Foghorn Therapeutics Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Foghorn is a clinical-stage biotechnology company developing medicines targeting the chromatin regulatory system. It has no approved products and reported no product-sales revenue; revenue came from collaboration agreements.
Financial performance
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Collaboration revenue | $5.6 million | $4.5 million | $10.9 million | $8.4 million |
| Research and development expense | $29.2 million | $26.0 million | $59.2 million | $50.5 million |
| General and administrative expense | $8.4 million | $7.7 million | $17.0 million | $14.9 million |
| Operating loss | $32.1 million | $29.2 million | $65.4 million | $57.0 million |
| Net loss | $29.5 million | $27.3 million | $60.0 million | $54.2 million |
| Basic and diluted net loss per share | $0.70 | $0.66 | $1.43 | $1.31 |
Higher collaboration revenue reflected increased work under the Lilly and Merck agreements. Expenses rose, primarily from platform and early-stage research investment and increased headcount. Lower FHD-286 clinical-trial spending partly offset the increase in R&D. Higher interest income—$5.5 million for the first half versus $1.5 million—partly offset operating losses. The filing does not present a meaningful gross margin measure.
Liquidity and balance sheet
- At June 30, 2023, cash and cash equivalents were $57.7 million and marketable securities were $226.6 million, totaling $284.3 million; cash, cash equivalents and restricted cash totaled $59.4 million.
- First-half operating cash use was $63.4 million. Investing activities provided $68.6 million, mainly from marketable-security maturities, and financing activities provided $0.2 million. Cash, cash equivalents and restricted cash increased $5.5 million over the period.
- Total liabilities were $388.9 million, including $325.9 million of deferred revenue and $47.9 million of operating lease liabilities. The balance sheet lists no borrowings. Stockholders’ deficit was $49.4 million, versus equity of $0.1 million at December 31, 2022; accumulated deficit was $433.1 million.
- Management expects available cash, cash equivalents and marketable securities to fund operating and capital requirements for at least 12 months from the financial statements’ issuance date. The company expects continued losses and says additional funding will be needed.
Programs, outlook and risks
- The FDA lifted the full clinical hold on the FHD-286 AML/MDS Phase 1 study on June 1, 2023. The company planned to start a Phase 1 combination study in relapsed or refractory AML with decitabine or low-dose cytarabine in Q3 2023. The prior hold followed suspected fatal differentiation-syndrome cases.
- Foghorn reported FHD-286 uveal melanoma Phase 1 data in June, describing safety and tolerability findings, but said it did not plan to advance the program independently in that indication.
- FHD-609 enrollment was paused after a grade 4 QTc-prolongation event; the FDA placed the study on partial clinical hold. The dose-escalation portion was complete and a maximum tolerated dose identified. The company said it would not independently pursue a dose-expansion study.
- The Lilly collaboration’s unsatisfied transaction price was $309.8 million, expected to be recognized through 2029 or beyond depending on clinical-development timing. Merck’s unsatisfied transaction price was $16.1 million, expected to be recognized through approximately 2028. Potential milestone payments remain contingent; the filing gives no assurance of their timing or receipt.
- The company recorded a $1.5 million income-tax provision for the first half, primarily related to the Lilly upfront payment’s tax treatment and required capitalization of R&D costs. It maintained a full valuation allowance against net deferred tax assets.
- Key risks include clinical and regulatory uncertainty, potential adverse events, reliance on collaborators and third-party manufacturers and research organizations, and the need for future financing. Management reported no material change to the risk factors in its 2022 Form 10-K, no material litigation, and effective disclosure controls.
Important facts for investors to verify
- Whether the planned FHD-286 AML combination trial began in Q3 2023 and what subsequent safety and efficacy data show.
- Updates on the FHD-609 partial clinical hold and the company’s response to the QTc-prolongation event.
- Actual cash use, available liquidity and financing needs relative to management’s stated 12-month runway.
- Progress and revenue recognition under the Lilly and Merck collaborations, including whether any contingent milestones are achieved.
- Whether rising R&D and personnel costs, alongside continued operating losses, alter the company’s development plans or funding outlook.