Preliminary Information Special Note Regarding Forward-Looking Statements The report contains forward-looking statements about future operations, financial position, and product development, subject to risks and uncertainties, with no obligation to update publicly - The report contains forward-looking statements regarding future operations, financial position, business strategy, market size, growth opportunities, nonclinical and clinical development, anticipated IND clearance for THB335, efficacy and safety of product candidates, funding, regulatory approvals, and the impact of macroeconomic conditions9 - Forward-looking statements are subject to risks, uncertainties, and assumptions, including those detailed in the 'Risk Factors' section, and new risks may emerge in a competitive and rapidly changing environment10 - Readers should not rely on forward-looking statements as predictions of future events, and the company undertakes no obligation to update them publicly, except as legally required11 Risk Factor Summary A summary of principal risks includes limited operating history, significant losses, funding needs, internal control weakness, THB335 dependence, and regulatory uncertainties - The company has a limited operating history, has not completed clinical trials beyond Phase 1, and has no approved products, with a history of significant net losses expected to continue15 - Substantial additional funds are required for business objectives, and failure to obtain capital may force delays or termination of product development15 - A material weakness in internal control over financial reporting has been identified, which, if not remediated, could affect financial reporting accuracy and stock price15 - Future performance is highly dependent on the success of THB335 and the ability to develop future product candidates, with drug development being a lengthy, expensive, and uncertain process15 - The company faces significant competition from established pharmaceutical and biotechnology companies and relies heavily on third parties for clinical trials and research15 - Obtaining, maintaining, and enforcing patent protection is crucial, and the regulatory approval process is highly uncertain, potentially leading to delays or inability to commercialize products15 PART I Item 1. Business Third Harmonic Bio develops oral KIT inhibitors for mast cell-mediated inflammatory diseases, with lead candidate THB335 entering clinical studies in Q2 2024, facing competition and regulatory complexities Overview Third Harmonic Bio develops oral KIT inhibitors for inflammatory diseases, with lead candidate THB335, designed to mitigate hepatotoxicity, entering clinical studies in Q2 2024 - Third Harmonic Bio is a biopharmaceutical company focused on developing next-generation, highly selective, oral small-molecule inhibitors of KIT for dermal, respiratory, and gastrointestinal inflammatory diseases17 - The company recently submitted an IND application for THB335, its new oral KIT inhibitor product candidate, and plans to initiate Phase 1 clinical studies in Q2 2024, with Phase 2 development initially focusing on chronic spontaneous urticaria18 - THB335 maintains the nonclinical pharmacology and selectivity of THB001 but includes structural modifications to mitigate hepatotoxicity risk and provide a differentiated metabolic, distribution, and physiochemical profile1819 Our Strategy The company's strategy is to develop oral KIT inhibitors for a broad range of mast cell-driven inflammatory diseases, expanding its pipeline through internal discovery and strategic collaborations - The company aims to develop oral KIT inhibitors for a broad range of indications across therapeutic areas where mast cell-driven inflammation can benefit from a highly selective, oral small molecule, such as skin, respiratory, and gastrointestinal tracts21 - The strategy includes continuing to innovate and potentially expand the pipeline through internal discovery efforts and selectively evaluating strategic collaborations, building on deep knowledge of oral small molecule KIT inhibition21 - The company believes that targeting mast cells directly through highly selective KIT inhibition is key to achieving broad symptomatic relief across various inflammatory disorders, as mast cells are a primary driver of allergic inflammatory responses2324 Overview of Mast Cells and KIT Mast cells, derived from KIT-positive hematopoietic progenitors, are crucial immune cells implicated in inflammatory disorders, making KIT inhibition an optimal therapeutic target for their inactivation and depletion - Mast cells, derived from KIT-positive hematopoietic progenitors, are present throughout the body in connective and vascularized tissues, especially in the skin, respiratory, and gastrointestinal tracts27 - Dysfunctional mast cell activity is implicated in a broad range of inflammatory disorders, including urticaria, asthma, and gastrointestinal disorders27 - KIT (CD117) is the master regulator of mast cell activity; its inhibition drives mast cell inactivation and depletion, making the KIT-SCF signaling axis an optimal therapeutic intervention point3436 Therapeutic Modulation of the Allergic Response Direct mast cell targeting via KIT inhibition offers a broader therapeutic approach for allergic responses compared to mediator-specific treatments, addressing unmet needs despite historical challenges with off-target effects - Targeting mast cells directly provides a broader therapeutic approach for mast cell-mediated diseases compared to inhibiting individual mediators, which often require combination therapy and do not provide adequate relief for a large patient population38 - Anti-IgE monoclonal antibodies like Omalizumab (Xolair) offer some clinical benefit but do not fully remedy symptoms for most patients, potentially because they don't address IgE-independent mast cell activation39 - Directly reducing mast cell activity through KIT inhibition is a novel therapeutic approach, but its advancement has been hindered by the potential risk of off-target adverse effects40 Overview of Urticaria Urticaria is a common inflammatory disorder, with chronic forms significantly impacting quality of life, and a substantial unmet need exists as current first-line treatments fail to control symptoms for many patients - Urticaria (hives) is a common inflammatory disorder with a lifetime prevalence of up to 25%, affecting women twice as often as men, and onset peaks between 20 and 40 years old41 - Chronic urticaria, characterized by constant or frequently recurring lesions for six or more weeks, negatively impacts patients' quality of life and is associated with psychiatric comorbidities like anxiety and depression42 - Approximately 50% of chronic spontaneous urticaria patients remain uncontrolled despite first-line H1 antihistamine therapy, indicating a large unmet need for more effective treatments44 Our Solution: Oral KIT Inhibitors The company is developing highly potent and selective oral small molecule wild-type KIT inhibitors, offering refined dose titration and improved patient convenience for mast cell-mediated inflammatory diseases - The company is designing and developing highly potent and selective, oral small molecule wild-type KIT inhibitors for mast cell-mediated inflammatory diseases45 - Oral small molecules are anticipated to provide more refined dose titration capabilities than anti-KIT mAbs and offer improved patient convenience by avoiding injection events45 First-Generation Oral KIT Inhibitor: THB001 Clinical Results in Chronic Inducible Urticaria THB001, the first-generation oral KIT inhibitor, was discontinued due to liver transaminitis, despite demonstrating rapid and sustained reduction in serum tryptase and clinical activity in Phase 1b trials - THB001, the first-generation oral KIT inhibitor, was discontinued during Phase 1b development due to observed liver transaminitis in two of five patients46 - The trial demonstrated rapid and sustained reduction in serum tryptase (83.1% mean change from baseline by week one) and clinical activity, with four of five patients achieving partial or complete Critical Temperature Threshold responses despite early termination48 - The transaminitis adverse events were moderate and resolved, and other adverse events were mild and reversible, consistent with known on-target effects of KIT inhibition47 Elucidating the Hepatotoxicity Mechanism of THB001 Mechanistic studies of THB001 identified a reactive intermediate metabolite as the cause of drug-induced liver injury, informing structural modifications in THB335 to mitigate this risk - Extensive mechanistic studies of THB001 identified the formation of a reactive intermediate metabolite as the primary cause of drug-induced liver injury (DILI), which was not predicted by nonclinical toxicology studies50 - These studies showed high levels of protein adduct formation and an oxidative stress transcriptomic signature in human liver culture systems, along with glutathione conjugate metabolites in human urine samples50 - The mechanistic understanding from these studies led to the selection of THB335, with structural modifications designed to functionally block the site of reactive metabolite formation, supporting its differentiated metabolic profile50 THB335 THB335 is the company's next-generation oral KIT inhibitor, designed to mitigate hepatotoxicity while retaining potency and selectivity, with Phase 1 clinical studies planned for Q2 2024 - THB335 is a next-generation oral small molecule wild-type KIT inhibitor, retaining THB001's potency and selectivity, with structural modifications to mitigate hepatotoxicity risk and provide a differentiated metabolic, distribution, and physiochemical profile51 - Key attributes of THB335 include nanomolar potency against KIT, high selectivity against related kinases, no evidence of reactive metabolite formation, high oral bioavailability, improved peripheral restriction, and a favorable pharmacokinetic profile525356 - An IND application for THB335 has been submitted to the FDA, with Phase 1 clinical studies planned for Q2 2024, and Phase 2 development expected to initially focus on chronic spontaneous urticaria56 Examples of selected mast cell-mediated diseases potentially addressable with KIT inhibition The company is exploring oral KIT inhibitors for various mast cell-mediated inflammatory diseases beyond urticaria, including respiratory and gastrointestinal conditions, representing attractive markets with unmet needs - The company is exploring development opportunities for oral KIT inhibitors across a range of mast cell-mediated inflammatory diseases, including skin, respiratory, and gastrointestinal conditions like eosinophilic esophagitis and asthma57 - They believe KIT inhibition has wide therapeutic utility as mast cells are present in numerous tissue types, and these additional indications represent attractive markets with established development and regulatory pathways and significant unmet needs57 - For severe asthma, an estimated 750,000 to one million patients in the U.S. alone, there have been no new oral therapies since the late 1990s, indicating a substantial unmet need58 Licenses, Partnerships and Collaborations The company holds an exclusive, worldwide license from Novartis for specific patent rights and know-how related to THB001 and THB335, with obligations for development, commercialization, milestones, and royalties - The company has an exclusive, worldwide, sublicensable license agreement with Novartis for specified patent rights and know-how related to three licensed compounds, including THB001 and THB33559384 - The company is solely responsible for all research, development, regulatory, and commercialization activities for the Licensed Products and must use commercially reasonable efforts to develop and commercialize at least one product in key markets59384 - Novartis Agreement Payment Obligations | Payment Type | Amount (Aggregate) | | :------------- | :----------------- | | Upfront Payment | $0.4 million | | Development Milestones | Up to $31.7 million | | Sales & Commercialization Milestones | Up to $200.0 million | | Royalties | Tiered single-digit percentage on annual net sales | Manufacturing The company manages third-party CDMOs for clinical trial manufacturing of its oral KIT inhibitor candidates, utilizing readily-sourced raw materials and straightforward scalability, with plans for additional CDMOs for later stages - The company oversees and manages third-party Contract Development and Manufacturing Organizations (CDMOs) for the development and manufacture of oral KIT inhibitor product candidates for clinical trials63 - The manufacturing process utilizes readily-sourced raw materials and offers straightforward scalability63 - Current manufacturers are believed to be able to supply upcoming clinical trials, with the potential to onboard additional CDMOs for later clinical and commercial development stages63 Competition The company faces substantial competition from well-resourced pharmaceutical and biotechnology entities, whose superior products or faster regulatory approvals could significantly diminish its commercial opportunity - The company faces substantial competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, and governmental agencies64 - Competitors often have significantly greater financial resources and expertise in R&D, manufacturing, regulatory approval, and marketing66 - The commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, better tolerated, less expensive, or more convenient, or if they obtain regulatory approval more rapidly67 Intellectual Property Intellectual property, including patents and trade secrets, is critical for the company, which protects its technology and product candidates through owned and licensed rights, despite inherent challenges in enforcement and potential patent term limitations - Intellectual property (patents, trade secrets, know-how) is vital for the company, which seeks to protect its technology and product candidates (THB001, THB335, and other KIT inhibitors) through owned and licensed patent rights6876 - The overall patent portfolio includes eight patent families with issued patents and pending applications in the U.S. and foreign jurisdictions, covering compositions of matter, methods of use, and pharmaceutical compositions76 - Patents for THB001 and additional KIT inhibitor compounds are expected to expire between 2032 and 2043, not including potential patent term adjustments or extensions77787981 - The company also relies on trade secrets and confidentiality agreements, but acknowledges the difficulty in enforcing claims and the risk of independent development or disclosure by competitors74243 Government Regulation The company's pharmaceutical products are subject to extensive U.S. and international government regulations covering all stages from research to marketing, with stringent approval processes and ongoing compliance requirements Regulation Within the United States Pharmaceutical products in the U.S. are extensively regulated by the FDA, with non-compliance potentially leading to severe administrative or judicial sanctions - Pharmaceutical products in the U.S. are subject to extensive regulation by the FDA, covering research, development, testing, manufacturing, approval, labeling, promotion, distribution, and post-approval monitoring8283 - Failure to comply with U.S. requirements can result in administrative or judicial sanctions, including FDA refusal to approve applications, warning letters, product recalls, and criminal prosecution83 FDA Approval Process The FDA approval process is lengthy and expensive, involving nonclinical tests, IND submission, multi-phase clinical trials, NDA submission, and facility inspections, potentially requiring REMS and post-approval testing - Pharmaceutical product development in the U.S. involves nonclinical tests, IND submission, and adequate, well-controlled clinical trials (Phase 1, 2, 3) to establish safety and effectiveness848587 - The FDA review process for NDAs typically takes 10-12 months for standard review and 6-8 months for priority review, which can be extended90 - Before approval, the FDA inspects clinical sites for GCP compliance and manufacturing facilities for cGMP compliance; approval may require a REMS and substantial post-approval testing9293 Disclosure of Clinical Trial Information Sponsors of FDA-regulated clinical trials must register and publicly disclose trial information and results, which can be delayed but may still provide competitors with valuable insights - Sponsors of clinical trials for FDA-regulated products must register and disclose certain clinical trial information publicly95 - Results of clinical trials must be disclosed after completion, with potential delays of up to two years, which competitors may use to gain knowledge95 Pediatric Information PREA mandates pediatric data submission for NDAs, with possible waivers, while BPCA offers a six-month exclusivity extension for drugs if pediatric studies are conducted in response to an FDA request - PREA requires NDAs to include data on safety and effectiveness for relevant pediatric subpopulations, with provisions for full or partial waivers or deferrals96 - BPCA provides a six-month extension of exclusivity for drugs if FDA requests pediatric studies and the applicant performs and reports on them within the statutory timeframe97 Post-Approval Requirements Approved products face extensive ongoing FDA regulation, including strict marketing controls, adverse event reporting, and cGMP compliance, with non-compliance potentially leading to recalls or approval withdrawal - Approved products are subject to extensive post-approval requirements, including strict regulation of marketing and promotion, adverse event reporting, and submission of periodic reports98100 - The FDA may require post-marketing (Phase 4) testing, REMS, and surveillance, and manufacturing processes must continuously conform to cGMPs, with facilities subject to unannounced inspections100 - Product approvals can be withdrawn, or recalls requested, if regulatory standards are not maintained or if problems are identified post-marketing100 The Hatch-Waxman Amendments The Hatch-Waxman Amendments govern generic drug approvals and patent exclusivity, allowing generic challenges to listed patents and providing marketing exclusivity for New Chemical Entities and patent term extensions - NDA applicants must list patents in the FDA's Orange Book, which generic competitors can challenge via Paragraph IV certification in an ANDA, potentially leading to a 30-month stay on FDA approval101102 - New Chemical Entities (NCEs) receive five years of marketing exclusivity, and certain changes to a drug can receive three years of exclusivity if supported by new clinical investigations104 - Owners of relevant drug patents may apply for up to a five-year patent term extension to compensate for time lost during the FDA regulatory review process, with a maximum total patent term of 14 years post-approval105 Regulation Outside of the United States The company is subject to diverse and stringent regulations in various countries for clinical trials, commercial sales, and distribution, with approval processes and requirements varying significantly by jurisdiction - The company is subject to various regulations in other jurisdictions governing clinical trials, commercial sales, and product distribution106 - The approval process and requirements vary significantly from country to country, affecting the number and type of studies needed and the time required for approval106 Non-Clinical Studies and Clinical Trials In the EU, non-clinical studies must adhere to GLP principles, while clinical trials must comply with EU, national, ICH GCP, and Declaration of Helsinki guidelines, with sponsors typically liable for 'no fault' compensation - Non-clinical studies in the EU must comply with Good Laboratory Practice (GLP) principles, as set forth in EU Directive 2004/10/EC108 - Clinical trials in the EU must adhere to EU and national regulations, ICH guidelines on Good Clinical Practice (GCP), and ethical principles from the Declaration of Helsinki108 - EU clinical trial sponsors not established in the EU must appoint a legal representative and are generally liable for 'no fault' compensation to injured study subjects108 Marketing Authorization EU marketing approval requires a Marketing Authorization Application (MAA), often through a centralized procedure, with the EMA assessing quality, safety, and efficacy over a 210-day evaluation period - Marketing approval in the EU requires submitting a Marketing Authorization Application (MAA), often via the centralized procedure for certain medicinal products, which grants EU-wide validity110111 - The EMA's CHMP (and CAT for ATMPs) assesses the product's quality, safety, and efficacy, coordinating scientific assessment and preparing draft reports110112 - The evaluation period for an MAA by the EMA is 210 days (excluding clock stops), culminating in a favorable or unfavorable opinion for the European Commission's final decision113 Data and Marketing Exclusivity The EU provides eight years of data exclusivity and two years of market exclusivity for reference products, extendable to eleven years for new indications, though qualification is not guaranteed - In the EU, reference product candidates generally receive eight years of data exclusivity and an additional two years of market exclusivity, preventing generic/biosimilar reliance on their data for ten years117 - The 10-year market exclusivity can be extended to eleven years if a new therapeutic indication with significant clinical benefit is authorized within the first eight years117 - There is a special regime for biosimilars, but no specific guidelines for complex biological products like gene or cell therapies, making their biosimilar approval unlikely currently118 Pediatric Development The EU's Pediatric Investigation Plan (PIP) mandates pediatric studies for new medicines, offering rewards like supplementary protection certificate extensions, and the PRIME scheme facilitates accelerated development for unmet medical needs - The EU's Pediatric Investigation Plan (PIP) requires studies in children for new medicines, with rewards including a six-month extension of supplementary protection certificates for compliance119 - Orphan medicines developed under a PIP receive an additional two years of market exclusivity119 - The Priority Medicines (PRIME) scheme facilitates accelerated development and regulatory dialogue for product candidates targeting unmet medical needs and of major public health interest120 Post-Approval Requirements EU MAA holders face comprehensive post-approval oversight, including pharmacovigilance, adverse reaction reporting, and strict regulation of advertising and promotion to align with approved product characteristics - MAA holders and manufacturers in the EU are subject to comprehensive regulatory oversight, including pharmacovigilance systems, expedited adverse reaction reporting, and periodic safety update reports (PSURs)121 - New MAAs must include a Risk Management Plan (RMP), and regulatory authorities may impose specific post-authorization obligations122 - Advertising and promotion of medicinal products are strictly regulated, requiring consistency with approved product characteristics and prohibiting off-label promotion and direct-to-consumer advertising of prescription medicines123 Brexit and the Regulatory Framework in the United Kingdom Post-Brexit, the MHRA is the UK's standalone regulator, with separate rules for Great Britain and Northern Ireland, requiring UK marketing authorizations and introducing new national licensing procedures - Post-Brexit, the MHRA is the UK's standalone regulator, with Northern Ireland following the EU regulatory regime and Great Britain (GB) having its own rules127 - Existing EU marketing authorizations for centrally authorized products were automatically converted to UK MAs for GB127 - UK-established companies can no longer use the EU centralized procedure and must obtain a UK MA through national authorization procedures or post-Brexit international cooperation procedures127 Other Healthcare Laws The pharmaceutical industry is subject to various state and federal healthcare laws, including anti-kickback, false claims, and privacy laws, with non-compliance risking significant penalties and costs - The pharmaceutical industry is subject to federal and state anti-kickback, false claims, price transparency, and health information privacy laws (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA, HITECH)128129130131132133134 - These laws restrict marketing practices, prohibit improper payments to induce purchases, and forbid false claims to federal healthcare programs, with violations potentially leading to liability under the federal civil False Claims Act129130 - HIPAA and HITECH impose obligations on covered entities and business associates to safeguard individually identifiable health information, requiring breach notifications and carrying increased civil and criminal penalties132 - Non-compliance can result in significant penalties, including civil, criminal, and administrative sanctions, damages, fines, imprisonment, and exclusion from government healthcare programs135 Healthcare Reform Recent healthcare reforms, particularly the Inflation Reduction Act, are significantly impacting the pharmaceutical industry by eliminating the Medicare Part D coverage gap, enabling drug price negotiation, and imposing inflation-based rebates - The Inflation Reduction Act (IRA) of August 2022 will eliminate the Medicare Part D coverage gap by 2025, requiring manufacturers to subsidize 10-20% of patient prescription costs136 - The IRA allows HHS to directly negotiate selling prices for high-expenditure single-source drugs under Medicare Part B and Part D, with negotiated prices taking effect from 2026136 - The IRA also imposes rebates on Medicare Part D and Part B drugs whose prices increase faster than the rate of inflation136 - These provisions, some facing legal challenges, are expected to significantly impact the pharmaceutical industry and drug pricing136 Coverage and Reimbursement Market acceptance of approved products depends heavily on third-party payor coverage and reimbursement, which is a costly and time-consuming process with no uniform policy, potentially hindering profitability - Market acceptance of product candidates, if approved, depends on the extent of third-party coverage and reimbursement from government health programs and private insurers137 - Third-party payors are increasingly challenging drug prices, medical necessity, and cost-effectiveness, often limiting coverage to specific formularies137 - Obtaining coverage and adequate reimbursement is a time-consuming and costly process, with no uniform policy in the U.S., and rates can change, potentially impacting profitability137299302 Employees and Human Capital Resources As of December 31, 2023, the company had 30 full-time employees, with a human capital strategy focused on attracting and retaining talent through equity and cash incentive plans to drive business objectives - As of December 31, 2023, the company had 30 full-time employees, with 18 engaged in research and development activities and 11 holding Ph.D. or M.D. degrees138 - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, advisors, and consultants139 - Equity and cash incentive plans are used to attract, retain, and reward employees, aiming to increase stockholder value and achieve company objectives139 Facilities The company leases office spaces in Cambridge, Massachusetts, and San Francisco, California, which are considered sufficient for current needs until their leases expire in 2028 - The company leases office space in Cambridge, Massachusetts (10,356 sq ft) and San Francisco, California (4,703 sq ft)140354 - The current office space is considered sufficient to meet needs until the leases expire in 2028354 Corporate Information and Trademarks Third Harmonic Bio, Inc. was incorporated in Delaware in 2019 and uses its corporate name and logo as trademarks, acknowledging other companies' marks in its report - The company was incorporated in Delaware on April 25, 2019, as Project Ige, Inc., and changed its name to Third Harmonic Bio, Inc. on June 28, 2019141 - The mark 'Third Harmonic Bio' is a registered common law trademark, and the report acknowledges other companies' trade names, trademarks, and service marks12142 Additional Information The company's website provides free access to SEC filings and corporate governance information, with additional filings available on the SEC's website - The company's website (https://thirdharmonicbio.com) provides free access to annual, quarterly, and current reports, including amendments, as filed with the SEC143 - Information on corporate governance, board of directors, corporate governance guidelines, code of business conduct, and board committee charters is also available on the company's website144 - The SEC's website (www.sec.gov) contains reports, proxy, and information statements for the company143 Item 1A. Risk Factors Significant risks include financial instability, uncertain drug development, intense competition, operational challenges, intellectual property issues, stringent regulations, and stock market volatility Risks Related to Our Financial Position, Limited Operating History and Need for Additional Capital The company faces risks from its limited operating history, significant net losses ($30.8 million in 2023), accumulated deficit ($114.2 million), need for substantial additional funding, and a material weakness in internal financial controls - The company has a limited operating history since 2019, no products approved for commercial sale, and a history of significant net losses, including $30.8 million for the year ended December 31, 2023, and an accumulated deficit of $114.2 million146147148 - Substantial additional funds will be needed to pursue business objectives, including advancing THB335 and future product candidates, obtaining regulatory approvals, and establishing commercial capabilities; failure to obtain this capital may force delays or termination of programs149153154156 - Adverse developments in the financial services industry (e.g., liquidity concerns at financial institutions) could negatively affect the company's business operations and financial condition157158159160 - A material weakness in internal control over financial reporting has been identified (lack of segregation of duties, system limitations, insufficient resources), which, if not remediated, could lead to inaccurate financial reporting and a decline in stock price161162164165 Risks Related to Discovery, Development and Commercialization The company's success depends on the lengthy and uncertain development of THB335 and future candidates, facing risks of clinical trial delays, adverse events, intense competition, and challenges in market acceptance and commercialization - Future performance is substantially dependent on the success of THB335 and the ability to identify, develop, and commercialize future product candidates, a process that is lengthy, expensive, and inherently uncertain166172 - Clinical trials may experience delays, fail to show safety or efficacy, or reveal significant adverse events (e.g., liver transaminitis with THB001), which could inhibit regulatory approval or market acceptance172173175176180 - The company faces substantial competition from large pharmaceutical and biotechnology companies with greater resources, and its commercial opportunity could be reduced if competitors develop superior products or obtain approvals faster186187188189 - Market acceptance of approved products depends on factors like safety, efficacy, convenience, pricing, and reimbursement, and may be limited to smaller patient subsets than estimated190191192 - The company currently lacks internal sales and marketing capabilities and may need to build them or rely on third-party collaborations, which, if unsuccessful, could prevent successful commercialization194195 Risks Related to Our Business and Operations The company faces risks from managing growth, reliance on third-party vendors, cybersecurity threats, product liability, environmental compliance, and potential changes in tax laws - Significant expansion in development, clinical, and regulatory capabilities is expected, which may lead to difficulties in managing growth and recruiting/retaining qualified employees200202203204 - Reliance on third-party CROs, CDMOs, and other vendors for clinical trials and manufacturing exposes the company to risks if these parties fail to perform, comply with regulations, or meet deadlines201 - The business depends on the efficient and uninterrupted operation of IT systems, and those of third parties, making it vulnerable to security breaches, cyber-attacks, and data loss, which could disrupt programs and compromise sensitive information206208209211 - Product liability risks are significant, potentially causing delays in development, FDA investigations, product recalls, and substantial monetary awards, which may not be fully covered by insurance213 - Non-compliance with environmental, health, and safety laws, or disruptions from natural disasters, could adversely affect business operations and financial condition216217218 - Changes in tax laws or limitations on the ability to use net operating loss carryforwards could adversely affect financial performance219220 Risks Related to Intellectual Property The company's success depends on obtaining and enforcing patent protection for its technologies and licensed compounds, facing risks of patent invalidation, infringement claims, trade secret loss, and insufficient patent terms - Success depends on obtaining, maintaining, and enforcing patent protection for technologies and product candidates (THB335, other KIT inhibitors), including licensed intellectual property from third parties like Novartis235236244 - There is no guarantee that pending patent applications will result in issued patents, that issued patents will be valid or enforceable, or that they will provide sufficient protection from competitors237241 - Failure to protect trade secrets or breaches of license agreements could harm the business and competitive position243245 - The company may face costly and time-consuming litigation to protect or enforce patents, or defend against third-party infringement claims, which could delay development or commercialization254259261264 - Patent terms may be insufficient to protect competitive position for an adequate time, and changes in U.S. and ex-U.S. patent laws could diminish patent value267271 Risks Related to Government Regulation The company faces significant risks from the uncertain, costly, and time-consuming regulatory approval process, ongoing post-approval obligations, stringent healthcare laws, and potential adverse impacts from healthcare reforms on pricing and reimbursement - The regulatory approval process for THB335 and future product candidates is highly uncertain, costly, and time-consuming, with no guarantee of U.S. or foreign approval, even if development plans appear successful272273274277 - Approved products are subject to ongoing regulatory obligations, including manufacturing processes, labeling, post-approval monitoring, and adverse event reporting, with potential for restrictions, market withdrawal, or penalties for non-compliance278279280281 - Operations and relationships with healthcare providers are subject to anti-bribery, anti-kickback, fraud and abuse, transparency, and data privacy laws (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA, GDPR), with violations risking significant penalties283284285287288289290291 - Healthcare legislative and regulatory reforms, such as the Inflation Reduction Act, could lead to unfavorable pricing regulations, reduced reimbursement, and increased cost containment pressures, adversely affecting revenue and profitability292293294295296297298299300301302304 Risks Related to Our Common Stock Risks related to common stock include potential lack of liquidity, significant price volatility due to fluctuating operating results, dilution from future sales, concentrated ownership, reduced reporting requirements as an emerging growth company, and internal control deficiencies - An active and liquid trading market for common stock may not be sustained, potentially leading to inability to resell shares at or above purchase price and a decline in market value305 - Quarterly and annual operating results are expected to fluctuate significantly, influenced by R&D expenses, clinical trial results, regulatory approvals, and competition, which could cause stock price volatility306307308309310 - Sales of substantial numbers of shares by existing stockholders or future equity offerings could cause dilution and depress the market price of common stock311313314 - Principal stockholders and management own a significant percentage of common stock, enabling them to control matters subject to stockholder approval, which may conflict with other investors' interests315 - As an 'emerging growth company' and 'smaller reporting company,' the company benefits from reduced reporting requirements, which may make its common stock less attractive to investors316317318319 - Failure to maintain proper and effective internal controls over financial reporting could impair the ability to produce accurate and timely financial statements, leading to a decline in stock price and potential sanctions320321 General Risk Factors General risk factors include potential negative impacts from adverse analyst opinions, increased costs and management demands of public company operations, limitations of disclosure controls, and the risk of expensive securities litigation - If securities or industry analysts do not publish research or issue adverse opinions, the stock price and trading volume could decline330 - Operating as a public company incurs increased legal, accounting, and other expenses, requiring substantial management time for compliance with regulations like Sarbanes-Oxley332 - Disclosure controls and procedures, while designed for reasonable assurance, may not prevent or detect all errors or acts of fraud due to inherent limitations333334 - The company may be subject to expensive securities litigation due to stock price volatility, which could divert management attention and seriously harm the business335 Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - There are no unresolved staff comments337 Item 1C. Cybersecurity The Board oversees a risk-based cybersecurity program, including incident response and insurance, acknowledging ongoing exposure to cyberattacks and potential adverse impacts The Board's Roles and Responsibilities The Board of Directors, through its Audit Committee, oversees cybersecurity risk, receiving regular updates and guiding the annual cybersecurity roadmap based on third-party assessments - The Board of Directors, through the Audit Committee, oversees and monitors cybersecurity risk, receiving regular updates from management338339 - A periodic formal cybersecurity risk assessment, conducted by an expert third party, informs the ongoing cybersecurity roadmap, which is updated at least annually339 - The Audit Committee ensures the roadmap supports business objectives and decides on mitigating or accepting specific cybersecurity risks339 Risk Management and Strategy The company's risk-based cybersecurity program includes assessments, employee training, vendor control evaluations, and an Incident Response Plan, with cybersecurity insurance, despite acknowledging ongoing cyberattack exposure - The cybersecurity program, overseen by the IT Senior Director and reporting to the Audit Committee, uses a risk-based methodology to support the confidentiality, integrity, and availability of digital assets340341 - The program includes internal and third-party risk assessments, mandatory annual cybersecurity awareness training for all employees, and periodic testing342 - The company evaluates cybersecurity controls of third-party service providers, including annual review of SOC1 reports for critical finance vendors and enhancing vendor selection processes343344 - An Incident Response Plan (IRP) is being established to analyze, contain, and remediate cybersecurity incidents, including notifications for material incidents345 - Cybersecurity insurance is maintained to manage potential liabilities, but there's no guarantee of full or timely coverage346 - Despite implemented security measures, the company is exposed to cyberattacks and interruptions, which could materially disrupt operational systems or result in loss of proprietary information347348 Governance and Management's Responsibilities IT management, led by the Senior Director of IT, is responsible for the cybersecurity program, deploying various technologies and processes, and to date, threats have not materially affected the company's business - The Senior Director of IT is responsible for the cybersecurity program, including prevention, mitigation, detection, and remediation of incidents, with the Chief Administrative Officer as executive sponsor350 - The Senior Director of IT monitors cybersecurity incidents using expert technology and security partners, deploying intrusion monitoring, detection and response, patch management, threat hunting, and identity and access management351 - The Senior Director of IT has relevant expertise in cybersecurity, including implementing and managing ISO 27001 and extensive SOX IT compliance experience352 - Cybersecurity threats have not materially affected the company's business strategy, results of operations, or financial condition to date353 Item 2. Properties The company leases office spaces in Cambridge and San Francisco, deemed sufficient for current needs until 2028 - As of December 31, 2023, the company leases office space in Cambridge, Massachusetts (10,356 sq ft) for its corporate headquarters and in San Francisco, California (4,703 sq ft)354 - The current office space is believed to be sufficient to meet office needs until the expiration of the leases in 2028354 Item 3. Legal Proceedings The company is not currently involved in material legal proceedings, but litigation could negatively impact business - The company is not presently a party to any legal proceedings that would have a material adverse effect on its business355 - Litigation, regardless of outcome, can adversely impact the company due to defense and settlement costs, diversion of management resources, negative publicity, and reputational harm355 Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable356 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock began trading on Nasdaq in September 2022; no unregistered securities issued, IPO proceeds used as planned, no dividends paid, and no issuer equity purchases Stockholders The company's common stock began trading on Nasdaq in September 2022, with 8 stockholders of record as of March 22, 2024 - The company's common stock began trading on the Nasdaq Stock Market LLC under the symbol 'THRD' on September 15, 2022359 - As of March 22, 2024, there were 8 stockholders of record, but the actual number of holders is greater due to shares held in street name360 Recent Sales of Unregistered Securities During the fiscal year ended December 31, 2023, the company did not issue or sell any unregistered securities not previously disclosed - During the year ended December 31, 2023, the company did not issue or sell any unregistered securities not previously disclosed361 Use of Proceeds from Public Offering of Common Stock The company completed its IPO in September 2022, raising approximately $198.2 million in net proceeds, with no material change in the planned use of these funds - The company completed its IPO on September 19, 2022, selling 12,535,000 shares of common stock at $17.00 per share362 - The aggregate net proceeds from the IPO, after underwriting discounts and offering expenses, were approximately $198.2 million362 - There has been no material change in the planned use of proceeds from the IPO363 Dividend Policy The company has never declared or paid cash dividends and does not anticipate doing so, intending to finance business growth with future earnings - The company has never declared or paid cash dividends on its common stock and does not anticipate paying any in the foreseeable future364 - All available funds and future earnings are intended to finance the growth and development, operation, and expansion of the business364 - Future dividend decisions will be at the discretion of the board of directors, dependent on results of operations, financial condition, future prospects, and contractual restrictions364 Securities Authorized for Issuance under Equity Compensation Plans Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference from the company's Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders - Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference into the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders365 Issuer Purchases of Equity Securities The company did not purchase any of its registered equity securities during the period covered by this Annual Report - The company did not purchase any of its registered equity securities during the period covered by this Annual Report366 Item 6. [Reserved] This item is reserved and contains no information - This item is reserved367 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Analysis of financial condition and operations, highlighting significant losses, reliance on IPO proceeds, increasing R&D and G&A expenses, liquidity, and critical accounting policies Overview Third Harmonic Bio, a biopharmaceutical company, focuses on developing oral KIT inhibitors, with lead candidate THB335 entering clinical studies in Q2 2024, and expects continued losses, requiring additional funding despite $269.1 million in cash as of December 31, 2023 - Third Harmonic Bio is a biopharmaceutical company developing next-generation, highly selective, oral small-molecule inhibitors of KIT for dermal, respiratory, and gastrointestinal inflammatory diseases, with an initial focus on chronic spontaneous urticaria370 - The company submitted an IND for THB335, its new oral KIT inhibitor, with clinical studies planned for Q2 2024. THB335 is designed to mitigate hepatotoxicity risk observed in the discontinued THB001371372373 - Since inception, the company has incurred significant operating losses and negative cash flows, with a net loss of $30.8 million in 2023 and an accumulated deficit of $114.2 million376377 - The company expects to continue incurring net operating losses and substantially increasing R&D and G&A expenses, requiring substantial additional funding377380381 - As of December 31, 2023, the company had $269.1 million in cash and cash equivalents, projected to fund operations through at least 2026384 Components of Our Results of Operations The company has no revenue, with operating expenses primarily comprising expensed R&D and G&A costs, while other income is mainly interest, and income tax benefits are not recorded due to net losses Revenue The company has not generated revenue since inception and does not anticipate doing so in the near future, with future revenue contingent on successful clinical development or collaboration agreements - The company has not generated any revenue since its inception and does not expect to generate revenue from product sales or other sources in the near future387 - Future revenue generation depends on successful development and commercialization of product candidates or entering into collaboration/license agreements387 Operating Expenses Operating expenses primarily consist of expensed R&D costs, including third-party services and employee-related expenses, and G&A expenses, both expected to increase with business expansion and public company operations - Research and development (R&D) expenses are a significant portion of operating expenses, expensed as incurred, and include direct costs for CROs, CDMOs, clinical trial materials, consultants, and licensing payments388389390 - Indirect R&D costs primarily consist of employee-related expenses and facilities costs, which are not tracked on a specific program basis390 - R&D expenses are expected to continue increasing as the company discovers and develops additional product candidates and expands its headcount and intellectual property portfolio391 - General and administrative (G&A) expenses include employee-related costs, legal fees for patent/corporate matters, accounting, consulting, and other professional services, and are expected to increase with business expansion and public company operations394395 Total Other (Income) Expense, Net Total other income, net, primarily comprises interest income from interest-bearing money market accounts and U.S. Treasury Securities - Other income primarily consists of interest income generated from interest-bearing money market accounts and U.S. Treasury Securities396 Income Taxes The company has not recorded income tax benefits due to net losses and maintains a full valuation allowance against deferred tax assets, with federal and state net operating loss carryforwards of $44.0 million and $43.6 million, respectively, as of December 31, 2023 - The company has not recorded income tax benefits for net losses or earned R&D tax credits since inception, due to the belief that realization of these tax attributes is unlikely397 - As of December 31, 2023, the company had U.S. federal and state net operating loss carryforwards of $44.0 million and $43.6 million, respectively397 - A full valuation allowance has been recorded against deferred tax assets as of December 31, 2022 and 2023397 Results of Operations The company's net loss decreased by 12% from $35.2 million in 2022 to $30.8 million in 2023, driven by increased interest income offsetting higher operating expenses Comparison of the year ended December 31, 2022 and 2023 The company's net loss decreased by 12% from $35.2 million in 2022 to $30.8 million in 2023, primarily due to a significant increase in net other income offsetting higher total operating expenses - Consolidated Statements of Operations Summary (in thousands) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2023 | $ Change | % Change | | :-------------------------- | :---------------------- | :---------------------- | :------- | :------- | | Research and development | $24,407 | $23,964 | $(443) | (2%) | | General and administrative | $13,301 | $19,990 | $6,689 | 50% | | Total operating expenses | $37,708 | $43,954 | $6,246 | 17% | | Loss from operations | $37,708 | $43,954 | $6,246 | 17% | | Total other (income) expense, net | $(2,553) | $(13,130) | $(10,577) | * | | Net loss | $35,155 | $30,824 | $(4,331) | (12%) | Research and Development Expenses R&D expenses slightly decreased by $0.4 million (2%) to $24.0 million in 2023, driven by reduced THB001 and other discovery costs, partially offset by increased THB335 and employee-related expenses - Research and Development Expenses (in thousands) | Category | Year Ended Dec 31, 2022 | Ye
Third Harmonic Bio(THRD) - 2023 Q4 - Annual Report