Finch Therapeutics (FNCH) - 2022 Q4 - Annual Report

Financial Performance - The company reported net losses of $114.6 million and $58.2 million for the years ended December 31, 2022, and 2021, respectively, with an accumulated deficit of $275.6 million as of December 31, 2022[245]. - Total revenue for the year ended December 31, 2022, was $0.9 million, a decrease of $17.7 million from $18.5 million in 2021, primarily due to the termination of the Takeda Agreement[266]. - General and administrative expenses rose significantly to $38.1 million in 2022, up from $21.2 million in 2021, driven by an $8.1 million increase in professional fees and a $3.6 million increase in facilities and supplies[269]. - The company recognized a goodwill impairment charge of $18.1 million in 2022 due to a decline in market conditions affecting its market capitalization[272]. - Restructuring expenses amounted to $2.4 million in 2022, reflecting costs associated with expense reduction measures implemented during the year[273]. - Net cash used in operating activities was $74.9 million in 2022, compared to $67.1 million in 2021, primarily due to a net loss of $114.6 million[276]. - Total other income, net was $0.9 million for 2022, a decrease from $1.8 million in 2021, primarily due to the forgiveness of the PPP Loan in 2021[270]. Research and Development - The company has a robust intellectual property estate with over 70 issued U.S. and foreign patents related to microbiome therapeutics[236]. - The decision to discontinue the Phase 3 clinical trial of CP101 was made in January 2023, focusing instead on realizing the value of the intellectual property estate[236]. - Research and development expenses are expected to decrease due to reduced headcount and the discontinuation of the Phase 3 clinical trial of CP101[256]. - Research and development expenses increased to $57.9 million in 2022 from $57.3 million in 2021, reflecting a $6.9 million increase in unallocated costs and a $3.9 million increase in platform-related expenses[268]. - The company discontinued its Phase 3 clinical trial of CP101 in recurrent CDI, which may lead to impairment of the IPR&D asset in Q1 2023[300]. Collaborations and Agreements - The company has entered into a collaboration agreement with the University of Minnesota for multiple investigator-sponsored clinical trials using a microbiome product candidate[242]. - The company received a one-time upfront payment of $10 million from Takeda under the Takeda Agreement, which was terminated effective November 17, 2022[251]. - The company has made payments of $5 million to OpenBiome related to the OpenBiome Agreement, with potential future milestone payments up to $26 million[254]. - The company is obligated to pay regulatory milestone payments to OpenBiome aggregating up to $6.0 million upon achieving regulatory approvals, and sales-based milestone payments of up to $20.0 million upon meeting certain net sales criteria[285]. - The company raised approximately $177.0 million from the sale of convertible preferred stock and $14.0 million in collaboration revenue from the Takeda Agreement, which was terminated in 2022[274]. Cash and Financing - The company plans to finance its cash needs through equity offerings, debt financings, or other capital sources, as it does not currently expect to generate substantial revenue[247]. - As of December 31, 2022, the company's cash and cash equivalents were $71.0 million, expected to fund operations into 2025[281]. - Cash flows from financing activities provided $14.9 million in 2022, primarily from borrowings under the Loan Agreement and stock option exercises[279]. - Borrowings under the Loan Agreement amounted to $15.0 million with an average interest rate of 8.71% as of December 31, 2022[311]. - The company voluntarily prepaid all outstanding principal and interest under the Loan Agreement on January 25, 2023[311]. Market and Risk Factors - The company does not expect to generate revenue from product sales in the near future and plans to derive revenue from enforcement and out-licensing of its intellectual property estate[274]. - The company is classified as an "emerging growth company" and a "smaller reporting company," with total annual gross revenues below $1.235 billion and market value of stock held by non-affiliates below $700.0 million[306][307]. - The company has not entered into investments for trading or speculative purposes, focusing instead on capital preservation[310]. - The company does not expect significant effects on operating results or cash flows from changes in market interest rates due to the conservative nature of its investment portfolio[310]. - The company is primarily exposed to market risk through fluctuations in foreign currency exchange rates[309]. - The company may continue to rely on exemptions from certain disclosure requirements as a smaller reporting company[308]. Obligations - Total contractual obligations amount to $68.147 million, with lease commitments of $52.582 million, loan payable of $15.0 million, and license agreements totaling $565,000[282].