Business context and reporting period
4D Molecular Therapeutics, Inc. is a clinical-stage gene therapy company developing targeted AAV-vector product candidates. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022. The company reported five product candidates in Phase 1/2 trials: 4D-310, 4D-150, 4D-125, 4D-110 and 4D-710. It has no approved products and has generated no product-sale revenue.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.5 | $1.4 | $1.9 | $17.9 |
| Research and development | $18.9 | $15.8 | $58.8 | $43.8 |
| General and administrative | $8.1 | $8.2 | $24.4 | $20.7 |
| Operating loss | $(26.5) | $(22.7) | $(81.3) | $(46.6) |
| Net loss | $(25.7) | $(22.2) | $(80.1) | $(46.2) |
| Basic and diluted loss per share | $(0.79) | $(0.82) | $(2.48) | $(1.72) |
| Operating cash used | — | — | $(64.5) | $(47.3) |
At September 30, 2022, cash and cash equivalents were $108.3 million and marketable securities totaled $130.5 million, or $238.8 million combined. Current assets were $232.5 million versus current liabilities of $13.6 million. The filing reports no borrowings; liabilities included $16.6 million of operating lease liabilities and a $0.2 million derivative liability. Nine-month capital expenditures were $10.4 million. No product gross-margin measure is reported.
Material changes versus prior comparable periods
- Revenue fell 63% in Q3 and 90% for the nine-month period, primarily because Roche revenue ceased after its collaboration agreement terminated in September 2021. Roche contributed $17.2 million in the first nine months of 2021 and none in 2022.
- Research and development expense rose 20% in Q3 and 34% year to date. Management attributed the increase mainly to higher R&D headcount and trial and consumables costs as two additional Phase 1/2 trials, 4D-150 and 4D-710, progressed.
- Year-to-date net loss increased to $80.1 million from $46.2 million, reflecting lower collaboration revenue and higher operating expenses.
- Operating cash use increased to $64.5 million from $47.3 million for the nine months. Cash and cash equivalents declined $44.7 million from year-end 2021; investing cash flow included $283.0 million of security maturities, $253.8 million of purchases and $10.4 million of property and equipment purchases.
Outlook, commentary and risks
- Management believes cash, cash equivalents and marketable securities can fund planned operations for at least one year from the issuance of the financial statements. It expects operating losses and negative operating cash flows to continue and R&D and G&A expenses to increase. Additional funding will be needed, with no committed external funding source.
- Management expects 2022 collaboration revenue to be primarily from uniQure. In Q3, uniQure accounted for substantially all collaboration revenue; future milestones and royalties are contingent and uncertain.
- The company expects higher future capital spending related to manufacturing capacity. Financing may require equity dilution, debt with restrictive terms, or collaboration arrangements that surrender rights.
- Key risks include clinical-trial safety, efficacy and enrollment; regulatory uncertainty for gene therapies; manufacturing scale-up and third-party supply; intellectual-property protection; and dependence on external financing. COVID-19, inflation, higher interest rates, volatile capital markets and the war in Ukraine may also affect operations or funding.
- Marketable securities had $1.9 million of aggregate unrealized losses at September 30, 2022, reflected in accumulated other comprehensive loss. The company said it intended and was able to hold loss-position securities until maturity or recovery and recorded no other-than-temporary impairment.
- The filing reports no material legal proceedings outstanding. Management concluded 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 the reported cash runway remains adequate as clinical-trial, staffing and manufacturing spending rises, and whether additional financing will be required sooner than expected.
- Clinical progress, enrollment, safety findings and upcoming data for the five Phase 1/2 programs, alongside any changes to expected development plans.
- The concentration and duration of collaboration revenue, including remaining uniQure deferred revenue and any possible milestone, royalty or licensing receipts.
- Manufacturing capacity, capital requirements and reliance on contract manufacturers and suppliers for clinical materials.
- The market value and maturity profile of investments, including the unrealized-loss position, and the effect of interest-rate or credit-market changes.