FORMA THERAPEUTICS HOLDINGS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our
Annual Report on Form 10-K for the fiscal year ended
Overview
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapeutics to transform the lives of patients with rare hematologic diseases and cancers. Our drug discovery expertise has generated a pipeline of product candidates focused on indications with significant unmet patient need. Our pipeline consists of four product candidates, two of which we are pursuing for our development, etavopivat for the treatment of sickle cell disease, or SCD, and other hemoglobinopathies, and FT-7051 for the treatment of metastatic castration-resistant prostate cancer, or mCRPC.
Our lead product candidate, etavopivat, is a novel, oral, once-daily,
potentially disease-modifying therapy initially being studied for the treatment
of SCD. SCD, one of the most common single-gene disorders in the world, is a
chronic hemolytic anemia that affects hemoglobin, the iron-containing protein in
red blood cells, or RBCs, that delivers oxygen to cells throughout the body. SCD
is often characterized by low hemoglobin levels, painful vaso-occlusive crises,
or VOCs, progressive multi-organ damage and early death. Etavopivat is a potent
activator of pyruvate kinase-R, or PKR, designed to improve RBC metabolism,
function and survival, and potentially resulting in both increased hemoglobin
levels and reduced VOCs. We have completed our evaluation of etavopivat in a
multi-center, placebo-controlled Phase I trial in SCD patients ages 12 years and
older. Based on the results of the Phase I trial, we opened a global pivotal
Phase II/III trial, which we refer to as the Hibiscus Study, in SCD patients in
late 2020 and began enrolling patients in the first quarter of 2021. In
Our other product candidate, FT-7051, is a potent and selective inhibitor of
CREB-binding protein/E1A binding protein p300, or CBP/p300, in clinical
development for the treatment of mCRPC. Prostate cancer is reported as the
second and third leading cause of cancer death for men in
On
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Additionally, we licensed exclusively two programs each to
COVID-19 Pandemic
The ultimate extent of the ongoing impact of the COVID-19 global pandemic on our business, financial condition and results of operations is highly uncertain and will depend on future developments that cannot be predicted, including new information that may emerge concerning the severity of the COVID-19 pandemic, the impact of new strains of COVID-19, the effectiveness, availability and utilization of vaccines, and actions taken by government authorities and businesses to contain or prevent the further spread of COVID-19. For instance, a recurrence of COVID-19 cases or the impact of new variants of the virus could cause a more widespread or severe impact on commercial activity depending on where infection rates are highest. If we or any of the third parties with whom we engage, were to experience any additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on our business, results of operations and financial condition. To date, many clinical trials, including ours, have been impacted by the COVID-19 pandemic, with clinical trial sites implementing new policies in response to the COVID-19 pandemic, resulting in potential delays to enrollment of clinical trials or changes in the ability to access sites participating in clinical trials. The ongoing COVID-19 pandemic has impacted patients' visits to study sites for both our etavopivat and olutasidenib programs. We continue to work closely with our contract research organizations, or CROs, and the study sites to ensure patient safety and help facilitate study conduct. We will continue to monitor developments as we address the disruptions and uncertainties relating to the COVID-19 pandemic.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from the sale of products in the foreseeable future.
Historically, our revenue has been primarily derived from collaboration
agreements to discover, develop, and commercialize drug candidates. Our
collaboration arrangements with Celgene Corporation were all terminated in
Operating Expenses
Research and Development Expense
Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates, including the conduct of preclinical and clinical studies and product development, which are expensed as they are incurred. These expenses consist primarily of:
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compensation, benefits, including equity-based compensation, and other employee related expenses;
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research and development related facility and depreciation costs;
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supplies to support our internal research and development efforts; and
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third-party contract costs relating to research, process and formulation development, preclinical and clinical studies and regulatory operations.
We track direct research and development expenses, consisting principally of external costs, such as costs associated with CROs and manufacturing of preclinical and clinical drug product and other outsourced research and development expenses to specific product programs once a product candidate has been selected. We do not allocate internal research and development expenses consisting of employee and contractor-related costs, costs associated with our research and facility expenses, including depreciation or other indirect costs, to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development and, as such, are separately classified. The table below summarizes our research and development direct expenses for non-partnered product candidates and both external and internal costs that were unallocated to programs for the periods presented (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Etavopivat $ 13,423 $ 12,157 $ 22,162 $ 21,951
FT-7051 1,336 1,615 2,822 2,584
Olutasidenib 4,110 4,727 7,508 8,690
External predevelopment and
unallocated expenses 3,824 2,760 6,055 5,289
Internal research and development
expenses 16,366 10,328 31,785 19,416
Total research and development
expense $ 39,059 $ 31,587 $ 70,332 $ 57,930 We invest carefully in our pipeline and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical data of each product candidate, as well as the competitive landscape and ongoing assessments of such product candidate's commercial potential. We expect our research and development costs will be substantial for the foreseeable future. We expect costs associated with our etavopivat and FT-7051 programs to increase as the programs progress through clinical development. We expect costs associated with olutasidenib to decrease over time as the ongoing clinical trials for olutasidenib in AML and glioma progress towards completion.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
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our ability to add and retain key research, pharmaceutical sciences and development personnel;
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our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize etavopivat and FT-7051;
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our successful enrollment in and completion of clinical trials, including our ability to generate positive data from any such clinical trials;
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the costs associated with the development of any additional development programs we identify in-house or acquire through collaborations or other arrangements;
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our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression, as applicable, of our product candidates;
? our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing; ? our ability to forecast and meet supply requirements for clinical trials and commercialized products using third-party manufacturers; ? the terms and timing of any additional partnership, collaboration, license or other arrangement, including the terms and timing of any payments thereunder; ?
the ability to develop and obtain clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all;
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obtaining and maintaining third-party coverage and adequate reimbursement, if etavopivat or FT-7051 is approved;
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acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;
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effectively competing with other therapies, if etavopivat, or FT-7051 is approved;
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our ability to obtain and maintain patent, trade secret and other intellectual property protection for etavopivat and FT-7051 and regulatory exclusivity for etavopivat and FT-7051, if and when approved;
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our receipt of marketing approvals for etavopivat and FT-7051 from applicable regulatory authorities; and
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the continued acceptable safety profiles of our lead products following approval.
A change in any of these variables with respect to any of our programs would significantly change the costs, timing and viability associated with that program.
General and Administrative Expense
General and administrative expense consists primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. These costs relate to the operation of the business, unrelated to the research and development function, or any individual program.
Our general and administrative expenses may increase in the future as our
organization and headcount needed to support our research and development
activities grows and the potential commercialization of our product candidates,
if approved. We also expect to incur increased expenses associated with being a
public company, including increased costs of accounting, audit, legal,
regulatory and tax-related services associated with maintaining compliance with
exchange listing and the
Interest Income
Interest income consists of interest generated from our cash, cash equivalents and marketable securities and amortization and accretion of purchase premiums and discounts associated with our investments.
Other (Expense) Income, Net
Other (expense) income, net primarily consists of gains and losses recognized from the revaluation of foreign exchange rates due to timing of payments made on accounts payable.
Income Taxes
Income tax expense is comprised of domestic (US federal and state) income taxes at the applicable tax rates, adjusted for non-deductible expenses, research and development tax credits, equity-based compensation book and tax differences, and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates. However, due to the full valuation allowance on our deferred tax assets, the net impact to our overall income tax expense is not material.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our condensed consolidated statements of operations for each period presented (in thousands):
Three Months Ended
June 30, Change
2022 2021 ($)
Collaboration revenue $ - $ - $ -
Operating expenses:
Research and development 39,059 31,587 7,472
General and administrative 13,939 12,471 1,468
Total operating expenses 52,998 44,058 8,940
Loss from operations (52,998 ) (44,058 ) (8,940 )
Other income:
Interest income 599 309 290
Other (expense) income, net (192 ) 272 (464 )
Total other income, net 407 581 (174 )
Loss before taxes (52,591 ) (43,477 ) (9,114 )
Income tax (benefit) expense (13 ) 108 (121 )
Net loss $ (52,578 ) $ (43,585 ) $ (8,993 )
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Collaboration Revenue
There was no collaboration revenue for the three months ended
Research and Development Expense
The following table summarizes our research and development expenses for each period presented (in thousands):
Three Months Ended
June 30, Change
2022 2021 ($)
Etavopivat $ 13,423 $ 12,157 $ 1,266
FT-7051 1,336 1,615 (279 )
Olutasidenib 4,110 4,727 (617 )External predevelopment and unallocated expenses 3,824 2,760 1,064 Internal research and development expenses
16,366 10,328 6,038
Total research and development expense $ 39,059 $ 31,587 $ 7,472 Research and development expense increased by
The increase in research and development expense was primarily attributable to a
General and Administrative Expense
General and administrative expense increased by approximately
The increase in general and administrative expense was primarily attributable to
a
Comparison of the Six Months Ended
The following table summarizes our condensed consolidated statements of operations for each period presented (in thousands):
Six Months Ended
June 30, Change
2022 2021 ($)
Collaboration revenue $ - $ - $ -
Operating expenses:
Research and development 70,332 57,930 12,402
General and administrative 27,075 22,338 4,737
Total operating expenses 97,407 80,268 17,139
Loss from operations (97,407 ) (80,268 ) (17,139 )
Other income:
Interest income 888 571 317
Other (expense) income, net (227 ) 268 (495 )
Total other income, net 661 839 (178 )
Loss before taxes (96,746 ) (79,429 ) (17,317 )
Income tax (benefit) expense (10 ) 116 (126 )
Net loss $ (96,736 ) $ (79,545 ) $ (17,191 )
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Collaboration Revenue
There was no collaboration revenue for the six months ended
Research and Development Expense
The following table summarizes our research and development expenses for each period presented (in thousands):
Six Months Ended
June 30, Change
2022 2021 ($)
Etavopivat $ 22,162 $ 21,951 $ 211
FT-7051 2,822 2,584 238
Olutasidenib 7,508 8,690 (1,182 )External predevelopment and unallocated expenses 6,055 5,289 766 Internal research and development expenses
31,785 19,416 12,369
Total research and development expense $ 70,332 $ 57,930 $ 12,402 Research and development expense increased by
The increase in research and development expense was primarily attributable to a
General and Administrative Expense
General and administrative expense increased by approximately
The increase in general and administrative expense was primarily attributable to
a
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily with proceeds from our
license and collaboration agreements, through the issuance and sale of our
preferred shares and preferred stock to outside investors and completion of our
initial public offering, or IPO, and follow-on public offering. From inception
through
In addition, in
Continued cash generation is highly dependent on our ability to establish new
third-party collaborators, through out-licensing of assets and from potential
milestones from existing out-licensed programs with Bristol-Myers Squibb and
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Cash Flows
The following table summarizes our sources and uses of cash for each period
presented (in thousands):
Six Months Ended
June 30,
2022 2021
Net cash (used in) provided by:
Operating activities $ (94,059 ) $ (73,776 )
Investing activities 91,189 (157,965 )
Financing activities 623 (75 )
Net decrease in cash, cash equivalents and restricted cash
Operating Activities
Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we invested in developing our platform, drug discovery efforts and related infrastructure.
Net cash used in operating activities increased by approximately
Investing Activities
For the six months ended
Financing Activities
For the six months ended
Plan of Operation and Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical and clinical activities of our programs. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution, which costs we might offset through entry into collaboration agreements with third parties. In addition, we expect to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows in the foreseeable future.
As of
Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may receive payments under collaboration arrangements or enter into collaborations with third parties is unknown, we may incorrectly estimate the timing and amounts of operating expenses and capital expenditures. Our future capital requirements will depend on many factors, including, but not limited to:
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the scope, progress, results and costs of preclinical studies and clinical trials for our programs;
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the number and characteristics of programs and technologies that we develop or may in-license;
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the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
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the costs necessary to obtain regulatory approvals, if any, for our product
candidates in
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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;
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the continuation of our existing licensing arrangements and entry into new collaborations and licensing arrangements;
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the costs we incur in maintaining business operations;
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the costs associated with being a public company;
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the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval;
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the effect of competing technological and market developments;
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the impact of any business interruptions to our operations or to those of our manufacturers, suppliers, or other vendors resulting from the COVID-19 pandemic, a similar public health crisis or political or economic instability, such as global conflicts and inflation;
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the impact of political and economic instability to the costs of labor, raw materials and research and development; and
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the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for programs.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Market volatility resulting from the COVID-19 pandemic, higher interest rates, diminished credit availability, or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Additional debt financing and preferred equity offerings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially result in dilution to the holders of our common stock.
If we raise additional funds through strategic collaborations 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. If we are unable to raise additional funds through equity offerings or debt financings when needed, we may be required to delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
There have been no material changes to our critical accounting policies from
those described under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies and
Significant Judgments and Estimates" in our Annual Report on Form 10-K for the
fiscal year ended
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Recently Issued Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1, "Notes to Condensed Consolidated Financial Statements," of this Quarterly Report on Form 10-Q, such standards will not have a material impact on our unaudited condensed consolidated financial statements or do not otherwise apply to our operations.
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