4D Molecular Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 12, 2022. The company is a clinical-stage gene-therapy developer and has no products approved for sale. Financial statements are unaudited.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparator |
|---|---|---|
| Collaboration and license revenue | $1.2 million | $2.0 million |
| Research and development expense | $19.4 million | $12.8 million |
| General and administrative expense | $8.2 million | $5.5 million |
| Operating loss | $26.4 million | $16.3 million |
| Net loss | $26.3 million | $16.4 million |
| Basic and diluted net loss per share | $0.82 | $0.61 |
| Net cash used in operating activities | $23.6 million | $15.4 million |
Revenue fell 39%, while operating expenses rose 51% and net loss increased 61%. R&D expense growth reflected higher personnel costs and clinical-trial spending; G&A growth reflected additional personnel and other public-company-related costs. No product revenue or gross margin was reported.
At March 31, cash and cash equivalents were $76.0 million and marketable securities totaled $208.5 million, or $284.5 million combined. Current assets were $243.0 million and current liabilities $12.1 million. Accumulated deficit was $233.3 million. No borrowings or other financial debt are identified in the supplied filing text; operating lease liabilities totaled $16.8 million ($2.0 million current, $14.8 million long-term).
Investing activities used $54.1 million, primarily for marketable-security purchases net of maturities and $6.4 million of property and equipment purchases. Financing activities provided $0.6 million, mainly from option and warrant exercises. Cash and cash equivalents decreased $77.0 million during the quarter. Available-for-sale securities had $1.4 million of accumulated unrealized losses in equity at quarter-end.
Material changes and business developments
- Revenue declined mainly because Roche revenue fell from $1.6 million to zero; Roche terminated its collaboration effective September 16, 2021, and no longer holds rights to 4D-110 under that agreement. Rights and related data and intellectual property reverted to 4DMT, subject to a possible royalty to Roche in one specified development scenario.
- uniQure revenue increased to $1.2 million from $0.4 million and represented 98% of Q1 2022 revenue. A reduction in estimated remaining costs produced a $1.1 million increase in revenue recognized in the quarter for work partially completed before 2022.
- The company reported five clinical-stage candidates: 4D-310, 4D-150, 4D-125, 4D-110 and 4D-710. The MD&A attributes increased clinical-trial costs to two additional Phase 1/2 trial start-ups, but refers to one candidate as “4D-7010”; investors should verify this apparent inconsistency against the original filing.
- Capital spending and construction in progress increased as the company develops laboratory and manufacturing capacity.
Outlook, risks and contingencies
- Management expects operating losses and negative operating cash flows to continue and expects R&D and G&A expenses to increase. It expects 2022 collaboration revenue primarily from uniQure, but collaboration revenue may fluctuate and milestone or royalty payments are contingent.
- Management believes cash, cash equivalents and marketable securities can fund planned operations for at least one year from issuance of the financial statements. It expects to need substantial additional capital; no committed external funding sources are disclosed. Financing may be unavailable or cause dilution, restrictive debt terms, or loss of product rights.
- Key risks include clinical and regulatory uncertainty, gene-therapy safety and manufacturing challenges, dependence on CROs, CMOs and suppliers, competition, intellectual-property rights, and potential clinical delays or disruption from COVID-19. The company also cites inflation, rising interest rates and market volatility as possible pressures.
- The company reported no material legal proceedings outstanding at March 31, 2022. The Cystic Fibrosis Foundation agreement includes potential payments tied to commercialization and a change of control; its embedded derivative liability was $0.2 million. Operating leases are a significant contractual obligation.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Clinical-trial progress, enrollment, safety findings and timelines for each of the five candidates, including the “4D-7010” reference.
- Cash-burn trajectory, actual runway versus management’s at-least-one-year estimate, and timing and terms of any additional financing.
- How much future collaboration revenue depends on uniQure, and whether any contingent milestones, royalties or sublicensing receipts become payable.
- Manufacturing-capacity spending, clinical supply readiness and dependence on external manufacturers and suppliers.
- Potential implications of Roche’s termination and the terms governing 4D-110 development and any possible royalty obligation.