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 small molecule product candidates focused on indications
with significant unmet patient need. Our pipeline consists of six product
candidates, two of which we are actively developing ourselves, FT-4202 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. We are simultaneously pursuing partnerships for two product candidates,
olutasidenib (formerly FT-2102), a selective inhibitor for cancers with
isocitrate dehydrogenase 1 gene mutations, or IDH1m, and FT-8225, which is a
liver-targeted fatty acid synthase, or FASN, inhibitor. Additionally, we have
licensed exclusively two programs each to
Our lead product candidate, FT-4202, is a novel, oral, once-daily, potentially
disease-modifying therapy initially being studied for the treatment of SCD. We
are evaluating FT-4202 in a multi-center, placebo-controlled Phase I trial in
SCD patients ages 12 years and older. We completed the healthy volunteer portion
of the trial in
Our 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 the
We are pursuing partnerships for our other compounds, olutasidenib, a selective
inhibitor of mutant isocitrate dehydrogenase 1, or mIDH1, and FT-8225, an
inhibitor of fatty acid synthase, or FASN, programs. We have successfully
completed a registrational Phase II trial for relapsed / refractory acute
myeloid leukemia, or R/R AML, that reported positive interim results in
Since our founding in 2007, we have devoted substantially all of our resources to the research and development of our drug discovery technology, developing our pipeline, building our intellectual property portfolio and raising capital. 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 the completion of our initial public offering (IPO), and subsequent follow-on offering.
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On
On
To date, we have not had any products approved for sale and have not generated
any revenue from product sales, and do not expect to do so for several years, if
at all. All of our programs are still in preclinical or clinical development.
Our ability to generate product revenue will depend on the successful
development and eventual commercialization of one or more of our product
candidates. Since our inception, all of our revenue has been generated from our
license and collaboration agreements with third parties. We have experienced
periods of both income and loss and positive and negative cash flows from
operations since inception. Our net (loss) income was
? complete preclinical studies, initiate and complete clinical trials for product candidates; ? continue enrollment in and proceed with the expansion cohorts of our ongoing Phase I clinical trial for FT-4202 for the treatment of SCD; ? continue our registration-enabling, global pivotal Phase II/III clinical trial of FT-4202 in SCD; ? prepare for and initiate our planned clinical trial of FT-4202 in patients with thalassemia; ? continue enrollment in our Phase I study for FT-7051 for the treatment of mCRPC; ? contract to manufacture our product candidates; ? advance research and development related activities to expand our product pipeline; ? seek regulatory approval for our product candidates that successfully complete clinical development; ? develop and scale up our capabilities to support our ongoing preclinical activities and clinical trials for our drug candidates and commercialization of any of our drug candidates for which we obtain marketing approval; ? maintain, expand, enforce, defend and protect our intellectual property portfolio; ? hire additional staff, including clinical, scientific and management personnel; ? continue to take temporary precautionary measures to help minimize the risk of the coronavirus disease, or COVID-19, to our employees and patientswho enroll in our studies; ? secure facilities to support continued growth in our research, development and commercialization efforts; and ? incur costs associated with our continued operations as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain marketing approval for our drug candidates. Business interruptions resulting from the coronavirus outbreak or similar public health crises have and could continue to cause a disruption of the development of our product candidates and our business. In addition, 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.
The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources. Any delay or failure to obtain regulatory approvals would materially adversely affect our product candidate development efforts and our business overall. Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty the likelihood, timing or cost of obtaining regulatory approval and marketing our product candidates.
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As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity offerings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other collaboration agreements or strategic transactions when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We have determined that our cash, cash equivalents and marketable securities of
COVID-19 Pandemic
In
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 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:
? compensation, benefits, including equity-based compensation, and other employee related expenses; ? research and development related facility and depreciation costs; 28
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? supplies to support our internal research and development efforts; and ? 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 for partnered programs and those costs that were unallocated to programs for the periods presented (in thousands):
Three Months Ended March 31, 2021 2020 FT-4202$ 9,794 $ 3,709 FT-7051 969 570 Olutasidenib 3,963 7,225 FT-8225 39 1,062 External predevelopment and unallocated expenses 2,492 1,533 Internal research and development expenses 9,086 9,111$ 26,343 $ 23,210
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 FT-4202 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 solid tumors progress towards completion. We do not anticipate significant future costs for FT-8225.
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:
? our ability to add and retain key research, pharmaceutical sciences and development personnel; ? our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize FT-4202 and FT-7051; ? our successful enrollment in and completion of clinical trials, including our ability to generate positive data from any such clinical trials; ? the costs associated with the development of any additional development programs we identify in-house or acquire through collaborations or other arrangements; ? 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 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; ? obtaining and maintaining third-party coverage and adequate reimbursement, if FT-4202 or FT-7051 is approved; ? acceptance of our lead product candidates, if and when approved, by patients, the medical community and third-party payors; ? effectively competing with other therapies, if FT-4202 or FT-7051 is approved; ? our ability to obtain and maintain patent, trade secret and other intellectual property protection for FT-4202 and FT-7051 and regulatory exclusivity for FT-4202 and FT-7051 if and when approved; ? our receipt of marketing approvals for FT-4202 and FT-7051 from applicable regulatory authorities; and 29
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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
Restructuring Charges
Restructuring charges consist of termination costs, including employee
severance, health benefits, and outplacement services, incurred as a result of
our
Interest Income
Interest income consists of interest generated from our cash, cash equivalents
and marketable securities, amortization and accretion of purchase premiums and
discounts associated with our investments, and the accretion of the carrying
value of the installment receivable from the divestiture of our hit discovery
capabilities to
Gain on Hit Discovery Divestiture
Gain on Hit Discovery divestiture consists of the gain recognized on the divestiture of our hit discovery capabilities and represents the fair value of the consideration received in excess of net assets sold.
Other (Expense) Income, Net
Other (expense) income, net primarily consists of gains and losses recognized from recording our warrants at fair value.
Income Taxes
On
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, and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates.
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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 March 31, Change 2021 2020 $ Collaboration revenue $ - $ - $ - Operating expenses: Research and development 26,343 23,210 3,133 General and administrative 9,867 8,933 934 Restructuring charges - 83 (83 ) Total operating expenses 36,210 32,226 3,984 Loss from operations (36,210 ) (32,226 ) (3,984 ) Other income: Gain on Hit Discovery divestiture - 23,312 (23,312 ) Interest income 262 641 (379 ) Other (expense) income, net (4 ) 18 (22 ) Total other income, net 258 23,971 (23,713 ) Loss before taxes (35,952 ) (8,255 ) (27,697 ) Income tax expense (benefit) 8 (19,485 ) 19,493 Net (loss) income$ (35,960 ) $ 11,230 $ (47,190 ) 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 March 31, Change 2021 2020 ($) FT-4202$ 9,794 $ 3,709 $ 6,085 FT-7051 969 570 399 Olutasidenib 3,963 7,225 (3,262 ) FT-8225 39 1,062 (1,023 )
External predevelopment and unallocated expenses 2,492 1,533 959
Internal research and development expenses 9,086 9,111 (25 ) Total research and development expense$ 26,343 $ 23,210 $ 3,133
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
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Restructuring Charges
In the three months ended
Gain on Hit Discovery Divestiture
In the quarter ended
Interest Income
Interest income decreased by approximately
Income Taxes
In the three months ended
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 the
IPO. From inception through
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 Celgene and
Cash Flows
The following table summarizes our sources and uses of cash for each period presented (in thousands): Three Months Ended March 31, 2021 2020 Net cash used in: Operating activities$ (41,237 ) $ (33,419 ) Investing activities (143,451 ) (29,318 ) Financing activities (167 ) (235 )
Net decrease in cash, cash equivalents and restricted cash
Operating Activities
We derive cash flows from operating activities primarily from cash collected from collaboration agreements and strategic transactions. 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.
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Net cash used in operating activities increased by approximately
Investing Activities
Net cash used in investing activities increased by approximately
Financing Activities
For the three 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, as a result of the completion of the IPO, 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:
? the scope, progress, results and costs of preclinical studies and clinical trials for our programs; ? the number and characteristics of programs and technologies that we develop or may in-license; ? 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; ? the costs necessary to obtain regulatory approvals, if any, for products inthe United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained; ? 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; ? the continuation of our existing licensing arrangements and entry into new collaborations and licensing arrangements; ? the costs we incur in maintaining business operations; ? the costs associated with being a public company; ? the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval; ? the effect of competing technological and market developments; ? 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 or similar public health crisis; and ? 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
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arrangements when needed on favorable terms or at all. Market volatility resulting from the COVID-19 pandemic 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.
Contractual Obligations
There have been no material changes to our contractual obligations during the
three months ended
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
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
JOBS Act and Emerging Growth Company Status
In
We will remain classified as an EGC until the earlier of: (i) the last day of
our first fiscal year in which we have total annual gross revenues of
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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 Unaudited 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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