4D Molecular Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The company is a clinical-stage gene therapy developer; it has no approved products and no product-sales revenue. Unless otherwise noted, financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 or prior date |
|---|---|---|
| Collaboration and license revenue | $2.0 million | $3.5 million; down 43% year over year |
| Research and development expense | $12.8 million | $13.2 million |
| General and administrative expense | $5.5 million | $3.7 million; up 52% |
| Total operating expenses | $18.3 million | $16.8 million |
| Operating loss | $16.3 million | $13.3 million |
| Net loss | $16.4 million | $13.2 million |
| Net loss per share, basic and diluted | $0.61 | $2.54 |
| Net cash used in operating activities | $15.4 million | $13.9 million |
| Cash and cash equivalents, March 31, 2021 | $259.9 million | $276.7 million at December 31, 2020 |
Revenue is generated through collaborations and licenses, principally Roche and uniQure. Roche revenue declined by about $1.8 million year over year, partly offset by a $0.3 million increase from uniQure. The filing reports no product-sales revenue. Operating loss as a share of revenue widened; conventional product margins are not applicable to this development-stage business.
At March 31, 2021, current assets were $264.5 million, including $259.9 million in cash; current liabilities were $13.9 million. Total liabilities were $27.7 million, including deferred revenue. The balance sheet reports no borrowings or debt. Stockholders’ equity was $242.4 million, and accumulated deficit was $152.1 million.
Material changes versus the prior comparable period
- Net loss increased by $3.2 million, or 24.7%, as lower collaboration revenue and higher operating expenses more than offset the modest R&D expense decline.
- R&D expense decreased 3%: external costs fell $1.6 million, primarily due to lower clinical-material manufacturing costs, while payroll and personnel costs rose $1.2 million with increased headcount and stock-based compensation.
- G&A expense rose $1.9 million, chiefly from personnel and stock compensation costs and higher directors’ and officers’ insurance premiums following the IPO.
- Cash declined $16.9 million during the quarter. Operating cash use was $15.4 million; investing cash use was $0.6 million, primarily for property and equipment; financing cash use was $0.8 million, primarily for offering costs.
- EPS comparisons are affected by the December 2020 IPO and preferred-stock conversion: weighted-average shares rose to 26.7 million from 5.2 million.
Outlook, risks, contingencies and unusual items
- Management expects operating losses and negative operating cash flow to continue, with R&D and G&A expenses expected to increase. It expects to require substantial additional capital, but reports no committed external funding. The company believes existing cash will fund planned operations for at least one year from the financial-statement issuance date; this is not a guarantee of funding beyond that period.
- Clinical and program milestones stated in the filing include initial 4D-125 and 4D-310 clinical data expected in the second half of 2021, initial 4D-110 data expected in 2022, and anticipated IND filings and trial starts for 4D-150 and 4D-710 in the second half of 2021. These are forward-looking expectations, not assurances.
- 4D-310 had received FDA Fast Track designation; 4D-110 and 4D-310 had U.S. orphan drug designations. Designations do not ensure approval or faster development.
- Key risks include clinical or regulatory setbacks, gene-therapy safety and manufacturing challenges, dependence on third-party suppliers and collaborators, competition, intellectual-property disputes, and potential COVID-19 disruption to trials, research, vendors and timelines.
- Revenue is concentrated: Roche accounted for 80% of Q1 2021 collaboration revenue and uniQure for 20%. Future collaboration revenue and contingent milestones or royalties depend on partner activity and product progress.
- Lease commitments totaled $26.7 million as of March 31, 2021, with leases extending into 2029. The CFF agreement includes potential payments tied to commercialization and change of control; its embedded derivative liability was valued at $0.2 million.
- In April 2021, the company settled a former-employee claim by issuing a warrant for 40,000 shares at $9.41 per share. A $1.1 million settlement accrual was included in March 31 current liabilities. The filing reports no current material legal proceedings.
- Management said disclosure controls and procedures were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether clinical data and planned IND timelines for the named programs are achieved, and whether COVID-19 or other factors cause delays.
- Cash use relative to management’s runway estimate, the expected pace of rising development and manufacturing costs, and the timing and terms of any additional financing.
- Roche and uniQure program progress, collaboration continuity, and the timing and amount of recognized revenue, milestones and potential royalties.
- Manufacturing capacity, clinical-material supply and the company’s ability to scale production while meeting regulatory requirements.
- The settlement accounting and warrant dilution, lease and CFF obligations, and the terms and remaining performance obligations under collaboration agreements.