Foghorn Therapeutics Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. Foghorn is a clinical-stage biotechnology company developing medicines targeting the chromatin regulatory system. It has no approved products and generated no product-sales revenue.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Collaboration revenue | $5.1 million | $5.3 million | Down $0.3 million |
| Research and development expense | $25.5 million | $30.0 million | Down $4.5 million |
| General and administrative expense | $7.7 million | $8.6 million | Down $0.9 million |
| Operating loss | $28.2 million | $33.3 million | Improved $5.1 million |
| Net loss | $25.0 million | $30.5 million | Improved $5.5 million |
| Net loss per share, basic and diluted | $0.59 | $0.73 | Improved $0.14 |
| Net cash used in operating activities | $29.3 million | $31.2 million | Use decreased $1.8 million |
- At March 31, cash and cash equivalents were $79.3 million and marketable securities were $127.4 million, totaling $206.7 million. Including restricted cash, cash and cash equivalents totaled $81.0 million.
- Management expects cash, cash equivalents and marketable securities to fund operating expenses and capital expenditures for at least 12 months from the financial statements’ issuance date. The company expects ongoing losses and says additional funding will be needed.
- Total liabilities were $352.5 million, including $297.6 million of deferred collaboration revenue and $43.0 million of operating lease liabilities. The filing reports no debt balance.
- Accumulated deficit was $496.6 million. Stockholders’ deficit was $97.5 million. Shares outstanding were 42.6 million at March 31, versus 42.3 million at December 31, 2023.
- Operating expenses exceeded collaboration revenue; a product-sales gross margin is not applicable because Foghorn had no product sales. No formal financial guidance was provided.
Material changes and management commentary
- Net loss narrowed year over year, mainly as R&D expense fell by $4.5 million and G&A expense by $0.9 million. Lower R&D personnel costs reflected reduced headcount; lower external costs included reduced FHD-609 spending following the shutdown of its Phase 1 trial in synovial sarcoma and SMARCA4-loss tumors, and reduced FHD-286 spending after the uveal melanoma study wound down.
- Collaboration revenue declined modestly: the absence of Merck revenue after that agreement’s 2023 termination was partly offset by increased Lilly revenue. All Q1 2024 collaboration revenue was from Lilly.
- Foghorn reported more than eight programs, one clinical-stage candidate, and an IND submitted in April 2024 for a candidate it anticipated entering clinical development later in 2024. FHD-286 is in a Phase 1 dose-escalation study in relapsed or refractory AML, in combination with decitabine or cytarabine. A Phase 1 study of Lilly-partnered FHD-909 was anticipated to start later in 2024.
- Under the Lilly collaboration, Foghorn shares 50% of certain BRM program development costs through at least registrational trials. The remaining transaction price allocated to the unsatisfied performance obligation was $297.6 million, expected to be recognized through 2029 or beyond; recognition may vary with work performed.
- Management expects expenses and operating losses to continue and potentially increase as programs advance. Funding may come from equity or debt offerings, collaborations, or licensing; unavailable or unfavorable financing could force delays, reductions, or discontinuation of programs.
Risks, contingencies, and other items
- Key risks include clinical and regulatory uncertainty, the need for additional capital, dependence on collaborators and third-party research and manufacturing organizations, intellectual-property protection, and the ability to retain key personnel. The filing states there were no material changes to the risk factors in the 2023 Form 10-K.
- The Merck collaboration was terminated effective November 7, 2023; no remaining performance obligation or deferred revenue remained at December 31, 2023.
- The company reported no material litigation and no material off-balance-sheet arrangements. Certain license agreements include potential maintenance fees, royalties, and milestones; the filing says none of its product candidates uses the covered technologies.
- Disclosure controls and procedures were concluded effective at the reasonable assurance level; no material change in internal control over financial reporting was reported for the quarter.
- Two officers adopted Rule 10b5-1 trading plans in March 2024 covering sales of up to 60,000 and 213,106 shares, respectively.
Important facts for investors to verify
- Whether the stated minimum 12-month runway remains valid as clinical spending, collaboration cost sharing, and cash burn evolve.
- Clinical progress, safety, enrollment, and timing for FHD-286 and the anticipated FHD-909 study, as well as the status of the April 2024 IND.
- Changes in Lilly program activity, cost-sharing obligations, milestone prospects, and the timing of revenue recognition from deferred revenue.
- Whether further headcount or program changes affect the expense reductions reported this quarter, and how much additional capital may be required.
- Potential dilution from future financing and equity compensation; the filing lists approximately 9.6 million stock options and 18,445 warrants excluded from diluted loss per share as anti-dilutive.