C4 Therapeutics(CCCC) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) C4 Therapeutics' unaudited financial statements as of June 30, 2022, reflect a decrease in total assets to $492.5 million, an increase in total liabilities to $147.9 million, and a widened net loss of $59.0 million for the six months, primarily due to higher R&D and G&A expenses despite increased collaboration revenue Condensed Consolidated Balance Sheets As of June 30, 2022, the company's total assets decreased to $492.5 million, total liabilities increased to $147.9 million due to higher operating lease liabilities, and total stockholders' equity decreased to $344.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $57,296 | $76,124 | | Marketable securities (current & non-current) | $340,541 | $375,355 | | Total assets | $492,475 | $506,765 | | Liabilities & Equity | | | | Total current liabilities | $46,148 | $51,246 | | Total liabilities | $147,882 | $117,159 | | Total stockholders' equity | $344,593 | $389,606 | | Total liabilities and stockholders' equity | $492,475 | $506,765 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the six months ended June 30, 2022, collaboration revenue increased to $21.5 million, while the net loss widened to $59.0 million due to higher R&D and G&A expenses, resulting in a net loss per share of $(1.21) Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue from collaboration agreements | $13,834 | $9,781 | $21,488 | $17,207 | | Research and development expense | $31,323 | $23,286 | $57,526 | $43,812 | | General and administrative expense | $9,895 | $8,611 | $22,715 | $16,020 | | Loss from operations | $(27,384) | $(22,116) | $(58,753) | $(42,625) | | Net loss | $(27,412) | $(22,580) | $(59,032) | $(43,551) | | Net loss per share | $(0.56) | $(0.51) | $(1.21) | $(1.00) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash used in operating activities increased to $48.8 million, while investing activities provided $29.2 million, and financing activities provided $0.7 million, a significant decrease from the prior year's $170.4 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,791) | $(42,936) | | Net cash provided by (used in) investing activities | $29,224 | $(29,296) | | Net cash provided by financing activities | $739 | $170,350 | | Net change in cash, cash equivalents and restricted cash | $(18,828) | $98,118 | | Cash, cash equivalents and restricted cash at end of period | $60,575 | $282,422 | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail the company's clinical-stage biopharmaceutical business, confirming sufficient cash for the next twelve months, outlining collaboration revenue sources, a $12.5 million term loan, and $17.1 million in stock-based compensation expense - The company is a clinical-stage biopharmaceutical firm focused on targeted protein degradation using its proprietary TORPEDO platform[44] - Management expects that its cash, cash equivalents, and marketable securities of $397.8 million as of June 30, 2022, will be sufficient to fund operations for at least the next twelve months[45] Revenue from Collaboration Agreements (Six Months Ended June 30, in thousands) | Agreement | 2022 | 2021 | | :--- | :--- | :--- | | Roche Agreement | $3,673 | $5,086 | | Biogen Agreement | $14,250 | $4,820 | | Calico Agreement | $3,565 | $7,301 | | Total | $21,488 | $17,207 | - The company has an outstanding $12.5 million term loan with Perceptive, bearing a variable interest rate (11.25% as of June 30, 2022) and maturing in June 2024[84] - Stock-based compensation expense totaled $17.1 million for the six months ended June 30, 2022, a significant increase from $9.1 million in the same period of 2021[93] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's TORPEDO platform and clinical pipeline, highlighting a $4.3 million increase in collaboration revenue for the first half of 2022, alongside significant increases in R&D and G&A expenses, confirming $397.8 million in funds are expected to last through 2024 Business Overview C4 Therapeutics is a clinical-stage biopharmaceutical company leveraging its TORPEDO platform to develop small-molecule medicines, with lead candidates CFT7455 and CFT8634 in Phase 1/2 trials and additional IND submissions planned - The company's most advanced product candidate, CFT7455, is in a Phase 1/2 clinical trial for multiple myeloma (MM) and non-Hodgkin lymphomas (NHLs)[101] - The first patient was dosed in a Phase 1/2 clinical trial for CFT8634, a degrader targeting BRD9 for synovial sarcoma, in May 2022[101] - An Investigational New Drug (IND) application for CFT1946, targeting BRAF V600X mutant cancers, is expected in the second half of 2022[101] Results of Operations For the six months ended June 30, 2022, revenue increased by $4.3 million due to the Biogen agreement, while R&D expenses rose by $13.7 million and G&A expenses by $6.7 million, primarily driven by increased personnel and stock-based compensation Comparison of Operating Results (Six Months Ended June 30, in thousands) | Item | 2022 | 2021 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21,488 | $17,207 | +$4,281 | $9.4M increase from Biogen agreement, offset by decreases from Calico and Roche | | R&D Expense | $57,526 | $43,812 | +$13,714 | Increased personnel ($7.3M), facilities ($2.7M), and clinical expenses ($2.4M) | | G&A Expense | $22,715 | $16,020 | +$6,695 | Increased personnel costs ($5.8M), mainly from higher stock-based compensation | Liquidity and Capital Resources As of June 30, 2022, the company held $397.8 million in cash and equivalents, expected to fund operations through 2024, with $48.8 million net cash used in operating activities for the first half of 2022, anticipating substantial future expense increases - As of June 30, 2022, the company had cash, cash equivalents, and marketable securities of approximately $397.8 million[114] - The company believes its existing funds will be sufficient to fund its operating plan through the end of 2024[136] - Net cash used in operating activities was $48.8 million for the six months ended June 30, 2022, primarily due to the net loss of $59.0 million, offset by non-cash charges like stock-based compensation of $17.1 million[114][115] Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on its $340.5 million marketable securities portfolio, but a short weighted-average maturity of 1.0 year mitigates significant impact from rate fluctuations - The company's primary market risk is related to changes in interest rates affecting its portfolio of marketable securities[125] - As of June 30, 2022, the company held $340.5 million in marketable securities with a short weighted-average maturity of 1.0 year, which limits the impact of interest rate changes[125] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2022, and concluded they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[127] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[128] PART II. OTHER INFORMATION Legal Proceedings As of the filing date of this report, the company was not a party to any material legal proceedings or claims - The company reports that it was not a party to any material legal matters or claims as of the date of the Form 10-Q[132] Risk Factors The company outlines extensive risks including significant losses, funding needs, unproven platform, clinical trial failures, reliance on third parties, intense competition, IP challenges, and unpredictable regulatory and commercialization processes Financial and Capital Risks The clinical-stage company faces financial risks from ongoing significant losses, the need for substantial additional funding, potential COVID-19 impacts, and restrictive covenants in its credit agreement - The company has a limited operating history and incurred a net loss of $59.0 million for the six months ended June 30, 2022, with an accumulated deficit of $326.7 million[134] - Substantial additional funding is needed to continue operations, and if unable to raise capital, the company may have to delay, limit, or terminate its research and development programs[136] - The ongoing COVID-19 pandemic poses a risk of adversely impacting business, including discovery programs, preclinical studies, clinical trials, and supply chain[139] Discovery and Development Risks The company's unproven TORPEDO platform and preclinical pipeline face high risks of clinical trial failure, unpredictable outcomes, and substantial competition from other protein degradation therapies - The company's TORPEDO platform for targeted protein degradation is an unproven approach, making it difficult to predict the time, cost, and likelihood of success[148] - Preclinical studies and clinical trials may fail to demonstrate adequate safety and efficacy, which would prevent or delay regulatory approval and commercialization[153] - The company faces substantial competition from numerous companies developing protein degradation therapies, including Arvinas, Kymera, and Nurix, as well as large pharmaceutical firms[160] Third-Party Reliance Risks Reliance on third-party CROs and CMOs for clinical trials and manufacturing introduces risks of performance failures and non-compliance, while critical collaborations with Roche, Biogen, and Calico are essential for capitalizing on product potential - The company relies on CROs to conduct clinical trials and CMOs for manufacturing, which reduces control and introduces risks of delays, quality issues, and regulatory non-compliance[171][172] - The company's collaborations with Roche, Biogen, and Calico are crucial; failure or termination of these agreements could prevent the company from receiving future payments and may require it to abandon or self-fund programs[175] Commercialization Risks Commercialization risks include potential failure to achieve market acceptance, the absence of a sales organization, uncertainty in obtaining favorable pricing and reimbursement, and exposure to product liability lawsuits - Approved products may fail to gain market acceptance from physicians, patients, and third-party payors, which is necessary for commercial success[179] - The company has no marketing and sales organization and will need to build one or rely on third parties, which carries significant risks and costs[180] - Successful commercialization depends on obtaining adequate coverage and reimbursement from third-party payors, which is uncertain and subject to cost-containment pressures[182] Intellectual Property Risks The company's success hinges on obtaining and maintaining patent protection, facing risks from an uncertain patent landscape, potential infringement lawsuits, inability to protect trade secrets, and the need for third-party IP licenses - Failure to obtain and maintain sufficient patent protection could allow competitors to develop and commercialize similar or identical products, impairing the company's commercial success[187] - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against infringement claims from third parties[189][191] - The company relies on trade secrets, and if it is unable to protect their confidentiality, its business and competitive position would be harmed[200] Regulatory Risks The company faces lengthy, costly, and unpredictable regulatory approval processes, ongoing compliance obligations post-approval, and complex healthcare laws that could lead to substantial penalties for non-compliance - The process to obtain marketing approval from the FDA and foreign regulatory authorities is lengthy, time-consuming, and inherently unpredictable, and product candidates could fail to receive approval for many reasons[203] - Even if approved, products are subject to ongoing regulatory requirements for manufacturing, labeling, and marketing, and failure to comply can lead to significant penalties or withdrawal of approval[206] - The company is subject to numerous federal and state healthcare laws, including anti-kickback statutes and false claims acts, and non-compliance could result in significant civil and criminal penalties[213] Operational and Personnel Risks Operational risks include high dependence on key personnel, challenges in managing growth, vulnerability of internal systems to security breaches, and exposure to employee misconduct - The company is highly dependent on its key managerial, scientific, and medical personnel and faces intense competition in attracting and retaining qualified employees[225] - The company expects significant growth and may experience difficulties in managing it, which could disrupt operations and strain resources[226] - Internal computer systems are vulnerable to security breaches, which could result in a material disruption of product development programs and loss of proprietary information[227] Common Stock Risks Common stock risks include price volatility, potential dilution from future capital raises, difficulty in sustaining an active trading market, concentrated ownership influencing stockholder matters, and no anticipated dividends - The price of the company's common stock may be volatile and subject to wide fluctuations, and an active, liquid trading market may not be sustained[230][232] - Executive officers, directors, and principal stockholders beneficially own a significant percentage of shares, giving them the ability to control matters submitted to stockholders for approval[234] - The company does not anticipate paying any cash dividends in the foreseeable future, so capital appreciation will be the sole source of gain for stockholders[239] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities, and no material change in the planned use of $191.2 million net proceeds from the October 2020 IPO - In October 2020, the company completed its IPO, selling 11,040,000 shares of common stock for aggregate net cash proceeds of $191.2 million[240][241] - There has been no material change in the planned use of proceeds from the IPO as described in the final prospectus[241] Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities - Not applicable[242] Mine Safety Disclosures This item is not applicable to the company - Not applicable[243] Other Information The company reports that there is no other information to disclose for this period - None[243] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes required certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files[247]