C4 Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited consolidated results; comparative period is Q1 2020 unless otherwise stated.
Business context
C4 Therapeutics is an early-stage biopharmaceutical company developing targeted protein degraders using its TORPEDO platform. It has no approved products and has generated no product-sales revenue; reported revenue comes from research and license collaborations with Roche, Biogen and Calico.
In January 2021, the FDA cleared CFT7455 for a planned first-in-human Phase 1/2 trial, which the company expected to initiate in the first half of 2021. The company expected to submit an IND for CFT8634 in the second half of 2021 and begin a Phase 1/2 trial in 2022. It expected candidates from its BRAF V600E and RET programs to enter clinical development by the end of 2022. The company was assessing next steps for its EGFR program.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Collaboration revenue | $7.4 million | $6.8 million; up $0.6 million |
| Research and development expense | $20.5 million | $16.3 million |
| General and administrative expense | $7.4 million | $2.8 million |
| Operating loss | $20.5 million | $12.3 million |
| Net loss | $21.0 million | $11.9 million |
| Net loss per share, basic and diluted | $0.49 | $9.59; prior-period share count was much lower |
| Net cash used in operating activities | $24.9 million | $16.7 million |
Revenue increased mainly because of greater effort on Biogen targets. R&D expense rose $4.2 million, primarily from higher preclinical and development costs and personnel expense, including stock-based compensation. G&A expense rose $4.6 million, driven by personnel, stock-based compensation and public-company professional fees. Total stock-based compensation was $3.8 million, compared with $0.1 million a year earlier. There is no product-sales margin to report.
At March 31, 2021, cash and cash equivalents were $94.9 million and marketable securities totaled $251.1 million, or approximately $346.0 million combined. Current assets were $322.0 million and current liabilities $37.7 million. The company reported total liabilities of $110.3 million and stockholders’ equity of $263.7 million.
Operating cash use was $24.9 million. Investing cash use was $61.7 million, mainly reflecting net purchases of marketable securities; financing cash use was $0.2 million. Cash, cash equivalents and restricted cash declined $86.8 million during the quarter, largely because funds were shifted into marketable securities.
Related-party debt had a $12.5 million principal balance and $10.2 million carrying value at quarter-end. It bears variable interest at LIBOR or 1.75%, whichever is greater, plus 9.50%; interest-only payments run through December 2022, with maturity in June 2024. The company could draw a further $7.5 million through June 30, 2021, subject to conditions. The loan is secured by substantially all company assets and includes covenants.
Changes, outlook and key risks
- Net loss increased by $9.1 million year over year; operating cash use increased by $8.3 million.
- Management stated that quarter-end cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months from issuance of the financial statements. Separately, the risk discussion said those resources, combined with anticipated collaboration-partner payments, were expected to fund the existing operating plan through the end of 2023. These are estimates dependent on assumptions; the company also said its resources would not fund any candidate through regulatory approval.
- The company expects significant expense growth as it advances candidates into clinical development and continues to operate as a public company. It anticipates needing substantial additional financing; availability and terms are uncertain and financing could dilute shareholders or require concessions on programs or intellectual property.
- In May 2021, the company achieved a $3.0 million Biogen lead-initiation fee, which it said would be recorded in Q2 2021.
- Key risks include the unproven protein-degradation approach, early-stage clinical and regulatory uncertainty, dependence on collaboration partners and third-party manufacturers, and competition and intellectual-property risks. COVID-19 could disrupt research, trials, staffing, supply chains and regulatory activity; the filing described staffing impacts at Indian CROs and prior manufacturing delays, with mitigation efforts underway.
- The company reported no material legal proceedings and no material changes in internal control over financial reporting. Management concluded disclosure controls were effective at the reasonable-assurance level.
Investor verification priorities
- Confirm whether CFT7455’s planned Phase 1/2 trial began on schedule and review subsequent enrollment, safety and efficacy updates.
- Track CFT8634’s IND timing and the stated BRAF V600E and RET clinical-development milestones.
- Assess cash runway against actual operating cash use, clinical-development spending and the assumptions behind the differing runway statements.
- Check whether the additional $7.5 million debt tranche was drawn, and monitor loan covenants, interest costs and collateral obligations.
- Monitor collaboration progress and contingent fees or milestones, including recognition of the $3.0 million Biogen fee in Q2 2021.
- Evaluate whether COVID-19, CRO/CMO capacity, manufacturing constraints or trial-enrollment challenges affect development timelines.