4D Molecular Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 9, 2023. The company is a clinical-stage genetic medicines developer with no approved products and no product-sale revenue. Financial amounts below are in U.S. dollars; millions unless stated otherwise.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Collaboration and license revenue | $20.2m | $0.5m | $20.7m | $1.9m |
| Research and development expense | $25.1m | $18.9m | $71.1m | $58.8m |
| General and administrative expense | $9.1m | $8.1m | $25.9m | $24.4m |
| Operating loss | $14.0m | $26.5m | $76.2m | $81.3m |
| Net loss | $10.3m | $25.7m | $68.6m | $80.1m |
| Basic and diluted loss per share | $0.24 | $0.79 | $1.81 | $2.48 |
- Revenue is collaboration and license revenue, not product sales. Q3 included a $20.0m upfront payment from Astellas; Astellas represented 99% of quarterly revenue.
- Higher revenue and interest income reduced net loss versus the prior-year periods, despite increased operating expenses. Q3 R&D expense rose 32%, primarily from greater clinical-trial activity, especially for 4D-150. No gross margin is reported.
- Interest income was $3.9m for Q3 and $7.8m for the first nine months, versus $0.8m and $1.2m, respectively, in 2022.
- At September 30, cash and cash equivalents were $275.7m and marketable securities were $44.0m, totaling $319.7m, compared with $218.5m at December 31, 2022. Current assets were $328.2m; current liabilities were $18.2m. The filing lists no conventional borrowings; operating lease liabilities totaled $15.2m.
- For the first nine months, operating cash use was $51.1m, compared with $64.5m in 2022. Investing activities provided $122.4m, primarily from securities maturities; financing activities provided $152.1m, chiefly from the May public offering and ATM sales. Cash increased $223.3m.
- Accumulated deficit was $383.0m. The company reported 42.75m common shares outstanding at September 30, up from 32.63m at year-end 2022, principally reflecting equity offerings.
Material changes and business developments
- In May 2023, the company raised $129.2m net from an underwritten offering of 8.625m shares. Through September 30, ATM sales generated $19.1m net; $80.1m remained available under the sales agreement.
- The July Astellas license granted rights to use the R100 vector for rare monogenic ophthalmic disease targets. The company received $20.0m upfront and may receive option fees and milestones of up to $942.5m, including potential near-term development milestones of $15.0m for the initial target, plus royalties. These future amounts are contingent, not assured.
- The company’s clinical portfolio includes 4D-150, 4D-710, 4D-310, 4D-125 and 4D-110; 4D-175 and 4D-725 were in preclinical development. Management attributed increased R&D spending mainly to clinical activity, particularly 4D-150.
- In August, the Cystic Fibrosis Foundation agreement was amended to revise the research plan, raise aggregate milestone awards from $3.5m to $6.3m, and extend the estimated completion date. The amendment did not change recognized transaction price because future milestones remained constrained.
Outlook, risks and unusual items
- Management expects operating losses and negative operating cash flows to continue, with R&D and G&A expenses expected to increase. It also anticipates significantly higher future capital expenditures for commercial manufacturing capacity. No specific earnings or revenue guidance is provided.
- Management believes cash, cash equivalents and marketable securities will fund planned operations for at least one year from issuance of the financial statements. The company expects to need substantial additional capital; further financing may be unavailable or dilutive, and no external funding sources are committed.
- After quarter-end, the company reported positive interim 4D-710 clinical and lung-biopsy biomarker findings in November 2023. These were interim data and remain subject to further review and confirmation.
- Also reported after quarter-end, the company said it had aligned with FDA on a plan to lift the clinical hold on the 4D-310 INGLAXA trial. The plan included a non-human-primate safety study and protocol changes intended to mitigate aHUS risk, including an immunosuppressive regimen. The hold had not been described as lifted in this filing.
- Key risks include clinical and regulatory failure or delay, gene-therapy safety and manufacturing challenges, dependence on CROs, CMOs and suppliers, competition, intellectual-property exposure, and the need for additional financing. The filing notes that NHP supply could be affected by Charles River’s voluntary suspension of shipments from Cambodia.
- Potential obligations include Aevitas milestone payments of up to approximately $144m and University of Pennsylvania milestone payments of up to approximately $42m, plus royalties related to 4D-175; no contingent liability was recorded because milestones were not probable and sales had not begun. The CFF agreement also includes contingent commercialization and change-of-control payments; its embedded derivative liability was $0.4m at quarter-end.
- No material legal proceedings were outstanding at September 30, 2023. Disclosure controls and procedures were assessed as effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether subsequent, complete 4D-710 data support the reported interim findings, including durability, safety and clinical outcomes.
- Whether FDA requirements for 4D-310 are completed and the clinical hold is formally lifted, and what the revised trial shows.
- How quickly the company’s $319.7m of cash and securities is consumed relative to its stated runway, planned manufacturing investment and financing needs.
- What conditions must be met for Astellas option fees, milestones and royalties, and the timing and likelihood of any payments beyond the upfront fee.
- Future R&D spending, trial timelines and equity issuance, including potential dilution from ATM activity and outstanding equity awards.
- The size and timing of contingent obligations under the CFF and 4D-175 arrangements, and any changes in their probability or accounting treatment.