C4 THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited interim condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations, included in our Annual Report on Form 10-K for the year
ended
Business overview
We are a clinical-stage biopharmaceutical company dedicated to advancing targeted protein degradation science to develop a new generation of small-molecule medicines to transform how disease is treated. We leverage our proprietary technology platform, TORPEDO (Target ORiented ProtEin Degrader Optimizer), to efficiently design and optimize small-molecule medicines that harness the body's natural protein recycling system to rapidly degrade disease-causing protein, offering the potential to overcome drug resistance, drug undruggable targets and improve patient outcomes. We are advancing multiple targeted oncology programs to the clinic and expanding our research platform to deliver the next wave of medicines for difficult-to-treat diseases.
Our most advanced product candidate, CFT7455, is an orally bioavailable MonoDAC
degrader of protein targets called IKZF1 and IKZF3, currently in clinical
development for multiple myeloma, or MM, and non-Hodgkin lymphomas, or NHLs,
including peripheral T-cell lymphoma, or PTCL, and mantle cell lymphoma, or MCL.
We initiated a first-in-human Phase 1/2 clinical trial for this product
candidate in
We are also developing CFT8634, an orally bioavailable BiDAC degrader candidate
targeting a protein called BRD9, for synovial sarcoma and SMARCB1-deleted solid
tumors. In
Further, we are developing CFT1946, an orally bioavailable BiDAC degrader candidate specifically targeting V600X mutant BRAF to treat melanoma, non-small cell lung cancer, or NSCLC, colorectal cancer and other solid malignancies that harbor this mutation. We expect to submit an IND for this product candidate and begin a first-in human Phase 1/2 clinical trial in BRAF V600X driven cancers including melanoma, NSCLC and colorectal cancer in the second half of 2022.
Additionally, we are developing CFT8919, an orally bioavailable, allosteric, mutant-selective BiDAC degrader of epidermal growth factor receptor, or EGFR, with an L858R mutation in NSCLC. We expect to complete IND-enabling activities for this product candidate by the end of 2022.
Beyond these initial product candidates, we are further diversifying our pipeline by developing new degraders against both clinically-validated and currently undruggable targets. We have engineered degrader candidates that have successfully achieved blood-brain barrier penetration in preclinical studies, which is a key step in developing medicines with the potential to treat brain metastases in oncology as well as in therapeutic areas such neurodegenerative diseases. We also believe there are many other therapeutic areas and indications where leveraging our TORPEDO platform to develop novel degrader candidates may be advantageous.
Financial operations overview
Revenues
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. Our revenues to date have been generated through research collaboration and license agreements. We recognize revenue over the expected performance period under each agreement. We expect that our revenue for the next several years will be derived primarily from our current collaboration agreements and any additional collaborations that we may enter into in the future. To date, we have not received any royalties under any of our existing collaboration agreements.
Roche Collaboration and License Agreement
In
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defined preclinical development phase, Roche had an exclusive option to pursue a license from us for further clinical development and commercialization.
On
In
Under the Roche Agreement, we received additional upfront consideration of
For certain targets, Roche is required to pay us fees of
On
We granted Biogen a non-exclusive research license under our intellectual
property to perform research activities, select and optimize degraders and
develop products including the degraders, as well as a commercial license to
manufacture and commercialize the products related to the targets once the
initial research and development work is complete. The research under the Biogen
Agreement will take place over a 54-month research term, ending in
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up to four additional years. If Biogen elects to extend the term of the Biogen
Agreement, Biogen would be required to make an additional payment of
The Biogen Agreement provides for three initial targets, with Biogen having the
right to initiate up to an additional two targets and to control all
post-discovery activities. Biogen paid us a nonrefundable upfront payment of
Following the achievement of development candidate criteria, prior to any
IND-enabling study, for any target, Biogen will bear all costs and expenses of
and will have sole discretion and decision-making authority with respect to the
performance of further activities with respect to any degrader under development
under the Biogen Agreement and all products that incorporate that degrader.
Biogen is also required to pay us up to
Biogen also had the option to fund additional discovery activities, referred to
as sandbox activities, whereby we performed discovery-type research at Biogen's
election to develop other potential targets that may be used as replacement
targets for the initially nominated targets or two additional targets under the
Biogen Agreement. Sandbox activities fully concluded on
Calico License Agreement
In
We provided Calico with a non-exclusive research license under our intellectual property to perform research activities and select and optimize degraders and develop products including the degraders. We also granted Calico a commercial license for any licensed products resulting from the development candidates supplied by us. We are required to perform research and development activities for the nominated targets over the applicable research term, with the intent to provide a development candidate for each target to Calico once the agreed-upon research is complete.
Calico is obligated to reimburse our research and development activities for each target at specified levels through the identification of a development candidate, after which Calico shall assume full responsibility for candidate development.
After the initiation of each target, the Calico Agreement does not contain any options for Calico to license the individual targets; once we complete the initial research and development activities required, Calico controls and directs the targets with no additional work required to be performed by us. There is no exercise price or incremental fee payable to us to progress the research further, though Calico is required to pay an initiation fee with the commencement of each research plan. Once Calico nominates a target and pays the applicable target initiation fee, we will commence research and development activities for that target. The Calico Agreement provides for up to five initial targets. Research activities performed are reimbursed at specified levels for the five-year term of the Calico Agreement, with the term for one research program having been extended by an additional year.
Under this agreement, Calico paid us a nonrefundable upfront amount of
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Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
• salaries, benefits, and other related costs, including stock-based
compensation expense, for personnel engaged in research and development
functions;
• expenses incurred under agreements with third parties, including contract
research organizations and other third parties that conduct research,
preclinical, and clinical activities on our behalf as well as third parties
that manufacture our product candidates for use in our preclinical and
clinical trials;
• costs of outside consultants, including their fees, unit-based compensation,
and related travel expenses;
• costs of laboratory supplies and acquiring materials for preclinical studies
and clinical trials;
• facility-related expenses, which include direct depreciation costs of
equipment and allocated expenses for rent and maintenance of facilities and
other operating costs; and
• third-party licensing fees.
We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed.
We expect that our research and development expenses will continue to increase substantially in connection with our planned preclinical and clinical development activities.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect that our general and administrative expenses will continue to increase in the future to support increased research and development activities. These increases will likely include increased costs related to the hiring of additional personnel; fees to outside consultants, lawyers and accountants; director and officer insurance costs, among other expenses. and investor and public relations costs.
Other (expense) income, net
Other (expense) income, net primarily consists of the following:
• interest expense and amortization of our long-term debt, which is discussed
in greater detail in Note 9, Long-term debt and warrant - related party, to
the unaudited condensed consolidated financial statements in this Quarterly
Report on Form 10-Q; and
• interest income earned on our cash, cash equivalents, and marketable
securities and accretion of discount on marketable securities.
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Results of operations
Comparison of the three months ended
Revenue
Revenue from our collaboration and license agreements consisted of the following
for the three months ended
Three Months Ended March 31,
2022 2021
Revenue from collaboration agreements:
Roche Agreement $ 1,123 $ 2,193
Biogen Agreement 4,716 1,880
Calico Agreement 1,815 3,353
Total revenue from collaboration agreements
The
• a$2.8 million increase in revenue recognized under the Biogen Agreement, resulting from increased effort made on the nominated targets and additional revenue recognized from the Biogen milestone earned in 2021.
This was offset by:
• a$1.5 million decrease in FTE reimbursements recognized under the Calico Agreement as a result of the extension of the research term under the Calico Agreement with respect to a specified program inSeptember 2021 ; and • a$1.1 million decrease in revenue recognized under the Roche Agreement, resulting from the termination of the Roche Agreement as to the target BRAF inNovember 2021 .
Research and development expense
The following table summarizes our research and development expense for the
three months ended
Three Months Ended March 31,
2022 2021
Research and development expenses:
Personnel expenses $ 10,911 $ 6,934
Preclinical and development expenses 10,195 9,389
Facilities and supplies 2,273 2,297
Professional fees 1,655 1,171
Clinical expenses 809 218
Intellectual property 270 423
Other expenses 90 94
Total research and development expenses
The
• a$4.0 million increase in personnel expenses, representing salary and benefit costs, including a$2.4 million increase in stock-based compensation expense driven primarily by the equity awards issued to employees subsequent toMarch 31, 2021 , and due to the buildout of our clinical development team.
General and administrative expense
The following table summarizes our general and administrative expense for the
three months ended
Three Months Ended March 31,
2022 2021
General and administrative expenses:
Personnel expenses $ 8,548 $ 4,640
Professional fees 2,227 2,431
Facilities and other expenses 2,045 338
Total general and administrative expenses
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The
• a$3.9 million increase in personnel expenses resulting from a$2.6 million increase in stock-based compensation expenses driven primarily by the equity awards issued to employees subsequent toMarch 31, 2021 ; and • a$1.6 million increase in facilities and other expenses, which is driven primarily by lease commencement inJanuary 2022 of our additional leased space. Other (expense) income, net
The following table summarizes our other (expense) income for the three months
ended
Three Months Ended March 31,
2022 2021
Other (expense) income, net: Interest expense and amortization of long-term debt - related party
$ (527 ) $ (534 )
Interest and other income, net 276 72
Total other (expense) income, net $ (251 ) $ (462 )
Liquidity and capital resources
Sources of liquidity
Since inception, we have incurred significant operating losses. We expect to
incur significant expenses and operating losses for the foreseeable future as we
advance the preclinical and, if successful, the clinical development of our
programs. We do not currently have any approved products and have never
generated any revenue from product sales. To date, we have financed our
operations primarily through the sale of preferred stock, public offerings of
our common stock, and through payments from collaboration partners. As of
Cash flows
The following table summarizes our sources and uses of cash for the periods presented (in thousands):
Three Months Ended March 31,
2022 2021
Net change in cash, cash equivalents and restricted cash: Net cash used in operating activities
$ (26,596 ) $ (24,934 ) Net cash used in investing activities (4,004 ) (61,730 ) Net cash provided by (used in) financing activities 480 (151 ) Total net change in cash, cash equivalents and restricted cash$ (30,120 ) $ (86,815 ) Operating activities
Net cash used in operating activities for the three months ended
• our net loss of$31.6 million ; • a$5.9 million change in deferred revenue due to the recognition of revenue under our collaboration agreements; and • a$4.9 million change in accounts payable and accrued expenses.
These were offset by non-cash expenses of
Net cash used in operating activities for the three months ended
• our net loss of$21.0 million ; • a$5.6 million change in accounts payable and accrued expenses; and • a$3.8 million change in deferred revenue due to the recognition of revenue under our collaboration agreements. 24
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These were offset by non-cash expenses of
Investing activities
Net cash used in investing activities for the three months ended
Net cash used in investing activities for the three months ended
Funding requirements
Since our inception, we have incurred significant operating losses and we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. In addition, we expect to continue to incur costs associated with operating as a public company.
Specifically, we anticipate that our expenses will increase substantially in the future, if and as we:
• continue our ongoing first-in-human Phase 1/2 trial and initiate and conduct
planned first-in-human Phase 1/2 trials for our other lead product
candidates;
• advance additional product candidates into preclinical and clinical
development;
• continue to invest in our proprietary TORPEDO platform;
• advance, expand, maintain and protect our intellectual property portfolio;
• hire additional clinical, regulatory, quality and scientific personnel;
• add operational, financial and management information systems and personnel
to support our ongoing research, product development, potential future
commercialization efforts, operations as a public company and general and
administrative roles;
• seek marketing approvals for any product candidates that successfully
complete clinical trials; and
• ultimately establish a sales, marketing and distribution infrastructure and
scale up external manufacturing capabilities to commercialize any products
for which we may obtain marketing approval.
Because of the numerous risks and uncertainties associated with development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital and operating costs associated with our current and anticipated preclinical and clinical development. Our future capital requirements will depend on many factors, including:
• the progress, costs and results of ongoing and planned first-in-human Phase
1/2 trials for our lead product candidates and any future clinical
development of those lead product candidates;
• the scope, progress, costs and results of preclinical and clinical
development for our other product candidates and development programs;
• the number and development requirements of other product candidates that we
pursue;
• the progress and success of our collaborations with Roche, Biogen and
Calico, including whether or not we receive additional research support or
milestone payments from our collaboration partners upon the achievement of
milestones;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs and timing of preparing, filing and prosecuting patent
applications, maintaining and enforcing our intellectual property rights and
defending any intellectual property-related claims;
• our willingness and ability to establish additional collaboration
arrangements with other biotechnology or pharmaceutical companies on
favorable terms, if at all, for the development or commercialization of
current or additional future product candidates;
• the costs and timing of future commercialization activities, including
product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we receive marketing approval; and
• the revenue, if any, received from commercial sales of our product
candidates for which we receive marketing approval.
As a result of the anticipated expenditures described above, we will need to obtain substantial additional financing to support our continuing operations and pursue our long-term business plan. Until such time, if ever, that we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of equity offerings, debt offerings, collaborations, strategic
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alliances and marketing, distribution or licensing arrangements. Although we may
receive potential future milestone and royalty payments under our collaborations
with Roche, Biogen and Calico, we do not have any committed external source of
funds as of
If we raise additional capital through the sale of equity securities, each investor's ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as making acquisitions or capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Contractual obligations
We enter into contracts in the normal course of business with contract manufacturing organizations, contract research organizations and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
During the three months ended
Critical accounting policies and use of estimates
Our critical accounting policies are those policies that require the most
significant judgments and estimates in the preparation of our unaudited
condensed consolidated financial statements. We have determined that our most
critical accounting policies are those relating to revenue recognition from
collaborations, research and development expense recognition, lease liability
measurement, and stock-based compensation. There have been no significant
changes to our existing critical accounting policies discussed in our Annual
Report on Form 10-K for the year ended
Off-balance sheet arrangements
We have not entered into any off-balance sheet arrangements, as defined under
the applicable regulations of the
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