Third Harmonic Bio(THRD) - 2024 Q3 - Quarterly Report

Financial Performance - The company reported a net loss of $30.8 million for the year ended December 31, 2023, and $32.4 million for the nine months ended September 30, 2024, with an accumulated deficit of approximately $146.6 million as of September 30, 2024[87]. - Total operating expenses increased by 57% to $17.1 million for the three months ended September 30, 2024, compared to $10.8 million for the same period in 2023[96]. - The company expects to continue incurring net operating losses for several years as it advances its product candidates through clinical development[87]. - Net cash used in operating activities for the nine months ended September 30, 2024, was $23.3 million, primarily due to a net loss of $32.4 million[106]. - The company expects to incur significant expenses and operating losses for the foreseeable future, primarily for research and development services and general overhead costs[109]. Research and Development - Research and development expenses rose by 90% to $11.3 million for the three months ended September 30, 2024, from $6.0 million in the prior year[96]. - Total research and development expenses for the nine months ended September 30, 2024, were $26.0 million, an increase of $8.0 million from $18.0 million for the same period in 2023[98]. - The company initiated a Phase 1 clinical trial for THB335, a potent oral small molecule KIT inhibitor, with results expected in Q1 2025[82]. - THB335 demonstrated nanomolar potency against KIT and improved pharmacokinetic profiles compared to the first-generation product candidate THB001[84]. - The company has not generated any revenue from product sales since its inception in 2019 and relies on financing from equity offerings and capital sources[86]. Cash and Funding - The company has $296.1 million in cash and cash equivalents as of September 30, 2024, which is expected to fund operations through at least 2026[94]. - The company sold 3,900,000 shares of common stock through its ATM Facility, generating net proceeds of approximately $48.7 million[103]. - The company filed a shelf registration statement allowing for the offering of up to $400.0 million in various securities, including common stock and debt securities[102]. - The company is obligated to pay Novartis up to $31.7 million upon achieving certain development milestones and $200 million upon achieving specified sales milestones for licensed products[95]. Internal Controls and Compliance - The company identified a material weakness in internal control over financial reporting, which has not been fully remediated since it was first noted in 2021[120]. - The material weakness is attributed to a lack of segregation of duties, system limitations in accounting software, and insufficient internal resources with appropriate accounting and finance expertise[120]. - The company has implemented measures to improve internal controls, including engaging financial consultants and enhancing supervisory reviews by financial management[121]. - The company qualifies as an "emerging growth company" and has elected to delay the adoption of new accounting standards until they apply to private companies[123]. - The company is classified as a "smaller reporting company," with a market value of stock held by non-affiliates less than $700 million and annual revenue below $100 million[124]. Market and Economic Conditions - Interest income is sensitive to changes in U.S. interest rates, and cash equivalents are subject to interest rate risk, which could lead to a decrease in value if market rates increase[128]. - The company is currently not exposed to significant foreign currency exchange risk as all operations and expenses are denominated in U.S. dollars[129]. - Inflation has not materially impacted the company's financial position to date, but rising inflation rates may affect labor and clinical trial costs in the near future[130]. - The company has not had a formal hedging program for foreign currency, and foreign currency transaction gains and losses have not been material to its financial statements[129].