Foghorn Therapeutics(FHTX) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Foghorn Therapeutics Inc.'s unaudited condensed consolidated financial statements for the period ended June 30, 2024, detailing financial position, performance, and cash flows with explanatory notes Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2024, shows total assets of $328.6 million, an increase from $285.9 million at year-end 2023, primarily driven by a significant rise in cash and cash equivalents from a recent stock offering; total liabilities decreased to $342.9 million from $363.1 million, while the total stockholders' deficit improved substantially from -$77.2 million to -$14.3 million Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $138,947 | $80,336 | | Marketable securities | $146,230 | $153,721 | | Total current assets | $289,621 | $240,181 | | Total assets | $328,585 | $285,916 | | Liabilities and Stockholders' Deficit | | | | Total current liabilities | $50,871 | $58,436 | | Total liabilities | $342,907 | $363,106 | | Total stockholders' deficit | $(14,322) | $(77,190) | | Total liabilities and stockholders' deficit | $328,585 | $285,916 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended June 30, 2024, the company reported a net loss of $23.0 million, an improvement from a $29.5 million net loss in the same period of 2023, driven by lower operating expenses, particularly in research and development; for the six-month period, the net loss was $48.0 million in 2024, compared to $60.0 million in 2023 Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Collaboration revenue | $6,888 | $5,599 | $11,938 | $10,908 | | Research and development | $23,797 | $29,248 | $49,331 | $59,233 | | General and administrative | $7,325 | $8,401 | $15,035 | $17,042 | | Impairment of long-lived assets | $2,398 | $— | $2,398 | $— | | Total operating expenses | $33,520 | $37,649 | $66,764 | $76,275 | | Loss from operations | $(26,632) | $(32,050) | $(54,826) | $(65,367) | | Net loss | $(22,979) | $(29,487) | $(47,995) | $(59,975) | | Net loss per share | $(0.45) | $(0.70) | $(1.02) | $(1.43) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The statement shows a significant improvement in the stockholders' deficit, moving from a deficit of $77.2 million at the end of 2023 to $14.3 million at June 30, 2024, primarily driven by the issuance of common stock and pre-funded warrants, which added $102.8 million in capital, offsetting the net loss for the period - The issuance of common stock and pre-funded warrants in Q2 2024 provided net proceeds of $102.8 million, significantly reducing the total stockholders' deficit from $(97.5) million at March 31, 2024 to $(14.3) million at June 30, 2024[13] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities was $54.9 million, net cash provided by investing activities was $9.1 million, and financing activities provided $104.4 million, primarily from a stock and warrant offering, resulting in a net increase in cash, cash equivalents, and restricted cash of $58.6 million Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2024 | 2023 | | Net cash used in operating activities | $(54,882) | $(63,355) | | Net cash provided by investing activities | $9,120 | $68,639 | | Net cash provided by financing activities | $104,373 | $205 | | Net increase in cash, cash equivalents and restricted cash | $58,611 | $5,489 | | Cash, cash equivalents and restricted cash at end of period | $140,655 | $59,411 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail key events and accounting treatments, including a May 2024 offering of common stock and pre-funded warrants that raised net proceeds of $102.8 million, confirmation of sufficient cash reserves for at least the next 12 months, the ongoing Lilly collaboration with $290.7 million in deferred revenue, and a $2.4 million non-cash impairment charge from a new sublease agreement - In May 2024, the company completed a public offering of common stock and pre-funded warrants, resulting in net proceeds of $102.8 million after deducting underwriting discounts and other expenses[18][31] - Management expects that its current cash, cash equivalents, and marketable securities will be sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[19] - As of June 30, 2024, the unsatisfied portion of the performance obligation under the Lilly Collaboration Agreement was $290.7 million, which is expected to be recognized as revenue through 2029 or beyond[40] - The company entered into a sublease for a portion of its office space in May 2024, which triggered an impairment test, resulting in a non-cash impairment charge of $2.4 million, allocated between the operating lease right-of-use asset and leasehold improvements[43][45] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business overview, recent developments, and financial performance, highlighting the clinical progress of FHD-286, the anticipated start of the FHD-909 trial with Lilly, and the successful May 2024 financing, with analysis showing a decrease in net loss driven by lower R&D and G&A expenses, and confirmation of sufficient capital to fund operations for at least the next year Overview Foghorn is a clinical-stage biotech company pioneering medicines that target the chromatin regulatory system, advancing a pipeline of over eight programs, with FHD-286 in a Phase 1 study for AML and FHD-909 (partnered with Lilly) expected to enter clinical trials later in 2024, and a May 2024 public offering significantly strengthened the company's financial position with $102.8 million in net proceeds - The company is conducting a Phase 1 dose escalation study of FHD-286 in combination with other agents for relapsed/refractory acute myeloid leukemia (AML)[52] - In collaboration with Eli Lilly, a Phase 1 dose escalation study is expected to start later in 2024 for FHD-909, a selective inhibitor of SMARCA2 (BRM)[52] - The May 2024 public offering of common stock and pre-funded warrants resulted in net proceeds of $102.8 million[52][53] Results of Operations For Q2 2024, collaboration revenue increased to $6.9 million from $5.6 million in Q2 2023 due to progress in the Lilly partnership, R&D expenses decreased by $5.5 million to $23.8 million, primarily due to lower personnel costs and the shutdown of the FHD-609 trial, G&A expenses fell by $1.1 million to $7.3 million, also due to reduced headcount, and the company recorded a one-time $2.4 million impairment charge on long-lived assets Comparison of Results of Operations (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Collaboration revenue | $6,888 | $5,599 | $11,938 | $10,908 | | Research and development | $23,797 | $29,248 | $49,331 | $59,233 | | General and administrative | $7,325 | $8,401 | $15,035 | $17,042 | | Impairment of long-lived assets | $2,398 | $— | $2,398 | $— | | Net loss | $(22,979) | $(29,487) | $(47,995) | $(59,975) | - The decrease in R&D expenses for Q2 2024 was driven by a $3.0 million reduction in personnel-related costs and a $2.2 million decrease in early development costs, mainly from the shutdown of the FHD-609 clinical trial[68] - A non-cash impairment charge of $2.4 million was recorded in Q2 2024 related to the sublease of office space[72] Liquidity and Capital Resources As of June 30, 2024, the company had $285.2 million in cash, cash equivalents, and marketable securities; operations used $54.9 million in cash during the first six months of 2024, while financing activities, led by the May 2024 offering, provided $104.4 million, and management asserts that current capital is sufficient to fund operations and capital expenditures for at least the next twelve months - As of June 30, 2024, the company had cash, cash equivalents and marketable securities of $285.2 million[76] Summary of Cash Flows (in thousands) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2024 | 2023 | | Net cash used in operating activities | $(54,882) | $(63,355) | | Net cash provided by investing activities | $9,120 | $68,639 | | Net cash provided by financing activities | $104,373 | $205 | - The company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the report's issuance date[81] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is classified as a smaller reporting company and, as such, is not required to provide the information requested under this item - As a smaller reporting company, Foghorn Therapeutics is not required to provide quantitative and qualitative disclosures about market risk[85] Item 4. Controls and Procedures Based on an evaluation as of June 30, 2024, the company's management, including the Principal Executive Officer and Principal Financial Officer, concluded that its disclosure controls and procedures were effective, and there were no material changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024[86] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[87] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business - The company is not currently a party to any litigation or legal proceedings that management believes would have a material adverse effect on the business[89] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023[90] Item 5. Other Information The company confirms that none of its directors or officers entered into, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2024 - During the second quarter of 2024, no directors or officers entered into, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[91] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - The report lists several exhibits, including the Form of Pre-Funded Warrant, an underwriting agreement, officer certifications pursuant to the Sarbanes-Oxley Act, and XBRL instance documents[94]