Fulcrum Therapeutics(FULC) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the company's unaudited financial statements, management's analysis, and disclosures on controls and market risk Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the periods ended June 30, 2023, and December 31, 2022 Consolidated Balance Sheets The balance sheets show a significant increase in total assets and stockholders' equity driven by a recent public offering Key Balance Sheet Metrics | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Current Assets | $282,947 | $207,519 | | Total Assets | $300,332 | $226,685 | | Total Current Liabilities | $14,804 | $16,725 | | Total Liabilities | $24,904 | $27,743 | | Total Stockholders' Equity | $275,428 | $198,942 | - Total assets increased by $73.6 million, primarily driven by an increase in marketable securities[15] - Total stockholders' equity increased by $76.5 million, largely due to a public offering of common stock in January 2023[15][29] Consolidated Statements of Operations and Comprehensive Loss The company's net loss narrowed year-over-year due to decreased operating expenses, particularly in research and development Key Operational Metrics | Metric (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Collaboration Revenue | $880 | $1,882 | $1,175 | $4,474 | | R&D Expenses | $17,849 | $25,019 | $34,564 | $42,850 | | G&A Expenses | $10,323 | $11,098 | $21,843 | $21,857 | | Net Loss | $(23,783) | $(34,070) | $(48,562) | $(59,998) | | Net Loss per Share | $(0.38) | $(0.83) | $(0.80) | $(1.47) | - Net loss decreased by $10.3 million for the three months ended June 30, 2023, and by $11.4 million for the six months ended June 30, 2023, primarily due to decreased operating expenses and increased other income[17][127][134] - Research and development expenses decreased by $7.2 million (3 months YoY) and $8.3 million (6 months YoY), mainly due to a $5.0 million milestone payment in Q2 2022 and reduced FTX-6058 costs due to a clinical hold[129][130][136][138] Consolidated Statements of Stockholders' Equity Stockholders' equity increased significantly due to a public stock offering, while the accumulated deficit continued to grow Key Equity Metrics | Metric (in thousands) | Dec 31, 2022 | Jun 30, 2023 | | :-------------------- | :----------- | :----------- | | Common Stock | $52 | $62 | | Additional Paid-In Capital | $612,025 | $737,466 | | Accumulated Deficit | $(412,338) | $(460,900) | | Total Stockholders' Equity | $198,942 | $275,428 | - Additional paid-in capital increased significantly by $125.4 million, primarily from a public offering of common stock in January 2023, which generated net proceeds of $117.3 million[20][29] - Accumulated deficit increased to $460.9 million as of June 30, 2023, reflecting ongoing net losses[20][105] Consolidated Statements of Cash Flows Cash flow from financing activities increased substantially due to a stock offering, offsetting cash used in operations and investments Key Cash Flow Metrics | Metric (in thousands) | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net Cash Used in Operating Activities | $(44,901) | $(49,472) | | Net Cash (Used in) Provided by Investing Activities | $(74,066) | $51,054 | | Net Cash Provided by Financing Activities | $117,835 | $3,159 | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(1,132) | $4,741 | - Net cash used in operating activities decreased by $4.6 million, primarily due to lower external R&D costs related to FTX-6058's clinical hold[143] - Net cash provided by financing activities significantly increased to $117.8 million, driven by $117.3 million in net proceeds from a public common stock offering in January 2023[145] - Investing activities shifted from providing $51.1 million in cash in 2022 to using $74.1 million in 2023, mainly due to net purchases of marketable securities[144] Notes to Consolidated Financial Statements These notes detail the company's accounting policies, financial instruments, agreements, and other key financial information 1. Nature of the Business and Basis of Presentation The company is a clinical-stage biopharmaceutical firm with a history of losses, funded by a recent public offering - Fulcrum Therapeutics, Inc is a clinical-stage biopharmaceutical company focused on genetically-defined rare diseases[25] - The company has incurred significant losses since inception, with an accumulated deficit of $460.9 million as of June 30, 2023, and expects continued losses[11][30] - In January 2023, the company completed a public offering, issuing 9,615,384 shares of common stock at $13.00 per share, generating net proceeds of $117.3 million[29] - Management estimates that existing cash, cash equivalents, and marketable securities will fund operations for at least 12 months from the financial statement issuance date[31] 2. Summary of Significant Accounting Policies No material changes were made to significant accounting policies, and new accounting standards had no material impact - The consolidated financial statements include Fulcrum Therapeutics, Inc and its wholly-owned subsidiary, Fulcrum Therapeutics Securities Corp, with all intercompany transactions eliminated[32] - No material changes occurred in significant accounting policies during the six months ended June 30, 2023[33] - The company adopted ASU No 2016-13 (Credit Losses) and ASU No 2019-12 (Income Taxes) effective January 1, 2023, with no material impact on financial position or results[36][37] 3. Fair Value Measurements The company's financial assets, primarily cash equivalents and marketable securities, are measured at fair value using Level 2 inputs Fair Value of Financial Assets | Asset Type (in thousands) | June 30, 2023 Total Fair Value | December 31, 2022 Total Fair Value | | :------------------------ | :----------------------------- | :------------------------------- | | Cash Equivalents | $33,966 | $35,098 | | Marketable Securities | $244,198 | $167,823 | | Total | $278,164 | $202,921 | - The majority of financial assets are measured at fair value using Level 2 inputs (observable inputs other than quoted prices)[38] - There were no transfers between fair value levels during the three and six months ended June 30, 2023[38] 4. Cash Equivalents and Marketable Securities The company holds a significant portfolio of marketable securities, with a large portion in an unrealized loss position Fair Value of Cash Equivalents and Marketable Securities | Asset Type (in thousands) | June 30, 2023 Fair Value | December 31, 2022 Fair Value | | :------------------------ | :----------------------- | :--------------------------- | | Cash Equivalents | $33,966 | $35,098 | | Marketable Securities | $244,198 | $167,823 | | Total | $278,164 | $202,921 | - As of June 30, 2023, the company held 91 debt securities in an unrealized loss position for less than 12 months, with an aggregate fair value of $222.2 million[39] - The company did not record any credit-related impairments for marketable securities, as it has the intent and ability to hold debt securities until recovery[40] 5. Property and Equipment, Net Net property and equipment decreased slightly due to depreciation expense outpacing new acquisitions Property and Equipment Breakdown | Category (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Lab equipment | $9,475 | $9,057 | | Leasehold improvements | $7,102 | $7,102 | | Total Property and Equipment, Net | $6,161 | $6,906 | - Property and equipment, net, decreased by $0.7 million from December 31, 2022, to June 30, 2023[41] - Depreciation expense for the six months ended June 30, 2023, was $1.1 million, a slight decrease from $1.2 million in the prior year period[41] 6. Additional Balance Sheet Detail Accrued expenses decreased primarily due to lower R&D and payroll accruals, while interest income receivable increased Selected Balance Sheet Accounts | Category (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Prepaid expenses and other current assets | $4,127 | $4,369 | | Accrued expenses and other current liabilities | $7,875 | $9,551 | - Prepaid expenses decreased, while interest income receivable increased significantly from $852 thousand to $1.4 million[42] - Accrued expenses and other current liabilities decreased by $1.7 million, primarily due to lower payroll and benefits and external research and development accruals[42] 7. Preferred Stock The company has authorized preferred stock but has not issued any shares - As of June 30, 2023, and December 31, 2022, the company had 5,000,000 shares of undesignated preferred stock authorized, with no shares issued or outstanding[43] 8. Common Stock The number of common shares outstanding increased significantly following a public offering in January 2023 - As of June 30, 2023, 61,822,554 shares of common stock were issued and outstanding, up from 52,099,211 shares at December 31, 2022[15] - The increase in outstanding shares is primarily due to the public offering in January 2023[29] Shares Reserved for Future Issuance | Shares Reserved for Future Issuance | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Outstanding stock options | 10,114,591 | 6,504,080 | | Future issuance under 2019 Stock Incentive Plan | 2,512,307 | 1,941,054 | | Future issuance under 2022 Inducement Stock Incentive Plan | 1,482,845 | 329,880 | 9. Stock-based Compensation Expense Stock-based compensation expense increased year-over-year, with a significant amount of unrecognized expense remaining Stock-based Compensation Breakdown | Stock-based Compensation (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative | $2,391 | $2,076 | $5,799 | $4,541 | | Research and development | $972 | $803 | $1,817 | $2,185 | | Total | $3,363 | $2,879 | $7,616 | $6,726 | - The company has several stock incentive plans (2016, 2019, and 2022 Inducement Plan) and an Employee Stock Purchase Plan (ESPP)[48][49][51][58] - Total stock-based compensation expense increased by $0.5 million for the three months and $0.9 million for the six months ended June 30, 2023, compared to the prior year periods[57] - As of June 30, 2023, unrecognized stock-based compensation expense totaled $37.8 million, expected to be recognized over a weighted average period of 3.25 years[57] 10. Collaboration and License Agreements Collaboration revenue is primarily generated from the MyoKardia agreement, following the termination of the Acceleron agreement - The Acceleron Collaboration Agreement terminated effective October 1, 2022, resulting in no collaboration revenue from this agreement in 2023[60][61] - Under the MyoKardia Collaboration Agreement, the company recognized $0.9 million and $1.2 million in collaboration revenue for the three and six months ended June 30, 2023, respectively[79] - MyoKardia made a $10.0 million upfront payment and $2.5 million prepaid research funding in July 2020, and the company achieved a $2.5 million preclinical milestone[66] - The MyoKardia agreement includes potential milestone payments up to $298.5 million per target and tiered royalties on net sales[66] 11. Right of Reference and License Agreement (GSK) The company's agreement with GSK for losmapimod includes significant potential milestone payments and royalties - The company has an exclusive worldwide license from GSK to develop and commercialize losmapimod[80] - The agreement includes potential milestone payments up to $37.5 million (clinical/regulatory) and $60.0 million (sales), plus tiered royalties on net sales[81] - A $5.0 million clinical milestone was achieved during Q2 2022[81] 12. Leases The company holds operating leases for its corporate headquarters and additional office space with varying expiration dates Lease Liability Summary | Lease Liability (in thousands) | 26 Landsdowne Street | 125 Sidney Street | | :----------------------------- | :------------------- | :---------------- | | Total minimum lease payments | $13,453 | $631 | | Total lease liability | $11,540 | $620 | - The company leases corporate headquarters at 26 Landsdowne Street (expiring June 2028) and office space at 125 Sidney Street (expiring March 2024)[84][86] - Operating lease expense for the six months ended June 30, 2023, was approximately $0.9 million for 26 Landsdowne Street and $0.4 million for 125 Sidney Street[84][86] 13. Commitments and Contingencies The company is defending against a class action lawsuit related to the clinical hold on its FTX-6058 program - The company is subject to a class action lawsuit (Celano v Fulcrum Therapeutics, Inc, et al) filed in April 2023, alleging securities law violations related to the FTX-6058 clinical hold[89] - The lawsuit seeks compensatory damages for an allegedly inflated stock price between March 3, 2022, and March 8, 2023, and attorneys' fees[89] - The company intends to vigorously defend against this litigation and has not incurred material costs related to legal proceedings during the reporting period[89][90] 14. Defined Contribution Plan The company maintains a 401(k) plan for employees with consistent contribution levels year-over-year - The company has a 401(k) Plan for eligible employees[91] - Contributions to the 401(k) Plan were $0.2 million for the three months and $0.4 million for the six months ended June 30, 2023, consistent with the prior year[91] 15. Net Loss per Share All potential common stock equivalents were excluded from diluted net loss per share calculations due to their anti-dilutive effect Anti-Dilutive Securities | Common Stock Equivalents | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Outstanding stock options | 10,114,591 | 6,137,740 | 10,114,591 | 6,137,740 | | Unvested restricted stock units | 84,942 | 115,189 | 84,942 | 115,189 | - All common stock equivalents were excluded from diluted net loss per share calculations due to their anti-dilutive effect[92] 16. Subsequent Events The company entered into a new exclusive license agreement with CAMP4 Therapeutics after the reporting period - In July 2023, the company entered into a worldwide exclusive license agreement with CAMP4 Therapeutics Corporation for its Diamond Blackfan Anemia (DBA) program[93][94] - Under the CAMP4 agreement, the company will make an undisclosed upfront payment and CAMP4 is eligible for up to $35.0 million in development/regulatory milestones and $35.0 million in sales milestones, plus tiered royalties[95] - The company is currently evaluating the accounting treatment for the CAMP4 license agreement[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition, results of operations, clinical programs, and future funding needs Overview The company is advancing its lead candidate losmapimod while its FTX-6058 program remains on clinical hold - Fulcrum Therapeutics is a clinical-stage biopharmaceutical company focused on genetically defined rare diseases, with lead product candidates losmapimod (FSHD) and FTX-6058 (hemoglobinopathies)[100] - The Phase 3 clinical trial for losmapimod (REACH) is expected to complete enrollment in Q3 2023 and report topline data in Q4 2024[100] - The FTX-6058 program for SCD is currently on a full clinical hold by the FDA as of February 23, 2023, and the IND for beta thalassemia was withdrawn[101] - The company's proprietary product engine, FulcrumSeek, is used to identify and validate cellular drug targets for genetically defined diseases[103] - Net losses were $23.8 million and $48.6 million for the three and six months ended June 30, 2023, respectively, with an accumulated deficit of $460.9 million[105] Components of Results of Operations This section breaks down the key drivers of revenue and operating expenses Revenue Collaboration revenue decreased due to the termination of the Acceleron agreement and lower revenue from MyoKardia - The company has not generated product sales revenue and does not expect to for several years[109] - Collaboration revenue decreased due to the termination of the Acceleron agreement (effective Oct 2022) and lower revenue from the MyoKardia agreement[110][113] Collaboration Revenue Breakdown | Collaboration Revenue (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Acceleron | $0 | $100 | $0 | $1,000 | | MyoKardia | $900 | $1,700 | $1,200 | $3,500 | Operating Expenses Operating expenses are primarily driven by research and development and general and administrative costs Research and Development Expenses R&D expenses decreased significantly year-over-year, driven by a prior-year milestone payment and the FTX-6058 clinical hold - R&D expenses decreased by $7.2 million (3 months YoY) and $8.3 million (6 months YoY)[129][136] - The decrease was primarily due to a $5.0 million milestone payment to GSK in Q2 2022 and reduced costs for FTX-6058 following its clinical hold[130][138] - R&D expenses are expected to increase significantly in future periods as clinical trials advance and discovery efforts expand[123] R&D Expense Breakdown | R&D Expenses (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | External R&D | $10,353 | $16,416 | $19,903 | $24,793 | | Employee compensation | $5,037 | $5,311 | $9,844 | $11,531 | | Total R&D Expenses | $17,849 | $25,019 | $34,564 | $42,850 | General and Administrative Expenses G&A expenses remained relatively flat year-over-year, with lower professional services costs offsetting higher compensation - G&A expenses decreased by $0.8 million (3 months YoY) and remained relatively flat (less than $0.1 million decrease) for the six months YoY[132][137] - The decrease was primarily due to lower professional services costs (consulting, insurance, legal), offset by increased employee compensation and facility costs[132][137] G&A Expense Breakdown | G&A Expenses (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Employee compensation | $5,710 | $5,690 | $12,977 | $11,516 | | Professional services | $3,137 | $4,125 | $5,955 | $8,046 | | Total G&A Expenses | $10,323 | $11,098 | $21,843 | $21,857 | Other Income, Net Other income increased substantially due to higher interest rates and a larger cash and investment balance - Other income, net, increased significantly by $3.3 million (3 months YoY) and $6.4 million (6 months YoY)[133][139] - This increase was primarily due to a higher rate of return on cash, cash equivalents, and marketable securities, coupled with an increased average cash and investment balance[133][139] Results of Operations This section provides a comparative analysis of the company's operational results for the three and six-month periods Comparison of the Three Months ended June 30, 2023 and 2022 Net loss decreased significantly due to lower R&D expenses and higher other income Three-Month Operational Comparison | Metric (in thousands) | Jun 30, 2023 | Jun 30, 2022 | Change ($) | | :-------------------- | :----------- | :----------- | :--------- | | Collaboration revenue | $880 | $1,882 | $(1,002) | | R&D expenses | $17,849 | $25,019 | $(7,170) | | G&A expenses | $10,323 | $11,098 | $(775) | | Net loss | $(23,783) | $(34,070) | $10,287 | - Net loss decreased by $10.3 million, primarily driven by a $7.2 million reduction in R&D expenses and a $3.3 million increase in other income, net[127][129][133] Comparison of the Six Months ended June 30, 2023 and 2022 Net loss narrowed due to reduced R&D spending and higher other income, which offset lower collaboration revenue Six-Month Operational Comparison | Metric (in thousands) | Jun 30, 2023 | Jun 30, 2022 | Change ($) | | :-------------------- | :----------- | :----------- | :--------- | | Collaboration revenue | $1,175 | $4,474 | $(3,299) | | R&D expenses | $34,564 | $42,850 | $(8,286) | | G&A expenses | $21,843 | $21,857 | $(14) | | Net loss | $(48,562) | $(59,998) | $11,436 | - Net loss decreased by $11.4 million, primarily due to an $8.3 million reduction in R&D expenses and a $6.4 million increase in other income, net, partially offset by a $3.3 million decrease in collaboration revenue[134][136][139] Liquidity and Capital Resources The company believes its current capital is sufficient to fund operations into mid-2025 but will require future financing - As of June 30, 2023, the company had $278.2 million in cash, cash equivalents, and marketable securities[140] - The company expects existing capital to fund operating expenses and capital expenditure requirements into mid-2025[147] - Future funding requirements depend on clinical trial progress, R&D expansion, regulatory approvals, manufacturing, and potential collaborations[148] - The company anticipates financing future cash needs through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements[150] Critical Accounting Policies and Estimates No material changes to critical accounting policies were reported during the period - No material changes to critical accounting policies were reported during the three months ended June 30, 2023, from those described in the Annual Report on Form 10-K[152] Recently Issued Accounting Pronouncements Information on recently issued accounting pronouncements is available in the notes to the financial statements - A description of recently issued accounting pronouncements is disclosed in Note 2 to the consolidated financial statements[153] Emerging Growth Company Status The company utilizes the extended transition period for new accounting standards available to emerging growth companies - The company is an 'emerging growth company' (EGC) and has elected not to opt out of the extended transition period for complying with new or revised accounting standards[154] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosure requirements as a smaller reporting company - The company is a smaller reporting company and is not required to provide disclosures about market risk[155] Item 4. Controls and Procedures Management concluded that disclosure controls and internal financial reporting controls were effective as of the period end Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were deemed effective at a reasonable assurance level - Management, including the CEO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023[157] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[158] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, and other required disclosures Item 1. Legal Proceedings The company faces a class action lawsuit alleging securities violations related to the clinical hold on its FTX-6058 program - A class action complaint was filed on April 28, 2023, alleging violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934[161] - The lawsuit is related to the FDA's clinical hold on the IND application for FTX-6058 for sickle cell disease, announced in February 2023[161] - The plaintiffs seek compensatory damages for an allegedly inflated stock price between March 3, 2022, and March 8, 2023, and attorneys' fees[161] Item 1A. Risk Factors This section details significant risks that could materially affect the company's business, financial condition, and operations Risks Related to our Financial Position and Need for Additional Capital The company's history of losses and need for substantial future funding pose significant financial risks - The company has incurred significant losses since inception ($460.9 million accumulated deficit as of June 30, 2023) and expects to continue incurring losses, potentially never achieving profitability[163] - Substantial additional funding will be required to support ongoing and planned clinical trials (losmapimod, FTX-6058), R&D, and potential commercialization efforts[167] - Inability to raise capital when needed could force delays, reductions, or elimination of product development programs or commercialization efforts[167] - Adverse developments in the financial services industry, such as bank failures, could impair access to funding and adversely affect business operations[189][190] Risks Related to the Discovery and Development of our Product Candidates The early stage of development and the clinical hold on FTX-6058 create substantial uncertainty for product candidates - The company is early in development with only two clinical-stage candidates (losmapimod, FTX-6058), and FTX-6058 is currently on clinical hold, posing significant commercialization risks[191] - Clinical drug development is lengthy, expensive, and uncertain; preclinical and early clinical trial results may not predict future success, and serious adverse events could halt development[195][209] - The FDA placed a clinical hold on FTX-6058 due to hematological malignancies in nonclinical toxicology studies, which may prevent or delay its clinical development[210] - Challenges in patient enrollment for clinical trials, especially for rare diseases, could delay or prevent regulatory approvals[205][208] Risks Related to the Commercialization of our Product Candidates The company faces significant hurdles in market acceptance, competition, manufacturing, and pricing for its potential products - Even if approved, product candidates may fail to achieve market acceptance by physicians, patients, and payors, limiting commercial success[218] - The company lacks its own sales, marketing, and distribution capabilities and faces risks if unable to establish them or secure effective third-party agreements[220][222] - Substantial competition from larger pharmaceutical and biotechnology companies, with greater resources, poses a significant threat to market share[223][227] - Reliance on contract manufacturing organizations (CMOs) for product supply introduces risks of delays, quality issues, or inability to meet demand[231][232] - Unfavorable pricing regulations, inadequate third-party coverage, or healthcare reform initiatives could harm profitability and market access[241][242] Risks Related to our Dependence on Third Parties The company's reliance on CROs and collaboration partners introduces risks related to performance and control - Reliance on third-party CROs to conduct clinical trials reduces control and poses risks of unsatisfactory performance or missed deadlines[250][251][252] - Collaborations with third parties, such as MyoKardia, may not be successful, and the company may have limited control over collaborators' efforts and resource allocation[254][255] - Failure to establish or maintain collaborations could force the company to alter development and commercialization plans, potentially requiring additional capital or expertise[262] Risks Related to our Intellectual Property Protecting intellectual property is critical and faces challenges from patent prosecution, litigation, and license compliance - Inability to obtain, maintain, enforce, and protect patent protection for technology and product candidates could allow competitors to commercialize similar products[263][264] - Patent prosecution is expensive and complex, with uncertain outcomes regarding issuance, scope, validity, and enforceability[265][266] - Third parties may allege infringement of their intellectual property rights, leading to costly litigation, potential damages, or the need to obtain licenses on unfavorable terms[285][290] - Failure to comply with obligations under intellectual property licenses could result in termination of agreements and loss of critical intellectual property rights[295] - Inability to protect trade secrets and proprietary information could harm the company's business and competitive position[309] Risks Related to Regulatory Approval of our Product Candidates and Other Legal Compliance Matters The company faces a complex, lengthy, and uncertain regulatory landscape for product approval and post-marketing compliance - The marketing approval process is expensive, time-consuming, and uncertain; delays or failure to obtain approvals would materially impair revenue generation[312][316] - Orphan drug designation or exclusivity may not be obtained or, if granted, may not effectively prevent competition[320][323] - Special designations like fast track or breakthrough therapy do not guarantee faster development, review, or approval[324][327] - Any approved product will be subject to post-marketing restrictions, and non-compliance with regulatory requirements could lead to substantial penalties or market withdrawal[334][336] - Compliance with global privacy and data security requirements (e g, GDPR, CCPA) could result in additional costs, liabilities, or significant fines[342][347] Risks Related to Employee Matters and Managing Growth Retaining key personnel and managing expected growth are critical to the company's future success - Future success depends on retaining key executives and attracting/retaining qualified personnel, especially given recent executive transitions and a workforce reduction[365][366] - Expected significant growth in employees and operations (drug development, regulatory, sales/marketing) may lead to difficulties in management and could disrupt operations[367] Risks Related to our Common Stock Common stock ownership is concentrated, and its price is subject to high volatility and market conditions - Executive officers, directors, and principal stockholders collectively own approximately 48.9% of capital stock, enabling them to control or significantly influence matters submitted to stockholders[368] - Provisions in corporate charter documents and Delaware law could make company acquisition more difficult and prevent attempts to replace management[370][371] - The price of common stock is volatile and can fluctuate substantially due to various factors, including clinical trial results, regulatory developments, and market conditions[373][374] - As an 'emerging growth company,' reduced disclosure requirements may make common stock less attractive to investors, potentially leading to lower trading volume and increased price volatility[378][379] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - This item is not applicable[387] Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - This item is not applicable[388] Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - This item is not applicable[389] Item 5. Other Information No other information is reported under this item - No other information is reported[390] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, First Amendment to Collaboration and License Agreement with MyoKardia, and Employment Agreement with Alex C Sapir[394] - Certifications of the Principal Executive Officer and Principal Financial Officer are included, as well as Inline XBRL Instance and Taxonomy Extension Documents[394] Signatures The report is duly signed on behalf of the company by its President and Chief Executive Officer - The report was signed by Alex C Sapir, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) on August 3, 2023[398]