4D Molecular Therapeutics(FDMT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Unaudited Financial Statements This section presents the unaudited condensed financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, collaboration agreements, license arrangements, commitments, and other financial details for the periods ended June 30, 2025, and December 31, 2024 Condensed Balance Sheets | (In thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :--------------------------------- | :------------ | :---------------- | :----- | :------- | | Assets | | | | | | Cash and cash equivalents | $77,159 | $149,336 | $(72,177) | -48.3% | | Marketable securities (current) | $216,066 | $275,541 | $(59,475) | -21.6% | | Total current assets | $303,287 | $434,932 | $(131,645) | -30.3% | | Marketable securities (long-term) | $123,806 | $80,583 | $43,223 | 53.6% | | Total assets | $473,637 | $560,384 | $(86,747) | -15.5% | | Liabilities | | | | | | Accounts payable | $8,700 | $4,386 | $4,314 | 98.4% | | Accrued and other current liabilities | $19,190 | $18,869 | $321 | 1.7% | | Total current liabilities | $34,677 | $29,149 | $5,528 | 19.0% | | Total liabilities | $52,747 | $49,778 | $2,969 | 6.0% | | Stockholders' Equity | | | | | | Total stockholders' equity | $420,890 | $510,606 | $(89,716) | -17.6% | | Total liabilities and stockholders' equity | $473,637 | $560,384 | $(86,747) | -15.5% | Condensed Statements of Operations | (In thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (3M) | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (6M) | % Change (6M) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------ | :-------------- | :----------------------------- | :----------------------------- | :------------ | :-------------- | | Collaboration and license revenue | $15 | $5 | $10 | 200.0% | $29 | $33 | $(4) | -12.1% | | Research and development | $47,951 | $31,860 | $16,091 | 50.5% | $88,650 | $59,727 | $28,923 | 48.4% | | General and administrative | $11,520 | $10,601 | $919 | 8.7% | $24,456 | $20,898 | $3,558 | 17.0% | | Total operating expenses | $59,471 | $42,461 | $17,010 | 40.1% | $113,106 | $80,625 | $32,481 | 40.3% | | Loss from operations | $(59,456) | $(42,456) | $(17,000) | 40.0% | $(113,077) | $(80,592) | $(32,485) | 40.3% | | Interest income | $4,859 | $7,548 | $(2,689) | -35.6% | $10,441 | $13,293 | $(2,852) | -21.5% | | Net loss | $(54,658) | $(34,953) | $(19,705) | 56.4% | $(102,630) | $(67,354) | $(35,276) | 52.4% | | Net loss per share, basic and diluted | $(0.98) | $(0.63) | $(0.35) | 55.6% | $(1.84) | $(1.29) | $(0.55) | 42.6% | Condensed Statements of Comprehensive Loss | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (6M) | | :--------------- | :------------------------------- | :------------------------------- | :---------- | :----------------------------- | :----------------------------- | :---------- | | Net loss | $(54,658) | $(34,953) | $(19,705) | $(102,630) | $(67,354) | $(35,276) | | Net unrealized gain/(loss) on marketable securities | $5 | $(184) | $189 | $108 | $(309) | $417 | | Total comprehensive loss | $(54,653) | $(35,137) | $(19,516) | $(102,522) | $(67,663) | $(34,859) | Condensed Statements of Stockholders' Equity Total stockholders' equity decreased from $510.6 million at December 31, 2024, to $420.9 million at June 30, 2025, primarily due to a net loss of $102.6 million for the six months ended June 30, 2025, partially offset by stock-based compensation expense and common stock issuances[19][12] Key Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Item | Amount (in thousands) | | :-------------------------------------- | :-------------------- | | Balances at December 31, 2024 | $510,606 | | Stock-based compensation expense | $11,944 | | Net unrealized gain on marketable securities | $108 | | Net loss | $(102,630) | | Balances at June 30, 2025 | $420,890 | Condensed Statements of Cash Flows | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :----- | :------- | | Net cash used in operating activities | $(91,135) | $(59,331) | $(31,804) | 53.6% | | Net cash provided by (used in) investing activities | $18,096 | $(336,797) | $354,893 | 105.4% | | Net cash provided by financing activities | $862 | $336,081 | $(335,219) | -99.7% | | Net decrease in cash and cash equivalents | $(72,177) | $(60,047) | $(12,130) | 20.2% | | Cash and cash equivalents, end of period | $77,159 | $189,061 | $(111,902) | -59.2% | Notes to Unaudited Condensed Financial Statements Note 1. The Company 4D Molecular Therapeutics, Inc. is a late-stage biotechnology company focused on developing durable and disease-targeted therapeutics, having completed a public offering in February 2024 and anticipating continued operating losses and future funding needs despite current liquidity - 4D Molecular Therapeutics, Inc. is a late-stage biotechnology company focused on advancing durable and disease-targeted therapeutics[28] - In February 2024, the Company completed a public offering, raising net proceeds of $281.2 million, with an additional $34.9 million in March 2024 from underwriters exercising their option[29][30] - The Company had an accumulated deficit of $678.8 million as of June 30, 2025, and expects operating losses and negative cash flows to continue[31] - Current cash, cash equivalents, and marketable securities are believed to be sufficient to fund planned operations for at least one year, but additional funding will be required[31] Note 2. Summary of Significant Accounting Policies The financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, with management using estimates and judgments, operating as a single segment, managing credit risk, and evaluating new accounting pronouncements - The condensed financial statements are prepared under U.S. GAAP and SEC interim reporting rules, with certain information condensed or omitted compared to annual statements[32][33] - Management's estimates and judgments are crucial for financial reporting, covering areas like useful lives, contract terms, stock options, and derivative instruments[35] - The Company operates as a single segment, focusing on the discovery, development, and commercialization of medicines[37] - Credit risk is managed through an investment policy limiting purchases to high-quality issuers and restricting single-issuer investments[38] - The Company is evaluating the impact of recently issued accounting pronouncements: ASU 2024-03 (Expense Disaggregation Disclosures) effective for fiscal years beginning after December 15, 2026, and ASU 2023-09 (Improvements to Income Tax Disclosures) effective for annual periods beginning after December 15, 2024[43][44] Note 3. Fair Value Measurements and Marketable Securities The Company's financial assets are primarily measured at fair value using Level 1 and Level 2 inputs, while a Level 3 derivative liability is valued using a present value analysis, with marketable securities showing aggregate unrealized gains and losses Fair Value of Financial Assets (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Cash | $7,086 | $6,715 | | Money market funds (Level 1) | $62,635 | $142,621 | | Certificates of deposit (Level 2) | $16,385 | $47,647 | | Commercial paper (Level 2) | $51,425 | $60,202 | | U.S. Treasuries (Level 2) | $56,674 | $32,110 | | Corporate bonds (Level 2) | $222,826 | $216,165 | | Total | $417,031 | $505,460 | - The derivative liability is a Level 3 measurement, valued using a present value analysis with multiple scenarios, considering factors like change of control payment, probability of event, product status, and discount rate[46][127] Marketable Securities Unrealized Gains and Losses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------------------- | :------------ | :---------------- | | Aggregate fair value of marketable securities in a continuous loss position for less than twelve months | $114,697 | $69,947 | | Aggregate fair value of marketable securities in unrealized gain position | $225,175 | $286,177 | | Total marketable securities | $339,872 | $356,124 | Note 4. Property and Equipment, Net Property and equipment, net, decreased from $19.5 million at December 31, 2024, to $17.5 million at June 30, 2025, primarily due to increased accumulated depreciation and amortization Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Machinery and equipment | $14,488 | $14,172 | | Leasehold improvements | $18,467 | $17,763 | | Construction in progress | $128 | $1,182 | | Total property and equipment | $36,307 | $36,119 | | Less: Accumulated depreciation and amortization | $(18,802) | $(16,585) | | Property and equipment, net | $17,505 | $19,534 | - Depreciation expense was $1.3 million for the three months ended June 30, 2025 (up from $1.2 million in 2024) and $2.6 million for the six months ended June 30, 2025 (up from $2.4 million in 2024)[52] Note 5. Accrued and Other Current Liabilities Accrued and other current liabilities increased slightly from $18.9 million at December 31, 2024, to $19.2 million at June 30, 2025, driven by increases in accrued clinical and preclinical study costs, consulting and professional fees, and restructuring expenses Accrued and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Payroll and related expenses | $6,861 | $8,106 | | Accrued clinical and preclinical study costs | $8,277 | $7,977 | | Consulting and professional | $3,032 | $2,672 | | Restructuring expenses | $918 | $0 | | Total accrued and other current liabilities | $19,190 | $18,869 | Note 6. Research and Collaboration Arrangements Collaboration revenue was immaterial and solely from the Cystic Fibrosis Foundation, with ongoing agreements with uniQure and Arbor Biotechnologies, and the CFF agreement involving milestone-based funding and an embedded derivative for a change of control provision Collaboration and License Revenue (in thousands) | Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cystic Fibrosis Foundation | $15 | $5 | $29 | $33 | | Total revenue | $15 | $5 | $29 | $33 | - The uniQure Agreement was amended in 2019, eliminating the exclusivity clause and modifying milestone/royalty terms, with no revenues recognized under uniQure agreements for the three and six months ended June 30, 2025 and 2024[61][62][69] - The CFF Agreement provides funding for cystic fibrosis research, with milestone payments totaling $1.8 million achieved as of June 30, 2025, and future payments contingent on commercial sales and a change of control, the latter being an embedded derivative[70][72][78] - The Arbor Agreement, signed in December 2023, is a co-development and co-commercialization agreement for up to six genetic medicine products for CNS indications, with no R&D expenses incurred related to this agreement during the three and six months ended June 30, 2025[79][81] Note 7. License Arrangements The Astellas License Agreement was terminated in July 2025, while the Aevitas Agreement involves contingent milestone and royalty payments for sCFH rights, and the Company holds exclusive license agreements with the Regents of the University of California for core technologies - The Astellas License Agreement, signed in July 2023 for the 4D Vector, was terminated by AGT for convenience in July 2025, with no expected charges related to this termination[82][83][137] - The Aevitas Agreement (April 2023) acquired worldwide rights to sCFH for 4D-175, with potential future milestone payments up to $144.1 million and low single-digit royalties, with no liability recorded as of June 30, 2025, as milestones were not deemed probable[84][85] - The Company has exclusive license agreements with the Regents of the University of California for core technologies, including Therapeutic Vector Evolution, involving annual license fees, development milestones up to $3.1 million, low single-digit royalties, and mid-teens to mid-twenties sublicense consideration[86][87][88] Note 8. Commitments and Contingencies The Company has operating lease commitments for office, laboratory, and warehouse space in Emeryville, California, with total future minimum lease payments of $30.4 million, and no material legal proceedings outstanding - The Company has operating lease commitments for office, laboratory, and warehouse space in Emeryville, California, including the 5980 Horton Lease (expires August 2026), 5858 Horton Lease (extended to December 2030), 5858 Horton Expansion Lease (through December 2030), and Warehouse Lease (through December 2029)[91][92][93][94] Operating Lease Costs (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $1,344 | $698 | $2,688 | $1,397 | | Variable lease cost | $648 | $354 | $1,422 | $707 | | Total | $1,992 | $1,052 | $4,110 | $2,104 | - As of June 30, 2025, the weighted-average remaining lease term is 5.3 years, and the weighted-average discount rate is 10.8%, with total future minimum lease payments of $30.4 million[96] - The Company enters into indemnification agreements in the ordinary course of business and with its directors and officers, and no material legal proceedings were outstanding as of June 30, 2025[97][98] Note 9. Income Taxes No federal or state income tax provision was recorded due to recurring net losses and a full valuation allowance against deferred tax assets, and the recently enacted One Big Beautiful Bill Act is being assessed for future implications - No federal or state income tax provision was recorded for the three and six months ended June 30, 2025 and 2024, due to recurring net losses[99] - A full valuation allowance has been taken against net deferred tax assets, as realization of the benefit is not considered more likely than not[99] - The One Big Beautiful Bill Act, enacted in July 2025, is being assessed for implications on U.S. tax laws, but no material impact is expected on current year financial statements[100] Note 10. Common Stock As of June 30, 2025, the Company had 46.7 million shares of common stock issued and outstanding, with 22.8 million shares reserved for future issuance, and does not intend to pay dividends, while the Cystic Fibrosis Foundation provided $14.0 million in funding for the 4D-710 program - As of June 30, 2025, 46,700,242 shares of common stock were issued and outstanding, with 300,000,000 shares authorized[12][101] - The Company has reserved 22,796,483 shares of common stock for future issuance as of June 30, 2025, an increase from 20,813,800 shares at December 31, 2024[102] - The Company does not currently intend to pay dividends on its common stock[101] - The Cystic Fibrosis Foundation provided $14.0 million in funding for the 4D-710 development program, with the commitment fulfilled as of June 30, 2025[102][103][104] - The Jefferies ATM offering program was terminated on May 31, 2024, after selling 1,684,550 shares for net proceeds of $34.4 million, and no shares were sold under the Leerink ATM offering program for the six months ended June 30, 2025[105][106] Note 11. Stock-based Compensation The Company has three equity incentive plans and an ESPP, with 725,101 RSUs unvested and 10,445,483 stock options outstanding as of June 30, 2025, and total stock-based compensation expense for the six months ended June 30, 2025, was $11.9 million - The 2025 Employment Inducement Plan reserved 500,000 shares for new employee grants, with 451,700 shares available as of June 30, 2025[107] - The 2020 Equity Incentive Award Plan had 1,431,952 shares available for grant as of June 30, 2025, after automatic annual increases[108] - As of June 30, 2025, 725,101 Restricted Stock Units (RSUs) were unvested, and 10,445,483 stock options were outstanding, with 5,493,360 exercisable[114][115] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $2,498 | $3,196 | $6,479 | $6,231 | | General and administrative | $2,460 | $2,877 | $5,465 | $5,817 | | Total stock-based compensation expense | $4,958 | $6,073 | $11,944 | $12,048 | Note 12. Common Stock Warrants The Company has various common stock warrants, including pre-funded warrants issued in February 2024 and exchanged in November/December 2024, totaling 9,385,000 shares issuable upon exercise, which are immediately exercisable at a nominal price and classified as stockholders' equity - A warrant for 23,669 shares issued in May 2018 was fully vested upon issuance and exercised in May 2025, and another warrant for 30,000 shares issued in December 2020 vests over four years and expires in 2027[119][120] - In February 2024, the Company sold pre-funded warrants to purchase 3,583,476 shares, generating $99.4 million in net proceeds, and in November and December 2024, additional pre-funded warrants for 6,310,000 shares were issued in exchange for common stock[122][123] - The pre-funded warrants have a nominal exercise price ($0.0001 per share), are immediately exercisable, and are classified as a component of stockholders' equity[122][123] Note 13. Net Loss Per Share, Basic and Diluted The Company reported a basic and diluted net loss per share of $(0.98) for the three months and $(1.84) for the six months ended June 30, 2025, with potentially dilutive securities excluded due to the net loss Net Loss Per Share, Basic and Diluted | (In thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(54,658) | $(34,953) | $(102,630) | $(67,354) | | Weighted-average shares outstanding | 55,927,091 | 55,282,754 | 55,836,075 | 52,277,369 | | Net loss per share, basic and diluted | $(0.98) | $(0.63) | $(1.84) | $(1.29) | - Potentially dilutive securities, including 11,750,245 shares as of June 30, 2025 (options, RSUs, ESPP, warrants), were excluded from diluted net loss per share calculation because their inclusion would have been antidilutive[126] Note 14. Derivative Liability An embedded derivative from the CFF Agreement's change of control provision is remeasured to fair value each period, resulting in a derivative liability of $0.3 million as of June 30, 2025, with changes recorded in other income (expense), net - An embedded derivative arises from the change of control provision in the CFF Agreement, requiring bifurcation and separate accounting as a derivative liability[127] - The fair value of the derivative liability was $0.3 million as of June 30, 2025, down from $0.4 million at December 31, 2024, with the change in fair value recorded in other income (expense), net[128][49] - Valuation uses a present value analysis with multiple scenarios, incorporating estimates for change of control payment (zero to $18.9 million), probability of event (5.0% to 50.0%), product status at change of control (4.8% to 17.2%), and a 15% discount rate[127] Note 15. Related Party Transactions The Company entered into a research and option agreement with Reignite Therapeutics Inc., founded by its CEO, for developing adenovirus capsids, with payments to Reignite for R&D expenses totaling $0.5 million for the six months ended June 30, 2025 - The Company entered into a research and option agreement with Reignite Therapeutics Inc., a company founded by its CEO, to develop high-capacity, helper-dependent adenovirus capsids[129] - Payments to Reignite for research and development expenses were $0.4 million for the three months ended June 30, 2025, and $0.5 million for the six months ended June 30, 2025[130] - The Company has an option to acquire up to three capsids from the program, with an exercise fee of $1.0 million per selected capsid, totaling a maximum of $3.0 million[129] Note 16. 401(k) Plan The Company's 401(k) plan allows eligible employees to make contributions, with company contributions totaling $1.1 million for the six months ended June 30, 2025, an increase from the prior year 401(k) Contribution Expenses (in thousands) | Period | 2025 | 2024 | | :------------------------------- | :--- | :--- | | Three Months Ended June 30, | $500 | $400 | | Six Months Ended June 30, | $1,100 | $800 | Note 17. Segment Information The Company operates as a single operating and reportable segment focused on therapeutics, with all long-lived assets and revenue in the United States, and research and development expenses significantly increased due to trials, payroll, and facilities costs - The Company operates in a single operating and reportable segment, encompassing all activities related to the discovery, development, and commercialization of durable and disease-targeted therapeutics[133] Disaggregated Research and Development Expenses (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development trials and consumables expenses | $23,426 | $14,162 | $39,586 | $25,781 | | Payroll and personnel expenses | $17,871 | $13,158 | $35,099 | $25,591 | | Facilities and other research and development expenses | $6,654 | $4,540 | $13,965 | $8,355 | | Total research and development expenses | $47,951 | $31,860 | $88,650 | $59,727 | Note 18. Subsequent Events In July 2025, the Company announced a workforce reduction of approximately 25% of roles, expecting $3.0 million in cash expenses and $15 million in annual cash compensation cost savings, while the Astellas License Agreement was also terminated - On July 2, 2025, the Company announced a workforce reduction of approximately 25% of current and planned roles, primarily in early-stage research and development and support functions[136] - The workforce reduction is expected to incur approximately $3.0 million in cash expenses (severance, benefits, termination costs) in Q3 2025, and provide annual cash compensation cost savings of approximately $15 million[136][154] - In July 2025, Astellas Gene Therapies, Inc. terminated the Astellas License Agreement for convenience, with no expected charges to the Company[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting a strategic pipeline prioritization focusing on 4D-150 and 4D-710, with a workforce reduction in July 2025 to streamline operations and offset increased Phase 3 costs, and anticipating further funding needs despite current liquidity Overview The Company is a late-stage biotechnology company prioritizing 4D-150 for wet AMD and DME, and 4D-710 for cystic fibrosis, with significant net losses and an accumulated deficit, expecting to finance operations through equity sales, debt, or collaborations - The Company is a late-stage biotechnology company focused on advancing 4D-150 for wet AMD and DME, and 4D-710 for cystic fibrosis, as core pipeline priorities[139][140] - 4D-150 is in Phase 3 clinical trials for wet AMD (4FRONT-1 and 4FRONT-2, with 52-week topline data expected in H1 2027 and H2 2027, respectively) and has shown positive 60-week results in DME (SPECTRA trial), demonstrating 78% reduction in treatment burden[141][142][143][144] - 4D-710 is in Phase 1 clinical trial for cystic fibrosis, with an interim data update expected in Q4 2025[145] - Net losses were $54.7 million and $102.6 million for the three and six months ended June 30, 2025, respectively, with an accumulated deficit of $678.8 million[150] - The Company has no approved products and expects to finance operations through equity sales, debt, or collaborations, anticipating continued operating losses[151][152] Workforce Reduction On July 2, 2025, the Company announced a workforce reduction of approximately 25% of roles, primarily in early-stage R&D and support functions, expecting $3.0 million in cash expenses and $15 million in annual cash compensation cost savings, while maintaining sufficient liquidity for planned expenses - On July 2, 2025, the Company announced a workforce reduction of approximately 25% of current and planned roles, primarily in early-stage R&D and support functions[154] - The reduction is expected to result in approximately $3.0 million in cash expenses (severance, benefits, termination costs) in Q3 2025, and annual cash compensation cost savings of approximately $15 million[154] - As of June 30, 2025, the Company had $417.0 million in cash, cash equivalents, and marketable securities, sufficient to support planned expenses for 4D-150 Phase 3 trials, BLA preparation, and 4D-710 development[154] Components of Results of Operations Revenue is generated from collaboration and license agreements, while R&D expenses are expensed as incurred, G&A expenses are expected to remain stable or decline, and other income primarily includes interest income and derivative liability adjustments - Revenue is generated from collaboration and license agreements, primarily upfront and milestone payments and expense reimbursement, with no product sales revenue generated to date[155] - Research and development expenses include personnel costs, lab supplies, fees to CROs/CMOs, technology licenses, and allocated facility costs, which are expensed as incurred and not allocated by product candidate[157][158][159] - General and administrative expenses consist of personnel costs (executive, finance, legal, HR), professional fees, and allocated overhead, and are expected to remain relatively stable or decline due to operational streamlining[162][163] - Other income, net, primarily comprises interest income from cash equivalents and marketable securities, and adjustments for changes in the fair value of derivative liability[164] Comparison of the Three and Six Months Ended June 30, 2025 and 2024 | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Collaboration and license revenue | $15 | $5 | $10 | 200% | | Research and development | $47,951 | $31,860 | $16,091 | 51% | | General and administrative | $11,520 | $10,601 | $919 | 9% | | Total operating expenses | $59,471 | $42,461 | $17,010 | 40% | | Loss from operations | $(59,456) | $(42,456) | $(17,000) | 40% | | Other Income, Net | $4,798 | $7,503 | $(2,705) | (36)% | | Net loss | $(54,658) | $(34,953) | $(19,705) | 56% | | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Collaboration and license revenue | $29 | $33 | $(4) | (12)% | | Research and development | $88,650 | $59,727 | $28,923 | 48% | | General and administrative | $24,456 | $20,898 | $3,558 | 17% | | Total operating expenses | $113,106 | $80,625 | $32,481 | 40% | | Loss from operations | $(113,077) | $(80,592) | $(32,485) | 40% | | Other Income, Net | $10,447 | $13,238 | $(2,791) | (21)% | | Net loss | $(102,630) | $(67,354) | $(35,276) | 52% | - Research and development expenses increased by $16.1 million (51%) for the three months and $28.9 million (48%) for the six months ended June 30, 2025, primarily due to increased clinical trial activity for 4D-150, higher payroll, and increased facilities/IT expenses[169][172] - General and administrative expenses increased by $0.9 million (9%) for the three months and $3.6 million (17%) for the six months ended June 30, 2025, mainly due to higher legal fees, consulting services for public company compliance, IT system implementations, and increased G&A headcount[169][173] - Other income, net, decreased by $2.7 million (36%) for the three months and $2.8 million (21%) for the six months ended June 30, 2025, attributable to lower balances of cash equivalents and marketable securities[170] Liquidity and Capital Resources The Company has historically funded operations through equity sales, with $417.0 million in cash, cash equivalents, and marketable securities as of June 30, 2025, believed to be sufficient for at least one year, but expects continued net losses and substantial additional funding needs - The Company has historically funded operations through equity sales, including IPO ($204.7 million net), 2021 Offering ($111.1 million net), 2023 Offering ($129.2 million net), and 2024 Offering ($281.2 million net, plus $34.9 million from option exercise)[171][174][175][177][179][180] - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled $417.0 million, which is believed to be sufficient to fund planned operations for at least one year[182][186] - The Company expects continued net losses and will require substantial additional funding through equity, debt, or collaborations to support ongoing R&D, commercialization, and potential manufacturing capacity expansion[183][184][185] Summary of Cash Flows (in thousands) | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(91,135) | $(59,331) | | Net cash provided by (used in) investing activities | $18,096 | $(336,797) | | Net cash provided by financing activities | $862 | $336,081 | | Net decrease in cash and cash equivalents | $(72,177) | $(60,047) | - Net cash used in operating activities increased to $91.1 million for the six months ended June 30, 2025, from $59.3 million in the prior year, primarily due to increased net loss[192][193] - Net cash provided by investing activities was $18.1 million for the six months ended June 30, 2025, a significant change from $336.8 million used in the prior year, driven by higher maturities of marketable securities[195][196] - Net cash provided by financing activities decreased substantially to $0.9 million for the six months ended June 30, 2025, from $336.1 million in the prior year, due to the absence of large public offerings[197][198] Contractual Obligations, Commitments and Contingencies The Company's principal commitments consist of operating lease obligations for its facilities and service agreements with third parties, which generally allow for termination upon notice - The Company's principal commitments as of June 30, 2025, consist of obligations under operating leases for its headquarters and other facilities[200] - The Company also enters into service agreements with CROs, CMOs, and other third parties, which generally provide for termination upon notice with specified amounts due[199] Critical Accounting Policies and Significant Judgments and Estimates No changes were made to the Company's critical accounting policies and significant judgments and estimates during the three and six months ended June 30, 2025, as disclosed in the Annual Report on Form 10-K for 2024 - No changes were made to the Company's critical accounting policies and significant judgments and estimates during the three and six months ended June 30, 2025, as disclosed in the Annual Report on Form 10-K for 2024[202] Recent Accounting Pronouncements Information on recent accounting pronouncements is provided in Note 2, Summary of Significant Accounting Policies, of the condensed financial statements - Information on recent accounting pronouncements is provided in Note 2, Summary of Significant Accounting Policies, of the condensed financial statements[203] Off-Balance Sheet Arrangements The Company has not engaged in any off-balance sheet arrangements since its inception - The Company has not engaged in any off-balance sheet arrangements since its inception[204] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's primary market risk is interest rate sensitivity, affecting its $417.0 million in cash, cash equivalents, and marketable securities, but an immediate 10% change in interest rates is not expected to materially affect their fair value, and inflation has not had a significant impact - The Company's market risk primarily stems from interest rate sensitivity, impacting its $417.0 million in cash, cash equivalents, and marketable securities as of June 30, 2025[205] - Due to the short to medium-term maturities of these financial instruments, an immediate 10% change in interest rates is not expected to have a material effect on their fair value[205] - Inflation or interest rate changes have not had a significant impact on the Company's results of operations for any periods presented[206] Item 4. Controls and Procedures Management evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - The Company maintains disclosure controls and procedures designed to ensure timely and accurate reporting of information required under the Exchange Act[207] - As of June 30, 2025, management, with the participation of the principal executive and financial officers, concluded that the disclosure controls and procedures were effective at the reasonable assurance level[208] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[209] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 8, Commitments and Contingencies, in the condensed financial statements, which states there are no material legal proceedings outstanding as of June 30, 2025 - Legal proceedings information is incorporated by reference from Note 8, Commitments and Contingencies, in the financial statements[211] - As of June 30, 2025, there are no material legal proceedings outstanding[98] Item 1A. Risk Factors This section outlines significant risks associated with investing in the Company's common stock, covering its limited operating history, recurring net losses, substantial capital requirements, and the inherent uncertainties of novel AAV genetic medicine technology development, alongside manufacturing complexities, competition, intellectual property protection, operational risks, and broader economic conditions Risk Factor Summary The Company faces risks from its limited operating history, recurring net losses, substantial capital requirements, and the inherent uncertainties of novel AAV genetic medicine technology development, including potential clinical trial failures, regulatory challenges, manufacturing complexities, intense competition, and intellectual property protection issues - The Company is in late-stage drug development with a limited operating history and no approved products, making future success difficult to predict[215][216] - Recurring net losses are expected to continue, requiring substantial additional capital that may not be available on acceptable terms, potentially delaying or eliminating R&D programs[215][217][221] - Product candidates are based on novel AAV genetic medicine technology with limited regulatory and clinical experience, leading to unpredictable development timelines and costs[215][235] - Clinical trials may fail to demonstrate safety and efficacy, preventing or delaying regulatory approval and commercialization[215][276] - Gene therapies are complex to manufacture, posing risks of production problems, supply limitations, and delays[219][298] - Success depends on protecting intellectual property, which is subject to challenges, invalidation, and enforcement difficulties[219][383] Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements The Company has a limited operating history with no approved products or product revenue, incurring recurring net losses and requiring substantial additional capital, with quarterly operating results expected to fluctuate significantly - The Company has a limited operating history since September 2013, no products approved for commercial sale, and has not generated product revenue, making future success and viability highly uncertain[216] - The Company has incurred recurring net losses ($54.7 million and $102.6 million for Q2 and H1 2025, respectively) and expects significant losses to continue, with an accumulated deficit of $678.8 million as of June 30, 2025[217][218] - Substantial additional capital is required to finance operations, and failure to raise funds on acceptable terms could force delays, reductions, or termination of R&D programs or commercialization efforts[221][225][227] - Quarterly operating results may fluctuate significantly due to factors like clinical trial timing, regulatory approvals, manufacturing costs, and macroeconomic trends, potentially causing stock price volatility[231][232][234] Risks Related to the Research, Discovery, Development and Commercialization of Our Product Candidates Product candidates rely on novel AAV genetic medicine technology with unpredictable development timelines and costs, facing risks from adverse public perception, undesirable side effects, clinical trial failures, intense competition, and challenges in market acceptance and regulatory approvals across multiple jurisdictions - All product candidates rely on novel AAV genetic medicine technology, with limited regulatory and clinical experience, making development time and cost difficult to predict and potentially longer/more expensive[235] - Adverse public perception or regulatory scrutiny of genetic medicine technology could negatively impact development progress, commercial success, and clinical trial enrollment[243][244][246] - Product candidates may cause undesirable side effects, leading to clinical trial delays/halts, restrictive labels, denial of approval, or significant negative post-approval consequences like product recalls or liability claims[247][249][250] - The Company has no approved products or product sales revenue and profitability depends on successful development, regulatory approval, and commercialization, which is highly uncertain and may take several years, if ever[251][252][253][254] - Clinical trials are expensive, time-consuming, and subject to substantial delays or termination due to factors like patient enrollment difficulties, regulatory holds, manufacturing issues, or adverse events[256][257][258][259][261][262] - Interim or preliminary data from studies are subject to change upon comprehensive review and audit, and differences from final data could seriously harm the business[282][283][284] - Failure to create a pipeline of additional product candidates or develop commercially successful products through the Therapeutic Vector Evolution platform would limit commercial opportunity[285] - The Company faces substantial competition from major pharmaceutical and biotechnology companies with greater resources and expertise, potentially leading to competitors developing products more successfully or rendering the Company's candidates obsolete[286][287][289] - Inability to establish internal sales and marketing capabilities or secure third-party agreements for commercialization would hinder product sales and revenue generation[290][291][292][293] - Even with marketing approval, product candidates may fail to achieve market acceptance by physicians, patients, and payors due to factors like efficacy, safety, pricing, and competition[294][296][297] - Public health crises (e.g., pandemics) and disruptions at regulatory agencies (e.g., funding shortages, trade restrictions) could adversely affect preclinical/clinical trials, business operations, and timely regulatory approvals[271][272][274][275] - The Company has received Fast Track, Orphan Drug, RMAT, and PRIME designations for certain product candidates (e.g., 4D-310, 4D-710, 4D-150), but these do not guarantee faster review, approval, or market exclusivity[328][329][331][333][336][338] - Failure to obtain regulatory approval in multiple jurisdictions would limit market opportunities and seriously harm the business[342] - Enacted and future healthcare legislation (e.g., ACA, IRA, OBBB Act) and regulations may increase the difficulty and cost of obtaining marketing approval, affect pricing, and reduce reimbursement, impacting profitability[343][346][348][349][352][354] - Successful commercialization depends on obtaining and maintaining coverage and adequate reimbursement from governmental authorities and private health insurers, which is uncertain and can be a lengthy, costly process[358][360][361][362] Risks Related to Manufacturing Gene therapies are complex to manufacture, posing risks of production problems, supply limitations, and delays in development or regulatory approvals, with reliance on third-party manufacturers and suppliers entailing additional risks - Gene therapies are complex to manufacture, and production problems (e.g., product defects, contamination, insufficient inventory) could delay development, regulatory approvals, or limit product supply[298][299][309] - Delays in obtaining regulatory approval for manufacturing processes or disruptions in internal/contract manufacturing facilities (e.g., non-compliance with cGMP) could delay commercialization efforts[302][303] - Developing internal manufacturing capabilities requires significant resources and management time, and failure to achieve operating efficiencies or manage employee shortages could delay product development timelines[304][305] - Reliance on third-party manufacturers and suppliers for product candidates and raw materials (e.g., plasmids) entails risks of non-satisfactory performance, supply disruptions, increased costs, and quality issues[306][308][310][311] Risks Related to Regulatory Approval and Other Legal Compliance Matters The Company faces lengthy, expensive, and unpredictable regulatory approval processes, with approved products remaining subject to ongoing scrutiny, and business operations are subject to healthcare regulatory laws, environmental, health & safety laws, and animal welfare regulations, with non-compliance potentially leading to significant penalties and reputational harm - The regulatory approval processes (FDA, EMA, etc.) are lengthy, expensive, and unpredictable, and failure to obtain approval for product candidates would prevent revenue generation[313][314][317] - Even with approval, products remain subject to ongoing regulatory scrutiny, including cGMP compliance, labeling, promotion, and post-marketing studies, and non-compliance can lead to sanctions or market withdrawal[321][322][323][324][325] - Business operations and relationships are subject to healthcare regulatory laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could result in significant penalties, exclusion from healthcare programs, and reputational harm[366][367][368] - The Company's research involves hazardous materials, exposing it to environmental and health & safety laws, and non-compliance or accidents could lead to significant costs, liabilities, and operational disruptions[371][504][505] - Compliance with animal welfare regulations for research animals could increase operating costs and lead to penalties or adverse publicity if violated[372] Risks Related to Our Reliance on Third Parties Reliance on third parties for clinical trials, research, and preclinical testing reduces control and poses risks of unsatisfactory performance, missed deadlines, or non-compliance, while dependence on collaborations carries risks of resource discretion, intellectual property disputes, and program termination, and sharing trade secrets increases misappropriation risk - Reliance on third parties (CROs, CMOs, clinical investigators) for clinical trials, research, and preclinical testing reduces control and poses risks of unsatisfactory performance, missed deadlines, or non-compliance with regulatory requirements, potentially delaying product development and approvals[373][374][375][376] - Dependence on collaborations for R&D and commercialization of product candidates carries risks, including collaborators' discretion over resources, intellectual property disputes, delays, or termination of programs[377][378][379][381] - Sharing trade secrets with third parties (collaborators, contractors) increases the risk of misappropriation, unauthorized disclosure, or independent discovery by competitors, which could harm the Company's competitive position[420] Risks Related to Our Intellectual Property Commercial success depends on obtaining and maintaining patent and trade secret protection, which is subject to challenges, invalidation, enforcement difficulties, and potential expiration before commercialization, with global protection being challenging and costly, and the Company facing risks of infringement claims or loss of rights from third-party licenses - Commercial success depends on obtaining and maintaining patent and trade secret protection for product candidates and technologies, but patent applications may not issue, issued patents may be challenged or invalidated, and protection may not be sufficient against competitors[383][384][385][387][389] - The lives of patents may not be sufficient to effectively protect product candidates, as patents might expire before or shortly after commercialization, opening the door to competition[395] - Changes in U.S. or foreign patent laws (e.g., Leahy-Smith Act, EU Patent Package) could diminish the value of patents, increase prosecution costs, and weaken enforcement capabilities[398][399][400][401] - Protecting intellectual property rights globally is challenging and expensive, with varying levels of protection in different countries, potentially allowing competitors to use inventions where patent protection is weak or absent[402][403][404] - The Company may face claims challenging inventorship or ownership of patents and other intellectual property, leading to costly litigation, loss of rights, or diversion of management attention[406] - Failure to comply with procedural, documentary, and fee payment requirements of patent agencies can result in abandonment or lapse of patent rights[407] - Inability to protect the confidentiality of trade secrets (unpatented know-how, technology) through agreements and security measures could seriously harm the business, as monitoring unauthorized uses is difficult and enforcement is costly[408][409][410][411] - Rights to develop and commercialize product candidates are subject to third-party licenses, and failure to comply with license terms or inability to obtain future necessary licenses could result in loss of rights or technology[412][413][414][415] - Litigation or third-party claims of intellectual property infringement are costly, time-consuming, and could prevent product sales, require licensing, or result in damages[427][428][431][433][434] - The Company may be subject to claims of wrongfully hiring employees from competitors or using/disclosing confidential information of former employers, leading to litigation and potential loss of intellectual property rights[444][445] Risks Related to Our Operations The Company is highly dependent on key personnel, faces challenges in managing future growth, is vulnerable to unfavorable global economic conditions, and its IT systems are susceptible to security breaches, while compliance with data protection laws and changes in tax laws pose additional risks - The Company is highly dependent on key managerial, scientific, and medical personnel, and failure to attract, motivate, and retain qualified individuals in a competitive environment could delay product development and harm the business[446][447][448] - Future growth will require expanding the organization, which may lead to difficulties in managing increased responsibilities, recruiting employees, and maintaining operational controls[449][450][452] - Unfavorable global economic conditions (e.g., inflation, geopolitical conflicts) could adversely affect business, financial condition, and results of operations, potentially straining manufacturers/suppliers or impacting capital raising[453] - Engaging in acquisitions or strategic partnerships may increase capital requirements, dilute stockholders, incur debt, assume liabilities, and divert management attention[454][455] - Information technology systems, both internal and third-party, are vulnerable to security breaches and disruptions (e.g., cyberattacks, natural disasters), which could lead to loss of confidential information, development delays, liability, and reputational harm[456][457][458][460][461] - Actual or perceived failures to comply with evolving data protection, privacy, and security laws (e.g., HIPAA, CCPA, GDPR) could result in investigations, fines, legal liability, and damage to reputation[464][465][466][467][468][472] - The ability to use net operating loss carryforwards (NOLs) and other tax attributes may be limited due to past or future 'ownership changes' under U.S. tax law (Sections 382 and 383 of the Code)[473] - Changes in tax laws or regulations, or adverse interpretations thereof, could negatively impact the Company's domestic and international business operations and financial performance[474][475] Risks Related to Ownership of Our Common Stock The market price of common stock may be volatile due to various factors, with substantial sales by insiders or through equity plans potentially causing declines, and insiders holding significant influence over company matters, while operating as a public company incurs substantial costs and regulatory compliance burdens - The market price of the common stock may be volatile due to clinical trial results, competitive developments, regulatory changes, financing efforts, and general market conditions, potentially leading to substantial losses for investors[476][477] - Sales of a substantial number of common stock shares in the public market, including from equity incentive plans or pre-funded warrants, could cause the market price to decline significantly[479][480][481][482] - Insiders (directors, executive officers, >5% stockholders) beneficially own approximately 55% of outstanding common stock, giving them substantial influence over management and stockholder-approved matters, potentially delaying or preventing a change of control[484] - Operating as a public company incurs significant costs and requires substantial management time for compliance with SEC and Nasdaq rules, including Section 404 of Sarbanes-Oxley, with potential sanctions for non-compliance[485][486][487] - Provisions in the Company's certificate of incorporation, bylaws, and Delaware law (e.g., staggered board, limitations on stockholder actions) could discourage, delay, or prevent a change in control or management, depressing the stock price[488][489][490] - The Company does not intend to pay dividends on common stock, meaning investor returns will depend solely on stock price appreciation[496] General Risk Factors Legal proceedings, product liability lawsuits, and misconduct by employees or partners could lead to significant costs, liabilities, and reputational harm, while non-compliance with environmental, health, and safety laws, and increased focus on ESG matters, also pose financial and reputational risks - Legal proceedings or claims, even if unmeritorious, could be costly, time-consuming, divert management attention, and harm the Company's reputation[498] - Product liability lawsuits, arising from clinical testing or commercialization, could result in substantial liabilitie