022, we had cash, cash equivalents and marketable securities of $424.7 million.

### Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

*(in thousands)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $271,534 | $(23,147) |
| Net cash used in investing activities | (159,409) | (3,261) |
| Net cash provided by financing activities | 384 | 62 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $112,509 | $(26,346) |

#### Operating Activities

During the three months ended March 31, 2022, operating activities provided $271.5 million of cash, resulting from our changes in our operating assets and liabilities of $293.2 million and net non-cash charges of $5.2 million partially offset by a net loss of $26.9 million. Net cash provided by changes in our operating assets and liabilities for the three months ended March 31, 2022 consisted primarily of the $300.0 million of cash received related to our collaboration receivable, an increase of $1.3 million in accounts payable and a decrease of $0.2 million of prepaid expenses and other current assets partially offset by a $3.9 million decrease in deferred revenue resulting from the recognition of revenue on the upfront payments received in connection with our collaboration agreements, a $2.6 million decrease in accrued expenses and other liabilities and a $1.8 million decrease in operating lease liabilities.

During the three months ended March 31, 2021, operating activities used $23.1 million of cash, resulting from our net loss of $22.9 million, partially offset by net non-cash charges of $3.8 million and net cash provided by changes in our operating assets and liabilities of $4.0 million. Net cash provided by changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $3.4 million decrease in accounts payable and accrued expenses, an increase of $0.3 million in prepaid expenses and other current assets and a decrease of $0.3 million in deferred revenue resulting from the recognition of revenue on the upfront payment received in connection with our Collaboration Agreement.

Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to growth in our business, the advancement of our research programs and the timing of vendor invoicing and payments.

#### Investing Activities

During the three months ended March 31, 2022 net cash used in investing activities was $159.4 million due to $212.3 million of purchases of marketable securities and $0.2 million in purchases of property and equipment partially offset by $53.1 million of maturities of marketable securities.

During the three months ended March 31, 2021 net cash used in investing activities was $3.3 million due to $26.5 million of maturities of marketable securities and $1.8 million in purchases of property and equipment partially offset by $25.0 million of sales of marketable securities. Property and equipment purchases for the three months ended March 31, 2021 were primarily related to leasehold improvements for our new facility in Cambridge, Massachusetts.

#### Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities was $0.4 million consisting of net proceeds from the exercise of common stock options and the employee stock purchase plan.

During the three months ended March 31, 2021, net cash provided by financing activities was $0.1 million consisting of net proceeds from the exercise of common stock options for both periods.

### Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities, initiate clinical trials for our product candidates in development and continue to fund on-going clinical trials. As of the issuance date of these interim condensed consolidated financial statements, we expect that our cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements for at least twelve months. We have based these estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be inaccurate. We could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing sooner than planned, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

If we are unable to raise sufficient capital as and when needed, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate we may develop, or be unable to expand our operations or otherwise capitalize on our business opportunities. If we raise additional funds through collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

See “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for additional risks associated with our substantial capital requirements.

### Off-balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

### Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

## Market risk

As filed, 215 characters.

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

## Controls and procedures

As filed, 2,195 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal Accounting and Financial Officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures as of period end. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 303 characters.

For a discussion of potential risks or uncertainties, please see “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Filed May 9, 2022.
Source: SEC EDGAR, the filing index for accession 0001628280-22-013333. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.