Financial Performance - The company had a net loss of $23,386,000 for the three months ended March 31, 2022, compared to a net loss of $20,375,000 for the same period in 2021, representing an increase in loss of approximately 15%[20]. - The Company reported a net loss of $23,386,000 for the three months ended March 31, 2022, compared to a net loss of $20,375,000 for the same period in 2021, representing an increase in loss of approximately 14.8%[53]. - Revenue for the three months ended March 31, 2022 was $0, a decrease of $4.7 million compared to $4.7 million for the same period in 2021, attributed to the conclusion of revenue recognition from the Astellas Agreement[181]. - Total operating expenses for the three months ended March 31, 2022 were $23.3 million, a decrease of $1.6 million from $24.9 million in the same period in 2021[180]. - Net loss for the three months ended March 31, 2022 was $23.4 million, compared to a net loss of $20.4 million for the same period in 2021, reflecting an increase in losses of $3 million[180]. - Research and development expenses totaled $13.8 million for the three months ended March 31, 2022, down from $15.1 million in the same period in 2021, a decrease of $1.3 million[183]. Assets and Liabilities - As of March 31, 2022, Frequency Therapeutics reported total assets of $164,939,000, a decrease of 11% from $185,358,000 as of December 31, 2021[18]. - Cash and cash equivalents decreased to $49,830,000 as of March 31, 2022, down 37% from $79,635,000 at the end of 2021[18]. - The accumulated deficit increased to $203,471,000 as of March 31, 2022, compared to $180,085,000 at the end of 2021[18]. - The company had total liabilities of $52,269,000 as of March 31, 2022, a slight decrease from $54,534,000 at the end of 2021[18]. - Cash, cash equivalents, and marketable securities totaled $124.8 million as of March 31, 2022, expected to fund operations into 2024[196]. Stock and Shares - The weighted-average shares of common stock outstanding increased to 34,810,676 in Q1 2022 from 34,115,682 in Q1 2021, reflecting an increase of approximately 2%[20]. - The weighted-average shares of common stock outstanding increased to 34,810,676 as of March 31, 2022, from 34,115,682 in the prior year, reflecting a growth of about 2.0%[53]. - The Company has authorized 200,000,000 shares of common stock, with 34,976,409 shares issued and outstanding as of March 31, 2022, up from 34,611,213 shares as of December 31, 2021[57]. - The Company sold 12,767 shares of common stock under its ATM program for net proceeds of approximately $50,000 during the three months ended March 31, 2022[59]. - The total grant date fair value of options vested during the three months ended March 31, 2022, was $5,097,000, compared to $4,284,000 for the same period in 2021, an increase of approximately 18.9%[64]. Operating Activities - The company had a net cash used in operating activities of $17,343,000 for Q1 2022, a decrease from $25,474,000 in Q1 2021[29]. - Net cash used in operating activities for the three months ended March 31, 2022 was $17.3 million, a decrease from $25.5 million in the same period in 2021[201]. - The company incurred $12.7 million in net cash used in investing activities for the three months ended March 31, 2022, primarily due to $20.8 million in purchases of marketable securities[203]. - Net cash used in investing activities for Q1 2021 was $26.2 million, primarily from the purchase of marketable securities totaling $25.7 million[207]. - Net cash provided by financing activities for Q1 2021 was $0.6 million from the exercise of stock options[208]. Future Outlook and Funding - The company expects to continue generating operating losses for the foreseeable future, with future viability dependent on raising additional capital[33]. - Anticipated operating expenses are expected to increase substantially due to the expansion of product development programs, necessitating additional financing[143][144]. - Future funding requirements will depend on the progress and costs associated with clinical development of FX-322 and other product candidates, as well as regulatory requirements[211]. - The company may finance cash needs through public or private equity or debt financings, which could dilute ownership interests[212]. - Existing cash, cash equivalents, and marketable securities are projected to fund operating expenses and capital requirements into 2024, although this estimate is subject to change[210]. Clinical Trials and Product Development - FX-322, the lead product candidate, showed a statistically significant improvement in word recognition scores in a Phase 1b trial, with 34% of subjects achieving a 10% or greater absolute improvement[133]. - The Phase 2a trial of FX-322 did not demonstrate improvements in hearing measures compared to placebo, attributed to uncontrolled bias and limitations in baseline measures[132]. - The company plans to file an investigational new drug application for FX-345 in the second half of 2022, aiming to expand treatment opportunities for different types of sensorineural hearing loss[137]. - The company is focused on advancing its progenitor cell activation approach to potentially treat multiple sclerosis, with a preclinical compound FREQ-162 showing promising results in remyelination[138]. - The company is actively engaged in clinical trials, including a Phase 2b study of FX-322, with the primary endpoint being speech perception in subjects with noise-induced or sudden sensorineural hearing loss[136]. Collaborations and Agreements - Astellas paid the company an upfront payment of $80,000, with potential development milestone payments up to $230,000 and commercialization milestones of up to $315,000 under the collaboration agreement[81]. - The collaboration with Astellas is governed by a joint steering committee, with both parties responsible for development and commercialization activities in their respective territories[80]. - The company has a license agreement with MIT, which includes potential milestone payments up to $2,900 for each Licensed Product or Licensed Process[94]. - The Company is required to make milestone payments up to $26,000 for each Category of CALIBR Licensed Products, with a $1,000 initial license fee payment[101]. - The Company has entered into a license agreement with CALIBR for exclusive rights to certain patent rights for the treatment of multiple sclerosis[99]. Workforce and Operational Changes - Approximately 30% of the workforce was reduced to better align with business needs and focus capital resources on research and development programs, with estimated future cash outlays of $1.2 million related to severance costs[127][139]. - The company announced a reduction in force of approximately 30% of its workforce, with estimated future cash outlays of $1.2 million related to severance costs[200]. Accounting and Compliance - The company is classified as an emerging growth company, allowing it to take advantage of an extended transition period for compliance with new accounting standards[216]. - There were no material changes to critical accounting policies during the three months ended March 31, 2022, compared to the previous annual report[214].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39062 FREQUENCY THERAPEUTICS, INC. (Exact name of Registrant as specified in its Charter) Delaware 47-2324450 (State or other jurisdi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39062 (Address of principal executive offices) (Zip Code) (781) 315-4600 (Registrant's telephone number, including area code) ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39062 FREQUENCY THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction of incorpor ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39062 FREQUENCY THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction of incorpo ...

Product Development and Clinical Trials - FX-322, the lead product candidate, is still under clinical development and its success is critical for the company's business[13] - The Phase 1/2 clinical trial for FX-322 showed that 33% of subjects achieved a 10% or greater absolute improvement in word recognition scores[17] - Interim results from the Phase 2a trial indicated that four weekly injections did not demonstrate improvements in hearing measures compared to placebo[18] - The FDA granted FX-322 Fast Track designation, which may expedite its development process[18] - The Phase 1b clinical trial for FX-322 showed that 34% of subjects achieved a 10% or greater absolute improvement in word recognition scores after a single injection[22] - The Phase 2a clinical trial of FX-322 showed no improvements in hearing measures versus placebo, with 95 subjects evaluated across four arms[47] - The exploratory clinical study in Germany demonstrated measurable concentrations of FX-322 in cochlear fluid samples, confirming effective delivery to the cochlea[48] - The company plans to advance FX-322 as a single-dose regimen for SNHL, following interim results indicating dampened hearing benefits from repeated weekly injections[35] - FX-322 demonstrated a 34% improvement in word recognition (WR) scores of 10% or greater in treated subjects at day 90, statistically significant compared to the control group (p < 0.05) [51] - The clinical trial assessed hearing function using word recognition and words-in-noise tests, with follow-up visits at 15, 30, 60, and 90 days post-injection[82] - FX-322 treatment resulted in a mean percentage of words correct (WR) of 38.4% at baseline, improving to 69.6% at day 90, and 54.8% at follow-up[86] - A statistically significant improvement in WR was observed in FX-322-treated patients compared to placebo (p=0.010)[88] - The Phase 2a trial enrolled 95 patients across 16 sites, focusing on stable noise-induced hearing loss (NIHL) or stable sudden sensorineural hearing loss (SSNHL)[95] - The company plans to report an analysis of the end of Phase 2a data (210 days) in late Q2 2021[98] Financial Agreements and Collaborations - The company has received an upfront payment of $80 million from Astellas Pharma Inc. under the collaboration agreement for FX-322, with potential milestone payments of up to $230 million[26] - The company has an agreement with Astellas, which includes an upfront payment of $80 million and potential development milestone payments up to $230 million[130] - If the Astellas licensed products are successfully commercialized, the company could be eligible for up to $315 million in potential commercial milestone payments and tiered royalties ranging from low- to mid-teen percentages[130] - The company is engaged in collaborations with The Scripps Research Institute and Cambridge Enterprise to advance its MS program[27] Market and Competitive Landscape - The company faces significant competition in the biotechnology and pharmaceutical sectors, which could impact its operating results[14] - The company is aware of multiple companies developing therapeutics for hearing loss, including Novartis and Audion Therapeutics, which are conducting clinical trials[157] - The company recognizes that there are no approved therapies promoting remyelination for multiple sclerosis, highlighting a significant market opportunity[158] - The company faces competition from various companies in the pharmaceutical and biotechnology sectors, which may have greater financial resources and established market presence[154][155] Regulatory Environment - The FDA imposes substantial requirements on the company for drug development, which necessitates significant time and financial resources[161][162] - The FDA has a goal of ten months from the date of filing of a standard NDA for a new molecular entity to review and act on the submission[170] - The FDA conducts a preliminary review of all NDAs within the first 60 days after submission[172] - The FDA may require submission of a REMS plan for certain medications with serious safety concerns[173] - The FDA may issue a Complete Response Letter (CRL) if specific conditions must be met for final approval of the NDA[176] - The Pediatric Research Equity Act (PREA) requires a pediatric assessment for most drugs unless a deferral or waiver is granted[178] - The FDA has various expedited programs, including fast track designation and priority review, to expedite the development and review of drugs[179] - A priority review means that the goal for the FDA to review an application is six months, compared to the standard review of ten months[182] - Drugs may be eligible for accelerated approval based on adequate and well-controlled clinical trials establishing effects on surrogate endpoints[183] - The FDA may impose post-approval requirements, including Phase 4 clinical trials, to further assess a product's safety and effectiveness[188] - Manufacturers must continue to comply with cGMP requirements and may face inspections by government agencies[189] - The FDA provides a five-year period of non-patent marketing exclusivity for the first applicant to obtain approval of a New Drug Application (NDA) for a new chemical entity[193] Intellectual Property and Licensing - As of March 19, 2021, the company owned, licensed, or had an option to license 38 patent families, including 22 U.S. patents and 35 ex-U.S. patents[118] - The patent portfolio for the Hearing Loss program includes 31 patent families, with 17 U.S. patents and 32 ex-U.S. patents as of March 19, 2021[120] - The company has obtained worldwide licenses for intellectual property from Scripps and Cambridge to promote remyelination of nerve fibers[35] - The company relies on trade secrets and confidential know-how, but acknowledges the difficulty in protecting such information[125] - The company entered into a Non-Exclusive Patent License Agreement with Massachusetts Eye and Ear, making a $20 thousand license fee payment and committing to milestone payments up to $350 thousand for each product incorporating the licensed patent rights[138][139] - The company is obligated to pay annual license maintenance fees between $5 thousand and $7.5 thousand per MEE patent family case number prior to the first commercial sale of an MEE licensed product, and a minimum annual royalty payment of $15 thousand thereafter[139] - The company made a $1.0 million license fee payment upon entering the CALIBR License and is required to make milestone payments up to $26 million for each category of CALIBR licensed products[145] - The company is obligated to pay a mid-single-digit royalty on CALIBR licensed products and a royalty on sub-license revenues ranging from a low-teen percentage to 50%[145] - The Cambridge License requires the company to make a $50 thousand license fee payment and annual license fees of $50 thousand, along with milestone payments up to $10.5 million for each Cambridge licensed product[151] Impact of External Factors - The COVID-19 pandemic has had an adverse impact on the company's operations, potentially affecting clinical trials and capital raising efforts[30] - Third-party payors are increasingly reducing reimbursements for pharmaceutical products and services, impacting sales and physician utilization[200] - Significant uncertainty exists regarding the coverage and reimbursement status of newly approved products, requiring manufacturers to provide scientific support to each payor separately[199] - Legislative changes have resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, impacting the pharmaceutical industry[205] - The Affordable Care Act (ACA) increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%[203] - The ACA imposes a nondeductible annual fee on pharmaceutical manufacturers or importers who sell branded prescription drugs to specified federal government programs[203] - The distribution of prescription pharmaceutical products is regulated by the Prescription Drug Marketing Act, which sets minimum standards for drug distributors[192] - In the European Economic Area, medicinal products can only be commercialized after obtaining a Marketing Authorization, which varies in approval process and requirements[207] Research and Development Focus - The company is developing a product candidate for multiple sclerosis (MS) using its Progenitor Cell Activation (PCA) platform, with promising preliminary preclinical results[27] - The PCA platform has potential applications beyond hearing, including diseases of muscle, gastrointestinal tract, skin, and bone, with ongoing research for MS[35] - The company has initiated a discovery and preclinical program in multiple sclerosis (MS) targeting remyelination through small molecules[103] - The company is focused on building strategic collaborative relationships to facilitate the development of its PCA platform and product pipeline[35] Leadership and Strategic Vision - The leadership team includes experienced biotech executives and a Clinical Advisory Board focused on hearing science and technology[34] - The company aims to establish itself as a global leader in hearing function and expand its presence in hearing restoration[35] - Current treatment options for hearing loss are limited to hearing aids and cochlear implants, with no FDA-approved drug therapies for SNHL[66] - FX-322 is designed to regenerate hair cells in the cochlea, potentially improving overall hearing function and quality of life for patients with hearing loss[70] - The administration of FX-322 is performed intratympanically, taking approximately 10 to 15 minutes and is generally well-tolerated[72] - In preclinical studies, FX-322 showed the ability to regenerate hair cells in cochlea exposed to aminoglycoside antibiotics, restoring hair cells to near native levels[76] - The company plans to directly market and commercialize its lead product candidate, FX-322, for the treatment of SNHL in the United States, developing its own sales and marketing force targeting ENTs and audiologists[114]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39062 FREQUENCY THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction of inc ...

[Filing Information](index=1&type=section&id=Filing%20Information) [FORM 10-Q Details](index=1&type=section&id=FORM%2010-Q%20Details) This Form 10-Q report for Frequency Therapeutics, Inc. covers the period ended June 30, 2020, identifying the company as a non-accelerated filer, smaller reporting company, and emerging growth company - The registrant is a **non-accelerated filer, smaller reporting company, and an emerging growth company**[4](index=4&type=chunk) Common Stock Outstanding | Date | Shares Outstanding | | :--- | :--- | | July 31, 2020 | 33,645,901 | [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) [Nature of Forward-Looking Statements](index=3&type=section&id=Nature%20of%20Forward-Looking%20Statements) The report contains forward-looking statements subject to safe harbor provisions, involving known and unknown risks and uncertainties that may cause actual results to differ materially from projections - The report contains forward-looking statements covered by safe harbor provisions, which are subject to known and unknown risks and uncertainties[9](index=9&type=chunk) - Forward-looking statements are based on current expectations and projections about future events and financial trends[10](index=10&type=chunk) [Key Risks and Uncertainties](index=3&type=section&id=Key%20Risks%20and%20Uncertainties) Key risks include the impact of COVID-19 on clinical trials and operations, the success of product candidates like FX-322, regulatory approvals, intellectual property, and financing - Impact of COVID-19 on clinical trials, research, development, manufacturing, and financial markets is a significant risk[11](index=11&type=chunk) - Risks include the initiation, timing, progress, and results of preclinical and clinical trials for FX-322 and the MS program[11](index=11&type=chunk) - Ability to develop the progenitor cell activation (PCA) platform, obtain regulatory approvals, commercialize products, protect intellectual property, and secure additional financing are crucial factors[11](index=11&type=chunk) [PART I. Financial Information](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Frequency Therapeutics, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, with detailed explanatory notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased from **$223.2 million** at December 31, 2019, to **$204.8 million** at June 30, 2020, primarily due to reduced cash and marketable securities, while total liabilities also decreased Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $195,379 | $200,158 | | Short-term marketable securities | — | $17,197 | | Total current assets | $198,424 | $221,355 | | Total assets | $204,786 | $223,218 | | Deferred revenue | $35,265 | $48,152 | | Total current liabilities | $41,165 | $52,780 | | Total liabilities | $43,085 | $55,860 | | Total stockholders' equity | $161,701 | $167,358 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Revenue for the three months ended June 30, 2020, was **$8.5 million**, with a net loss of **$6.0 million**, while six-month revenue was **$15.8 million** and net loss was **$10.9 million**, showing an improvement from the prior year Consolidated Statements of Operations Highlights (in thousands, except per share) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $8,523 | $— | $15,787 | $— | | Research and development | $8,764 | $3,921 | $15,434 | $7,367 | | General and administrative | $5,959 | $3,098 | $12,208 | $5,568 | | Total operating expenses | $14,723 | $7,019 | $27,642 | $12,935 | | Net loss | $(6,025) | $(6,852) | $(10,938) | $(12,678) | | Net loss per share (basic & diluted) | $(0.19) | $(3.42) | $(0.35) | $(6.67) | [Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss for the three months ended June 30, 2020, was **$5.95 million**, and for the six months, **$10.93 million**, both improving from prior periods due to reduced net loss Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(6,025) | $(6,852) | $(10,938) | $(12,678) | | Unrealized gain on marketable securities | $75 | $80 | $6 | $150 | | Comprehensive loss | $(5,950) | $(6,772) | $(10,932) | $(12,528) | [Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=8&type=section&id=Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20(Deficit)) Stockholders' equity decreased from **$167.4 million** at December 31, 2019, to **$161.7 million** at June 30, 2020, primarily due to net loss, partially offset by stock-based compensation and common stock issuance Stockholders' Equity Changes (Six Months Ended June 30, 2020, in thousands) | Item | Balance, Dec 31, 2019 | Stock-based compensation | Issuance of common stock | Other comprehensive income | Net loss | Balance, June 30, 2020 | | :-------------------------- | :-------------------- | :----------------------- | :----------------------- | :------------------------- | :------- | :--------------------- | | Total stockholders' equity | $167,358 | $4,575 | $700 | $6 | $(10,938) | $161,701 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$19.6 million** for the six months ended June 30, 2020, with investing activities providing **$15.9 million** and financing activities providing **$0.7 million**, resulting in a **$3.1 million** net decrease in cash Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Activity | 2020 | 2019 | | :-------------------------------------- | :----- | :----- | | Net cash used in operating activities | $(19,625) | $(10,622) | | Net cash provided by (used in) investing activities | $15,854 | $(28,328) | | Net cash provided by financing activities | $700 | $430 | | Net decrease in cash, cash equivalents and short-term investments | $(3,071) | $(38,520) | | Cash, cash equivalents, short-term investments and restricted cash at end of period | $197,188 | $3,769 | [Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes detail the company's financial statements, covering organization, accounting policies, fair value, property, accrued expenses, equity, stock compensation, income taxes, collaboration, and commitments [Note 1. Organization and basis of presentation](index=11&type=section&id=Note%201.%20Organization%20and%20basis%20of%20presentation) Frequency Therapeutics, Inc. is a clinical-stage biotechnology company focused on regenerative medicine, having completed a reverse stock split, IPO, and private placement, while facing risks including the COVID-19 pandemic - Frequency Therapeutics, Inc. is a clinical-stage biotechnology company focused on harnessing innate biology for degenerative disease repair[30](index=30&type=chunk) - The company completed a 1-for-6.7355 reverse stock split in September 2019 and an IPO in October 2019, raising approximately **$79.7 million** in net proceeds[31](index=31&type=chunk)[32](index=32&type=chunk) - A private placement in July 2020 generated **$40.1 million** in net proceeds[33](index=33&type=chunk) - The COVID-19 pandemic is expected to materially and adversely impact financial estimates and operations in the near term[35](index=35&type=chunk) - The company has incurred recurring losses and had an accumulated deficit of **$79.8 million** as of June 30, 2020, expecting continued operating losses[37](index=37&type=chunk) [Note 2. Summary of significant accounting policies](index=12&type=section&id=Note%202.%20Summary%20of%20significant%20accounting%20policies) This note outlines the company's significant accounting policies, covering basis of presentation, consolidation, estimates, comprehensive income, segment information, cash, marketable securities, fair value, property, R&D, leases, revenue, stock compensation, income taxes, and net loss per share - The company operates as a single operating segment focused on discovering and developing small molecule drugs that activate progenitor cells[46](index=46&type=chunk) - Early adopted **ASC 842** for leases as of January 1, 2020, recognizing ROU assets and lease liabilities[66](index=66&type=chunk)[104](index=104&type=chunk) - Revenue from collaborative arrangements (e.g., Astellas Agreement) is recognized over time using an input method based on research and development costs incurred[73](index=73&type=chunk)[154](index=154&type=chunk) - Stock-based compensation is expensed based on grant date fair values using the Black-Scholes model[89](index=89&type=chunk) - Net loss per share is basic and diluted due to anti-dilutive potential common shares[96](index=96&type=chunk)[97](index=97&type=chunk) [Note 3. Fair value measurements](index=22&type=section&id=Note%203.%20Fair%20value%20measurements) Financial assets measured at fair value primarily consist of **Level 1 money market funds**, with no short-term marketable securities as of June 30, 2020, unlike the prior year Financial Assets at Fair Value (in thousands) | Item | June 30, 2020 (Fair Market Value) | December 31, 2019 (Fair Market Value) | | :-------------------------- | :------------------------------- | :------------------------------- | | Money market funds | $194,546 | $200,119 | | U.S. Government treasury securities | — | $17,197 | | Total | $194,546 | $217,316 | [Note 4. Property and equipment](index=23&type=section&id=Note%204.%20Property%20and%20equipment) Property and equipment, net, increased from **$1.76 million** at December 31, 2019, to **$2.56 million** at June 30, 2020, with depreciation expense of **$459 thousand** for the six months ended June 30, 2020 Property and Equipment, Net (in thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | Lab equipment | $2,768 | $1,846 | | Software | $237 | — | | Total | $5,080 | $3,828 | | Accumulated depreciation | $(2,525) | $(2,066) | | Property and equipment, net | $2,555 | $1,762 | - Depreciation expense for the six months ended June 30, 2020, was **$459 thousand**, up from **$374 thousand** in the prior year[113](index=113&type=chunk) [Note 5. Accrued expenses](index=23&type=section&id=Note%205.%20Accrued%20expenses) Accrued expenses remained stable at **$3.29 million** at June 30, 2020, compared to **$3.24 million** at December 31, 2019, with an increase in third-party research and development expenses Accrued Expenses (in thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Payroll and employee related expenses | $2,133 | $2,686 | | Third-party research and development expenses | $492 | $118 | | Total | $3,289 | $3,239 | [Note 6. Stockholders' equity](index=23&type=section&id=Note%206.%20Stockholders%27%20equity) Authorized capital includes **10 million preferred shares** and **200 million common shares**, with **31.2 million common shares outstanding** and **8.7 million shares reserved** for future issuance under stock option plans as of June 30, 2020 - Authorized capital: **10,000,000 preferred shares** ($0.001 par value) and **200,000,000 common shares** ($0.001 par value)[115](index=115&type=chunk) Common Stock Issued and Outstanding | Date | Shares Issued and Outstanding | | :--- | :---------------------------- | | June 30, 2020 | 31,249,499 | | December 31, 2019 | 30,844,507 | Shares Reserved for Future Issuance | Item | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :------------ | :---------------- | | Stock options outstanding | 6,803,296 | 5,968,672 | | Shares available for future grant | 1,853,818 | 1,859,654 | | Total | 8,657,114 | 7,828,326 | [Note 7. Stock-based compensation](index=24&type=section&id=Note%207.%20Stock-based%20compensation) Stock-based compensation expense for the six months ended June 30, 2020, was **$4.58 million**, a significant increase from **$1.53 million** in the prior year, with **$29.4 million** in unrecognized expense remaining - The 2019 Incentive Award Plan was approved, reserving **3,100,000 shares**, with an automatic annual increase of **4%** of outstanding common stock[120](index=120&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $1,033 | $768 | $2,003 | $809 | | General and administrative | $1,378 | $714 | $2,572 | $722 | | Total | $2,411 | $1,482 | $4,575 | $1,531 | - As of June 30, 2020, total unrecognized stock-based compensation expense was **$29.4 million**, to be recognized over a weighted-average period of **3.30 years**[134](index=134&type=chunk) [Note 8. Employee stock purchase plan](index=27&type=section&id=Note%208.%20Employee%20stock%20purchase%20plan) The 2019 Employee Stock Purchase Plan (ESPP) became effective with the IPO, reserving **315,000 shares** with an annual increase of **1%** of outstanding common stock, though no shares have been issued as of June 30, 2020 - The 2019 Employee Stock Purchase Plan (ESPP) was adopted, reserving **315,000 shares** initially, with an annual increase of **1%** of outstanding common stock[136](index=136&type=chunk) - No shares have been issued under the ESPP as of June 30, 2020[136](index=136&type=chunk) [Note 9. Income taxes](index=27&type=section&id=Note%209.%20Income%20taxes) The company has cumulative federal and state net operating losses (NOLs) and R&D credit carryforwards with a full valuation allowance, and prior ownership changes have limited their utilization - The company has cumulative federal and state net operating loss (NOL) and R&D credit carryforwards, but a full valuation allowance is recorded[137](index=137&type=chunk)[142](index=142&type=chunk) - Income tax expense for the three and six months ended June 30, 2020, was **$7 thousand** and **$45 thousand**, respectively, related to interest income from a subsidiary[138](index=138&type=chunk)[20](index=20&type=chunk) - Ownership changes in March 2017 and October 2019 (IPO) have resulted in limitations on the utilization of federal NOL carryforwards under Section 382[140](index=140&type=chunk) [Note 10. Collaboration agreement](index=28&type=section&id=Note%2010.%20Collaboration%20agreement) In July 2019, the company entered a License and Collaboration Agreement with Astellas Pharma Inc. for FX-322 outside the U.S., including an **$80 million upfront fee** and potential milestones up to **$545 million**, with the upfront recognized as revenue over the Phase 2a clinical trial period - Entered into a License and Collaboration Agreement with Astellas Pharma Inc. in July 2019 for exclusive rights outside the U.S. for Astellas Licensed Products, including FX-322[145](index=145&type=chunk) - Astellas paid an **$80 million** upfront payment and may pay up to **$230 million** in development milestones and **$315 million** in commercialization milestones, plus tiered royalties[150](index=150&type=chunk) - The **$80 million** upfront payment is recognized as revenue over the estimated period to completion of the Phase 2a clinical trial for FX-322 using the input method[154](index=154&type=chunk) Revenue Recognized from Astellas Agreement (in thousands) | Period | Revenue Recognized | | :-------------------------------- | :----------------- | | Three months ended June 30, 2020 | $8,500 | | Six months ended June 30, 2020 | $15,800 | | Since inception of agreement | $44,700 | [Note 11. Commitments and contingencies](index=30&type=section&id=Note%2011.%20Commitments%20and%20contingencies) Operating lease liabilities totaled **$2.34 million** as of June 30, 2020, with a new Lexington, MA facility lease committing **$47 million** over 10 years, alongside research commitments and officer/director indemnifications Operating Lease Liabilities (in thousands) | Item | Amount | | :-------------------------------------- | :----- | | Operating lease ROU assets (June 30, 2020) | $1,998 | | Current lease liabilities (June 30, 2020) | $421 | | Non-current lease liabilities (June 30, 2020) | $1,920 | | Total minimum lease payments (Woburn, MA) | $2,684 | - Entered into a new lease for a Lexington, MA facility with total minimum lease payments of approximately **$47 million** over an initial term of **10 years**, expected to commence December 1, 2020[162](index=162&type=chunk) - Committed to **$705 thousand** in payments over twelve months for research on a therapeutic drug to treat multiple sclerosis[167](index=167&type=chunk) - Indemnifies officers and directors, with unlimited potential future payments, but covered by D&O insurance[171](index=171&type=chunk) [Note 12. Subsequent events](index=32&type=section&id=Note%2012.%20Subsequent%20events) On July 20, 2020, the company completed a private placement, issuing **2,350,108 common shares** at **$18.00 per share** for **$40.1 million** in net proceeds, and entered a Registration Rights Agreement for resale - On July 20, 2020, the company issued and sold **2,350,108 shares** of common stock in a private placement for net proceeds of **$40.1 million**[176](index=176&type=chunk) - A Registration Rights Agreement was signed, requiring the company to file a registration statement for the resale of these shares within **60 days**[177](index=177&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its focus on FX-322 for hearing restoration, progress in clinical trials, the impact of the COVID-19 pandemic, and its financial performance, liquidity, and future funding requirements [Overview](index=33&type=section&id=Overview) Frequency Therapeutics is a clinical-stage biotech company focused on inner-ear cellular regeneration with lead candidate FX-322 for SNHL, currently in Phase 2a trials, while also developing an MS candidate and managing COVID-19 impacts, having raised significant capital but incurring substantial losses - The company is a clinical-stage biotechnology company focused on inner-ear cellular regeneration and hearing restoration, with lead product candidate FX-322 for SNHL[181](index=181&type=chunk) - FX-322 showed statistically significant and clinically meaningful improvement in hearing loss measures in Phase 1/2 trials and is currently in Phase 2a, with data readout expected in **Q2 2021**[182](index=182&type=chunk) - The COVID-19 pandemic temporarily halted patient enrollment in Phase 2a trials, but most sites have resumed, and enrollment activity has been steady[182](index=182&type=chunk) - The company is also developing a product candidate for multiple sclerosis (MS) with an IND submission planned for **H2 2021**[185](index=185&type=chunk) - Since formation in 2014, the company has raised approximately **$358.8 million** through various financings and collaboration agreements, but has incurred significant operating losses, with an accumulated deficit of **$79.8 million** as of June 30, 2020[190](index=190&type=chunk) [License and Collaboration Agreements](index=35&type=section&id=License%20and%20collaboration%20agreements) The company holds key license and collaboration agreements, notably with Astellas Pharma Inc. for FX-322 outside the U.S. (including an **$80 million upfront payment**), and other licenses with MIT, MEEI, CALIBR, and Cambridge Enterprise, each with specific development obligations, milestones, and royalties - Astellas Agreement: Exclusive license for FX-322 outside the U.S., with an **$80 million upfront payment** and potential development milestones up to **$230 million** and commercial milestones up to **$315 million**, plus tiered royalties[193](index=193&type=chunk)[194](index=194&type=chunk) - MIT License: Exclusive worldwide license for certain patent rights, requiring diligent development efforts and milestone payments up to **$2.9 million** per product, plus low single-digit royalties and low-twenties royalties on sublicense revenues[195](index=195&type=chunk)[196](index=196&type=chunk) - MEEI License: Non-exclusive worldwide license for patent rights related to hearing loss, with milestone payments up to **$350 thousand** per product and low single-digit royalties[197](index=197&type=chunk)[198](index=198&type=chunk) - CALIBR License: Exclusive worldwide license for MS treatment patent rights, with a **$1.0 million upfront payment** and milestone payments up to **$26.0 million** per product category, plus mid-single-digit royalties[199](index=199&type=chunk)[200](index=200&type=chunk) - Cambridge License: Exclusive worldwide license for demyelinating disease patent rights, with a **$50 thousand upfront payment** and milestone payments up to **$10.5 million** per product, plus low single-digit royalties[203](index=203&type=chunk)[204](index=204&type=chunk) [Components of Our Results of Operations](index=37&type=section&id=Components%20of%20our%20results%20of%20operations) This section details financial results components, including revenue from the Astellas Agreement, increasing research and development expenses for FX-322, rising general and administrative costs, and other income/expense items - Revenue is primarily from the Astellas Agreement's upfront license fee, recognized over the Phase 2a clinical trial period using the input method[206](index=206&type=chunk) - Research and development expenses are expensed as incurred, including salaries, third-party costs, manufacturing, and license payments[207](index=207&type=chunk) - General and administrative expenses include personnel costs, legal fees, professional fees, and public company operating costs[213](index=213&type=chunk)[214](index=214&type=chunk) - The company has significant federal and state net operating loss (NOL) and R&D credit carryforwards, but their utilization is limited by prior ownership changes[220](index=220&type=chunk)[222](index=222&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20operations) For the three months ended June 30, 2020, revenue was **$8.5 million** with a net loss of **$(6.0) million**, while six-month revenue was **$15.8 million** with a net loss of **$(10.9) million**, reflecting increased R&D and G&A expenses Summary of Results of Operations (in thousands) | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $8,523 | $— | $15,787 | $— | | R&D Expenses | $8,764 | $3,921 | $15,434 | $7,367 | | G&A Expenses | $5,959 | $3,098 | $12,208 | $5,568 | | Net Loss | $(6,025) | $(6,852) | $(10,938) | $(12,678) | - Research and development expenses increased by **$4.8 million** (3 months) and **$8.1 million** (6 months) year-over-year, driven by FX-322 external development costs and platform development[225](index=225&type=chunk)[235](index=235&type=chunk) - General and administrative expenses increased by **$2.9 million** (3 months) and **$6.6 million** (6 months) year-over-year, due to increased headcount, D&O insurance, and professional fees related to public company operations[227](index=227&type=chunk)[237](index=237&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20capital%20resources) The company expects continued operating losses, requiring additional financing, but believes existing cash and July 2020 private placement proceeds of **$195.4 million** will fund operations into **2023**, though future needs are uncertain - The company has incurred significant operating losses since inception and expects to continue to do so, requiring additional capital[242](index=242&type=chunk) Cash, Cash Equivalents, and Short-Term Investments (in millions) | Date | Amount | | :--- | :----- | | June 30, 2020 | $195.4 | - Existing cash, cash equivalents, short-term investments, and net proceeds from the July 2020 private placement are expected to fund operations into **2023**[253](index=253&type=chunk) - Future funding requirements are highly dependent on the progress and costs of clinical trials for FX-322 and other product candidates, regulatory requirements, and commercialization activities[254](index=254&type=chunk)[255](index=255&type=chunk) - The company is an 'emerging growth company' and 'smaller reporting company,' allowing for reduced disclosure requirements[262](index=262&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from this disclosure requirement as it is a **small reporting company**[263](index=263&type=chunk) - The company is exempt from this disclosure requirement as it is a small reporting company[263](index=263&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were **effective** as of June 30, 2020, with no material changes in internal control over financial reporting during the period - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2020[265](index=265&type=chunk) - No material changes in internal control over financial reporting occurred during the period[266](index=266&type=chunk) [PART II. Other Information](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any **material legal proceedings**[269](index=269&type=chunk) - The company is not subject to any material legal proceedings[269](index=269&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks that could materially and adversely affect the company's business, financial condition, results of operations, and future growth, spanning financial, development, commercial, third-party, legal, IP, and operational aspects [Risks Related to Our Financial Position and Need for Additional Capital](index=48&type=section&id=Risks%20related%20to%20our%20financial%20position%20and%20need%20for%20additional%20capital) The company has incurred significant losses since inception, expects continued losses, and requires substantial additional capital for operations and development, with failure to obtain financing potentially harming the business or diluting stockholders - The company has incurred significant losses since inception, with an accumulated deficit of **$79.8 million** as of June 30, 2020, and expects to continue incurring losses[271](index=271&type=chunk) - Substantial additional capital will be required to complete development, seek regulatory approvals, and commercialize product candidates, including FX-322[275](index=275&type=chunk) - Failure to raise necessary financing could lead to delays or discontinuation of product development and commercialization[276](index=276&type=chunk) - Raising additional capital through equity or convertible debt may dilute existing stockholders or impose restrictive covenants[280](index=280&type=chunk) - The company's ability to use net operating loss carryforwards may be limited by ownership changes[285](index=285&type=chunk) [Risks Related to Development, Clinical Testing, Manufacturing, and Regulatory Approval](index=52&type=section&id=Risks%20related%20to%20development,%20clinical%20testing,%20manufacturing,%20and%20regulatory%20approval) Success depends on FX-322's clinical development and the novel PCA platform's regulatory approval, with clinical trials being expensive, time-consuming, and prone to delays, while adverse events or the COVID-19 pandemic could halt development - Success is substantially dependent on FX-322, which is still in clinical development and may never receive regulatory approval or be successfully commercialized[287](index=287&type=chunk) - The PCA platform is a new therapeutic approach, making successful development, approval, and commercialization uncertain due to potential longer regulatory review and increased costs[289](index=289&type=chunk) - Clinical trials are expensive, time-consuming, and have uncertain outcomes; preclinical and early clinical results are not always predictive of future results[291](index=291&type=chunk) - Delays in clinical trials can occur due to various factors, including regulatory disagreements, patient enrollment issues, and the impact of the COVID-19 pandemic[292](index=292&type=chunk) - Serious adverse events or undesirable side effects from product candidates could halt clinical development, delay/prevent marketing approval, or lead to product recalls/warnings if approved[313](index=313&type=chunk)[316](index=316&type=chunk) - The COVID-19 pandemic could adversely impact preclinical studies, clinical trials (enrollment, site initiation, monitoring), and operations, leading to delays and disruptions[342](index=342&type=chunk)[343](index=343&type=chunk) [Risks Related to Commercialization](index=64&type=section&id=Risks%20related%20to%20commercialization) The company faces intense competition, and commercial success depends on adequate coverage, reimbursement, and market acceptance for novel therapies, requiring effective sales and marketing capabilities and managing international operational risks - The biotechnology, pharmaceutical, and medical device industries are highly competitive, and failure to compete effectively could harm operating results[345](index=345&type=chunk) - Successful commercialization depends on adequate coverage, reimbursement levels, and pricing policies from governmental authorities and health insurers, which are uncertain for novel products like FX-322[349](index=349&type=chunk) - Even if approved, product candidates may fail to achieve market acceptance by physicians, patients, and third-party payors, limiting commercial success[355](index=355&type=chunk) - Inability to establish effective sales and marketing capabilities, either independently or through collaborations, could hinder commercialization[359](index=359&type=chunk)[360](index=360&type=chunk) - Operating internationally involves risks such as conflicting laws, regulatory complexities, financial risks (e.g., foreign currency), and political instability[362](index=362&type=chunk)[370](index=370&type=chunk) [Risks Related to Our Dependence on Third Parties](index=68&type=section&id=Risks%20related%20to%20our%20dependence%20on%20third%20parties) The company heavily relies on the Astellas Agreement for FX-322 development, and on third-party CMOs for supply and CROs for clinical trials, introducing risks of delays, manufacturing defects, and limited control over performance - The Astellas Agreement is critical; its termination or inadequate performance by either party could materially delay FX-322 development and commercialization outside the U.S.[365](index=365&type=chunk)[367](index=367&type=chunk) - Reliance on third-party CMOs for clinical and commercial supply of product candidates exposes the company to risks of supply interruptions, manufacturing defects, and compliance issues with cGMP requirements[374](index=374&type=chunk)[375](index=375&type=chunk) - The company is substantially dependent on a single manufacturer for a key component of FX-322 and its lyophilization process, making transitions to new CMOs time-consuming and costly[374](index=374&type=chunk) - Reliance on CROs to conduct clinical trials limits control over activities and performance, potentially leading to delays, unreliable data, or intellectual property misappropriation[380](index=380&type=chunk)[382](index=382&type=chunk) [Risks Related to Healthcare Laws and Other Legal Compliance Matters](index=72&type=section&id=Risks%20related%20to%20healthcare%20laws%20and%20other%20legal%20compliance%20matters) Operations are subject to extensive healthcare regulatory laws, including anti-kickback, false claims, and HIPAA, with non-compliance risking penalties; legislative changes, GDPR, and environmental laws also pose significant compliance challenges - Business operations are subject to various healthcare regulatory laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, Physician Payments Sunshine Act) which could expose the company to penalties for non-compliance[393](index=393&type=chunk)[394](index=394&type=chunk)[396](index=396&type=chunk) - Enacted and future healthcare legislation, particularly related to drug pricing and cost-containment initiatives, could increase costs, reduce demand, and affect product pricing[385](index=385&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk) - Clinical trial programs and collaborations in the EEA are subject to GDPR, which imposes stringent data privacy requirements and significant fines for non-compliance[398](index=398&type=chunk) - The company is subject to environmental, health, and safety laws, with potential for liability and substantial expenses for compliance or remediation[399](index=399&type=chunk)[401](index=401&type=chunk) [Risks Related to Our Intellectual Property](index=77&type=section&id=Risks%20related%20to%20our%20intellectual%20property) Success depends on obtaining, maintaining, and enforcing intellectual property rights, facing complex and uncertain patent prosecution, potential licensing issues, and risks of expensive IP litigation, while also needing to protect trade secrets and trademarks - Failure to obtain, maintain, enforce, and protect patent protection for technology and product candidates could allow competitors to commercialize similar products, adversely affecting the business[402](index=402&type=chunk)[403](index=403&type=chunk) - The patent prosecution process is expensive, time-consuming, and uncertain, with potential for challenges to validity or enforceability, and patent terms may be inadequate[404](index=404&type=chunk)[405](index=405&type=chunk)[408](index=408&type=chunk) - Inability to obtain licenses from third parties on commercially reasonable terms or failure to comply with existing license obligations could lead to loss of critical IP rights[409](index=409&type=chunk)[411](index=411&type=chunk)[429](index=429&type=chunk) - The company may become involved in lawsuits to protect or enforce its IP rights, or face allegations of infringing third-party IP, which are expensive, time-consuming, and could result in substantial damages or injunctions[418](index=418&type=chunk)[422](index=422&type=chunk)[425](index=425&type=chunk) - Failure to protect the confidentiality of trade secrets or adequately protect trademarks and trade names could harm the business and competitive position[444](index=444&type=chunk)[445](index=445&type=chunk) [Risks Related to Our Employees, Managing Our Growth and Our Operations](index=86&type=section&id=Risks%20related%20to%20our%20employees,%20managing%20our%20growth%20and%20our%20operations) Future success depends on retaining key personnel and managing significant growth, which requires improved systems; acquisitions or in-licensing could disrupt business, and system failures or security breaches pose operational and liability risks - Future success is highly dependent on retaining key personnel and attracting, retaining, and motivating qualified employees in a competitive environment[448](index=448&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk) - Expected significant growth in employees and operations requires improved managerial, operational, and financial systems, which may be difficult to manage effectively[452](index=452&type=chunk) - Future acquisitions or in-licensing transactions could disrupt business, cause shareholder dilution, or reduce financial resources[453](index=453&type=chunk) - System failures or security breaches in computer systems could lead to data loss, operational disruptions, and liabilities, potentially delaying product development[454](index=454&type=chunk)[456](index=456&type=chunk) [Risks Related to Our Common Stock](index=88&type=section&id=Risks%20related%20to%20our%20common%20stock) The common stock market price is highly volatile due to clinical trial results, regulatory decisions, and market conditions, risking securities litigation; significant shareholder influence, adverse analyst opinions, and public company costs, along with anti-takeover provisions, also pose risks - The market price of common stock is highly volatile and subject to wide fluctuations due to factors like clinical trial results, regulatory decisions, and market conditions, including the COVID-19 pandemic[457](index=457&type=chunk)[459](index=459&type=chunk) - The company is susceptible to securities class action litigation, which could result in substantial costs and diversion of management's attention[460](index=460&type=chunk) - Directors, executive officers, and affiliated shareholders own a significant percentage (**15.0%** as of July 31, 2020) of common stock, allowing them to exert significant influence over shareholder approval matters[461](index=461&type=chunk) - Adverse analyst opinions or substantial sales of common stock could cause the stock price to fall[463](index=463&type=chunk)[465](index=465&type=chunk) - Operating as a public company incurs increased legal, accounting, and compliance costs, requiring substantial management time, especially for SOX Section 404 compliance[466](index=466&type=chunk)[467](index=467&type=chunk) - Anti-takeover provisions in organizational documents and Delaware law may discourage, delay, or prevent mergers or acquisitions[472](index=472&type=chunk)[474](index=474&type=chunk) - The restated certificate of incorporation designates specific courts as the exclusive forum for certain litigation, potentially limiting stockholders' ability to obtain a favorable judicial forum[476](index=476&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=94&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In October 2019, the company completed its IPO, issuing **6,325,000 common shares** at **$14.00 per share**, generating approximately **$79.2 million** in net proceeds, with no material change in their expected use - In October 2019, the company issued and sold **6,325,000 shares** of common stock in an IPO at **$14.00 per share**[478](index=478&type=chunk)[479](index=479&type=chunk) - The IPO generated approximately **$79.2 million** in net proceeds after deducting underwriting discounts and offering expenses[479](index=479&type=chunk) - No material change in the expected use of net proceeds from the IPO[480](index=480&type=chunk) [Item 3. Defaults Upon Senior Securities](index=94&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were **no defaults** upon senior securities during the reported period[481](index=481&type=chunk) - None[481](index=481&type=chunk) [Item 4. Mine Safety Disclosures](index=94&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is **not applicable** to the company[481](index=481&type=chunk) - Not applicable[481](index=481&type=chunk) [Item 5. Other Information](index=94&type=section&id=Item%205.%20Other%20Information) There is **no other information** to report under this item[482](index=482&type=chunk) - None[482](index=482&type=chunk) [Item 6. Exhibits](index=95&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, investor rights agreements, and certifications from the CEO and CFO - Key exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Second Amended and Restated Investors' Rights Agreement, and certifications from the CEO and CFO[483](index=483&type=chunk) [Signatures](index=96&type=section&id=SIGNATURES) [Report Signatures](index=96&type=section&id=Report%20Signatures) The report was signed on **August 12, 2020**, by David L. Lucchino (President and CEO) and Richard Mitrano (VP, Finance and Operations) - The report was signed on **August 12, 2020**, by David L. Lucchino (President and CEO) and Richard Mitrano (VP, Finance and Operations)[487](index=487&type=chunk)

Revenue and Financial Performance - Revenue for the three months ended March 31, 2020, was $7,264,000, compared to $0 for the same period in 2019[19]. - The total comprehensive loss for Q1 2020 was $4,982,000, compared to $5,756,000 in Q1 2019, showing a 13% improvement[22]. - The company reported a net loss of $4.913 million for the three months ended March 31, 2020, compared to a net loss of $5.826 million for the same period in 2019, representing a decrease of approximately 15.7%[91]. - Basic and diluted net loss per share was $(0.16) for the three months ended March 31, 2020, compared to $(3.24) for the same period in 2019, indicating a significant improvement in loss per share[91]. - The net loss for the three months ended March 31, 2020, was $4.9 million, an improvement of $0.9 million compared to a net loss of $5.8 million in 2019[209]. - Interest income increased to $0.7 million for the three months ended March 31, 2020, compared to $0.1 million in 2019, reflecting an increase of $0.6 million[209]. Operating Expenses - Total operating expenses for Q1 2020 were $12,919,000, a 118% increase from $5,916,000 in Q1 2019[19]. - Research and development expenses for the three months ended March 31, 2020 totaled $6.67 million, a significant increase from $3.45 million in the same period in 2019[197]. - General and administrative expenses were $6.2 million for the three months ended March 31, 2020, compared to $2.5 million in 2019, an increase of $3.7 million[214]. - The company reported a stock-based compensation expense of $2,164,000 for Q1 2020, significantly higher than $49,000 in Q1 2019[27]. - FX-322 external development costs were $1.0 million for the three months ended March 31, 2020, compared to $0.8 million in 2019, an increase of $0.2 million[212]. - Platform development, early-stage research, and unallocated expenses rose to $5.6 million in Q1 2020, up from $2.6 million in Q1 2019, marking a $3.0 million increase[213]. Cash and Liquidity - Cash and cash equivalents increased to $203,090,000 as of March 31, 2020, from $200,158,000 at the end of 2019[16]. - Cash used in operating activities for Q1 2020 was $9,363,000, compared to $6,150,000 in Q1 2019, indicating a 52% increase in cash outflow[27]. - Total current liabilities decreased to $43,728,000 as of March 31, 2020, down from $52,780,000 at the end of 2019, a reduction of 17%[16]. - The company’s cash and cash equivalents at March 31, 2020, consist entirely of cash held in banks and money market funds[47]. Stock and Equity - Stockholders' equity as of March 31, 2020, was $164,849,000, compared to $167,358,000 at the end of 2019, reflecting a decrease of 1.5%[16]. - The weighted-average shares of common stock outstanding for Q1 2020 were 30,868,220, compared to 1,797,986 in Q1 2019, reflecting a significant increase in shares[19]. - As of March 31, 2020, the Company had 6,908,115 stock options outstanding, an increase from 5,968,672 as of December 31, 2019, indicating potential future dilution[110]. - The Company has authorized 200,000,000 shares of common stock, with 31,009,250 shares issued and outstanding as of March 31, 2020, reflecting ongoing equity management[107]. Research and Development - The company is focused on developing FX-322 for sensorineural hearing loss (SNHL), with a Phase 1/2 clinical trial showing statistically significant improvements in hearing measures among 23 patients[169]. - FX-322 demonstrated measurable concentrations in cochlear fluid in an exploratory study in Germany, with no serious treatment-related adverse events observed in seven patients[170]. - The company expects research and development expenses to continue to increase substantially as it completes the Phase 2a clinical trial for FX-322 and initiates additional clinical trials[197]. - The company has incurred recurring losses since its inception and has funded operations primarily through capital stock sales and collaboration agreements[36]. Collaboration and Agreements - The company completed its IPO on October 31, 2019, raising approximately $79.7 million in net proceeds from the sale of 6,325,000 shares at $14.00 per share[31]. - Astellas paid the Company an upfront payment of $80.0 million in July 2019, with potential development milestone payments up to $230.0 million and commercialization milestones of up to $315.0 million[141]. - The Company recognized revenue when customers obtain control of promised goods or services, following a five-step model under ASC Topic 606[73]. - The Astellas Agreement remains in effect until the expiration of all royalty obligations, which are paid on a licensed product-by-licensed product and country-by-country basis[142]. Risks and Uncertainties - The company expects to continue generating operating losses for the foreseeable future, with future viability dependent on raising additional capital[36]. - The company relies on a single manufacturer for its product candidates, which poses a risk of supply interruption[53]. - The COVID-19 pandemic has impacted clinical trial enrollment and operations, with some sites temporarily halting enrollment[169][174]. - The company has realized gains on investments and foreign exchange gains, but has not recorded any net tax benefit from cumulative net operating loss carryforwards due to uncertainty around utilizing these tax attributes[205][207].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39062 FREQUENCY THERAPEUTICS, INC. (Exact name of Registrant as specified in its Charter) Delaware 47-2324450 (State or other jurisdi ...