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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 47-5617627 | ||||
(State or other jurisdiction of
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490 Arsenal Way, Suite 120 Watertown, MA | 02472 | ||||
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Title of each class | Trading
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Common Stock, $0.0001 par value per share | CCCC | The Nasdaq Global Select Market |
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o No xYes
o No xYes
x No oYes
x No oLarge accelerated filer | o |
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Emerging growth company | o |
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As of June 30, 2020, the last business day of the registrant’s most recently completed second quarter, there was no public market for the registrant’s common stock. Yes
$201,260,869.
49,050,851.
Auditor Firm ID: 185 | Auditor Name: KPMG LLP | Auditor Location: Boston, MA, United States |
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•the initiation, timing, progress, results, safety and efficacy, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials, the period during which the results of the trials will become available, and our research and development programs;
•the ultimate impact of the current novelongoing coronavirus, pandemic, or the COVID-19, pandemic, or any other health epidemic, on our business, manufacturing, clinical trials, research programs, supply chain, regulatory review, healthcare systems or the global economy as a whole;
•risks related to the direct or indirect impact of the ongoing COVID-19 pandemic or any future large-scale adverse health event, such as the scope and duration of the outbreak,pandemic, government actions and restrictive measures implemented in response, material delays in diagnoses, initiation or continuation of treatment for diseases that may be addressed by our development candidates and investigational medicines, or in patient enrollment in clinical trials, potential clinical trials, regulatory review or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic or other future large-scale adverse health event, and our ability to execute business continuity plans to address disruptions caused by the ongoing COVID-19 pandemic or future large-scale adverse health event;
•our ability to obtain funding for our operations necessary to complete further development, manufacturing and commercialization of our product candidates;
•our ability to obtain and maintain regulatory approval for any of our current or future product candidates;
•the period of time over which we anticipate our existing cash and cash equivalents, and short-term investmentsmarketable securities will be sufficient to fund our operating expenses and capital expenditure requirements;
•our ability to identify and develop product candidates for treatment of additional disease indications;
•the potential attributes and benefits of our product candidates;
•the rate and degree of market acceptance and clinical utility for any product candidates we may develop;
•the pricing and reimbursement of our product candidates, if approved;
•the effects of competition with respect to any of our current or future product candidates, as well as innovations by current and future competitors in our industry;
•the implementation of our strategic plans for our business, any product candidates we may develop, and our TORPEDO® (Target ORiented ProtEin Degrader Optimizer) platform;
•the ability and willingness of our third-party strategic collaborators to continue research, development, and manufacturing activities relating to our product candidates, including our ability to advance programs under our existing collaboration agreements with F. Hoffman-LaHoffmann-La Roche Ltd.Ltd and Hoffman-LaRocheHoffmann-La Roche Inc., or Roche, Biogen MA, Inc., or Biogen, and Calico Life Sciences LLC, or Calico, or other new collaboration agreements;
•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;
•estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;
•future agreements with third parties in connection with the manufacturing and commercialization of our product candidates, if approved;
•the size and growth potential of the markets for our product candidates and our ability to serve those markets;
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•our financial performance;
•regulatory developments in the United States and foreign countries;
•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•the success of competing therapies that are or may become available;
•our ability to attract and retain key scientific or management personnel;
•developments relating to our competitors and our industry; and
•other risks and uncertainties, including those discussed in Part I, Item 1A - Risk Factors in this Form 10-K.
•We are an early-stagea clinical-stage biopharmaceutical company with a limited operating history and have incurred significant losses since our inception. To date, we have not generated any revenue from product sales. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years and may never achieve or maintain profitability. Our net loss was $66.3$128.2 million and $34.1$83.9 million for the years ended December 31, 20202022 and 2019,2021, respectively.
•We will need substantial additional funding to pursue our business objectives and continue our operations. If we are unable to raise capital when needed, we may be required to delay, limit, reduce or terminate our research or product development programs or future commercialization efforts.
•Our approach to the discovery and development of product candidates based on our TORPEDO platform is unproven, which makes it difficult to predict the time, cost of development and likelihood of successfully developing any products.
Most•While we are a clinical-stage company and have commenced clinical trials of several product candidates, all of our other product candidates are still in preclinical development. Further, we have never completed a clinical trial of any of our product candidates. Our business could be harmed if we are unable to advance to clinical development, develop, obtain regulatory approval for and/or commercialize our product candidates, or if we experience significant delays in doing any of these things.
•We cannot be certain of the timely completion or outcome of our preclinical testing and clinical trials. In addition, the results of preclinical studies may not be predictive of the results of clinical trials and the results of any early-stage clinical trials we commence may not be predictive of the results of later-stage clinical trials.
•Our preclinical studies and clinical trials may fail to demonstrate adequately the safety potency, purity and efficacy of any of our product candidates, which would prevent, delay, or delayrequire additional research or analysis to proceed with development, regulatory approval, and commercialization of our current and future product candidates.
•We have entered into collaboration agreements with Roche, Biogen, and Calico, and may in the future seek to enter into collaborations with third parties for the development and/or commercialization of certain of our product candidates. If we fail to enter into these types of new collaborations, or if our existing collaborations are not successful,candidates, but we may be unable to continue development of our product candidates, we would not receive any contemplated milestone paymentsnever realize the full potential benefits under these existing or royalties, and we could fail to capitalize on the market potential of our product candidates.
•The continuing effects of the novel coronavirus,ongoing COVID-19 pandemic, including the spread of new strains or COVID-19,variants of the virus and the effects of localized shutdowns, could adversely impact our business, including our preclinical studies and clinical trials.
•We face substantial competition, which may result in others discovering, developing or commercializing products for the same indication and/or patient population before or more successfully than we do.
•We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates receive marketing approval. This reliance on third parties may increase the risk that we will not have sufficient quantities of our product candidates in a timely manner, or at an acceptable cost or quality.
•If we are unable to obtain required marketing approvals for, commercialize, manufacture, obtain, and maintain patent protection for or gain market acceptance of our product candidates, or if we experience significant delays in doing so, our business will be materially harmed and our ability to generate revenue from product sales will be materially impaired.
•If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad or enforceable, our competitors could develop and commercialize technology, product candidates, and products similar or identical to ours, and our ability to successfully commercialize our technology, product candidates, and products may be impaired.
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We use ourpatients.
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modified schedule.
In addition to our lead product candidates, wethe Phase 1 dose escalation portion of the ongoing clinical trial.
We have been a pioneer in the field of targeted protein degradation since our founding in 2015. Our technology originated from research at the Dana-Farber Cancer Institute by Jay Bradner, M.D., Ken Anderson, M.D. and Nathanael Gray, Ph.D., leading researchers in the field of protein degradation who co-founded our company along with our Executive Chairman, Marc A. Cohen. We have assembled a scientific team with extensive knowledge and translational medicine expertise in the protein degradation field. Our management team draws on experience in all phases of drug discovery and development gained at large pharmaceutical and biotechnology companies. In addition, we have entered into key strategic collaborations with each of F. Hoffman-La Roche Ltd., or Roche, Biogen, Inc., or Biogen, and Calico Life Sciences LLC, or Calico, that help us address targets across multiple therapeutic areas. Through these collaborations we have received upfront and milestone payments in an aggregate of $167.5 million through December 31, 2020.
Our Product Pipeline
We have leveraged our TORPEDOplatform to generate a robust pipeline of orally available, potent and selective protein degradation drug candidates that may be capable of treating diseases in a wide range of organ systems and tissues. Our pipeline focus is on establishing clear clinical proof-of-concept for targets with well-established biology and a defined regulatory pathway. As shown in the table below, we currently have a number of preclinical programs in development. We anticipate that we will start dosing patients in our Phase 1/2 trial of CFT7455 in the first half of 2021. We expected that CFT8634, BRAF V600E, and RET programs will be in the clinic by the end of 2022. We are currently in the process of assessing our EGFR program in the context of the EGFR treatment landscape and determining the appropriate next steps for this program. Our three strategic collaborations with partners provide additional pipeline optionality and an expansion of our potential targets for protein degradation.
We are advancing two types of protein degraders. We refer to the first type of degrader as MonoDACs, which are Monofunctional Degradation Activating Compounds. MonoDAC degraders function by binding to E3 ligases and creating a new surface on the E3 ligases that enhances the binding of the E3 ligases to target proteins. We refer to our second type of degrader as BiDACs, which are Bifunctional Degradation Activating Compounds. BiDAC degraders are designed so that one end of the molecule binds to the disease-causing target protein and the other end binds to the E3 ligase. Each of these types of degrader is intended to result in the same end point: the specific degradation of the target proteins of interest. These two approaches have complementary requirements for target engagement: BiDAC degraders utilize specific binding sites where chemical binding moieties, which are portions of a molecule, can be identified, which enables a rational drug discovery approach, while MonoDAC degraders, in contrast, rely on ligase-to-target protein surface interactions to drive the
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ubiquitination process, which is the process by which an E3 ligase tags a target protein for degradation using a molecular tag called ubiquitin, rather than specific compound-binding sites.
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Rapidly advance our late-stage discovery programs to generate product candidates. In addition to our lead product candidates, we have progressed programs targeting BRAF V600E, in collaboration with our partner Roche, RET, and EGFR. We are also pursuing several other earlier-stage research programs. We believe that our platform and approach are broadly applicablethe future development of those programs themselves. Based on the results of our clinical trials, we will work with the FDA to address unmet medical needs in a varietydiscuss potential expedited development and accelerated approval pathways for our product candidates as applicable.
Leverage our TORPEDO platform to generate discovery programs for previouslyclassically undruggable or challenging targets. We believe that we can apply the principles and approaches used to advance our lead programs more broadly to develop novel degraders for diseasesthat have the potential to treat poorly drugged targets or drug currently undruggable targets. Our target selection process focuses on identifying targets where traditional small molecule inhibitors and other therapeutic approaches have been unsuccessful. We believe our degraders offer potential broad tissue distribution, oral delivery, relative ease of manufacturing and well-established development and regulatory pathways, which are all critical characteristics across disease areas. Additionally, our targeted protein degradation approach has thecould have an outsized patient impact, either by its potential to address many proteinimprove upon existing treatment options or provide new treatments for diseases that currently have no approved therapies. When considering what targets that are currently considered undruggable,to select, we focus on targets with a clear genetic link to a disease and consider how a degrader is differentiated from an inhibitor or other therapeutic option. Our target selection planning also includes reviewing patient populations and registrational pathways as our degraders can theoretically destroy proteins using anywell as evaluating available conserved binding site, including low-affinity binding sites or non-functional binding sites, bringing biological utilitybiomarker assays to ligands that would otherwise be inactive.identify which patients may benefit from the investigational therapy. We are focusing our current proprietary programs on selected oncology indications, but we believe our platform has broad applicability beyond cancer that we plan to capitalize on in the future.
Strategically invest in•Expand the application of the TORPEDO platform through existing and new collaboration partners. We have existing strategic collaborations with Roche, Biogen and Calico under which we are working to identify and develop novel degraders across multiple therapeutic areas. We are also exploring additional strategic partnerships around certain targets, product candidates, and disease areas, which could advance and accelerate our TORPEDO platform. To date we have invested significant timeresearch, allowing us to access additional capabilities and resources intoexpand the experimental and analytical componentsutility of our TORPEDOplatform. This platform enables us to quickly develop novel protein degraders. We will continue to invest in the latest experimental tools to improve our capabilities and
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Maximize the potential of our product candidates with selective use of development and commercial collaborations. We retain worldwide commercial rights to CFT7455, CFT8634 and our RET and EGFR programs. In the future, we may selectively evaluate development and commercialization collaborations for our drug candidates with partners whose capabilities complement our own while retaining meaningful commercial rights in key geographic territories. We evaluate potential collaborations based not solely upon their ability to generate additional revenue streams for us, but also based on how they might increase our ability to reach a broader set of patients in our targeted disease areas or expand the breadth of indications that our product candidates are approved to treat.
Overview of Protein Degradation
As
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concentration across multiple steady states.ligases. Collectively, these factors underscore the essential role E3 ligases play in normal cellular function and how they can be leveraged against therapeutic protein targets.
Our approach represents
proteasome occurs in Step 5. Because the degrader is released unchanged, this recursive process—binding the target protein, ternary complex formation with the E3 ligase, poly-ubiquitination and release for degradation—can occur thousands of times with a single degrader molecule before it is eventually cleared by the body. Importantly, both the natural protein degradation process and the targeted protein degradation mediated by our degraders occur rapidly, on the order of milliseconds from initial target-ligase encounter to poly-ubiquitination and release for degradation by the proteasome. TheIn this way, protein degraders act as a catalyst for a natural process of targeted protein degradation mediated by our degraders is illustrated in the following graphic.
Once the targeted protein degradation process occurs for one molecule of a target protein, the degrader is released, and the process can be repeated with the same degrader molecule. This recursive process—binding the target protein, ternary complex formation with the E3 ligase, ubiquitination and release for degradation—can occur thousands of times with a single degrader molecule before it is eventually cleared by the body. Wewe refer to this process as the catalytic cycle, and itwhich is a crucial differentiator between degraders and traditional protein inhibitors, which must remain bound to the target protein to remain effective.
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Advantages of Targeted Protein Degradation Over Traditional Protein Inhibitors
Fast and Recursive Catalytic Effect
One degrader molecule can rapidly degrade many target proteins. Each catalytic cycle initiated by our degraders and ending with degradation of a disease-causing target protein occurs in a matter of milliseconds. The speed of the catalytic cycle combined with the catalytic amplification of our degraders could result in clinical impact on the disease mechanism that cannot be achieved with traditional inhibitors.
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Since targeted protein degradation does not function by inhibiting the target protein’s active site, in theory any conserved binding site on a target protein may be used for degrader binding to facilitate formation of the ternary complex and eventual protein degradation. In contrast,
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to the rapid optimization allowed by our TORPEDO
platform and the ability of our platform to predict degrader effects in vivo, we are able to quickly and efficiently advance programs from target identification to the candidate development stage.Our oral, small molecule targeted protein degraders are designed to leverage the body’s natural degradation machinery and repurpose it to recognize disease-causing proteins and tag them for destruction by the proteasome. Both our MonoDAC and BiDAC protein degrader approaches are complementary, and this provides us with additional flexibility to design degraders for each application and specific target. Since our degraders are fundamentally small molecules, we are able to deliver them through any route of administration available to traditional small molecules, including oral, intravenous and subcutaneous. Furthermore, our approach emphasizes the value of rapid catalytic degradation to increase the rate with which degradation of disease-causing target proteins occurs. Our approach focuses on minimizing biology and toxicity risk and pursuing diseases with significant unmet medical need and defined regulatory pathways.
Structural biology•Focus on Catalytic Efficiency: We seek to optimize catalytic degradation turnover by focusing our analytical techniques and predictive models on the relationship between degrader properties and ultimate protein degradation. Our degraders are designed to activate the E3 ligase and facilitate target protein binding and ubiquitination, resulting in rapid overall target degradation. The ability of our degraders to repeat this process recursively, with the same single degrader molecule interacting with many copies of the target protein, allows us to optimize our product candidates for catalytic degradation turnover and, as a result, create candidates that have the potential to provide a greater therapeutic effect. Our MonoDAC degraders and BiDAC degraders need to achieve sufficient binding affinity to initiate brief ternary complex model development:formation, but, unlike traditional inhibitors, they do not need to achieve prolonged stable binding to achieve desired physiological effects. In a number of our preclinical research activities, we have observed that even weaker binders can still result in very efficient degraders since they may allow for higher rates of catalytic degradation turnover, which is something we prioritize to achieve potentially greater activity.
Purpose-built chemistry engine: Our TORPEDO chemistry engine is designed to facilitate development of degraders with drug-like properties, leveraging structural insights generated by the platform and our deep drug development expertise. Traditionally, small molecule inhibitor optimization has often been guided by an emphasis on specific property enhancements, such as the Lipinkski “rule of five,” which stipulates limits on the molecular weight and hydrogen bond donors and acceptors to ensure drug-like properties. Degraders often fall well outside of these traditional boundaries and therefore require a reevaluation of these guidelines, commonly referred to as the “beyond-rule-of-five” space. By applying these principles in our chemistry designs, we are able to improve drug-like properties, including permeability, solubility and oral bioavailability, while maintaining potency and degradation at any dose in vivo activity.
Enabling quantitative degradation assays:◦We have developed high-throughput cellular degradation assays that are designed to produce quantitative data showing the relationship between degrader concentration and target protein degradation. This approach along with similar robust cellular assay systems, allows protein degradation quantitation with greater precision and higher throughput than traditional western-blot approaches. The application of our experimental data to our robust and proprietary models then
Predictive pharmacology founded on an enzymology framework:◦We have also established an enzymology framework that assesses and balances the relationship between degrader concentration, time, and target protein degradation to identify the key kinetic parameters of degrader induced protein degradation. We have extended this
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These features help focus our platform on the creation of candidates that we believe that this will present minimized biology and toxicity risk and address unmet treatment needs.
Minimizing Biology and Toxicity Risk
We place a significant emphasis on minimizing riskincrease the likelihood of successfully transitioning from preclinical models to the clinic.
Ligase selection: Cereblon:
◦Extensive clinical experience with the approved drugs thalidomide, lenalidomide and pomalidomide has shown that using Cereblon can effect target degradation. The mechanism of action of these molecules is to degrade disease targets, specifically IKZF1 and IKZF3, by bringing them into complex with Cereblon. Lenalidomide and pomalidomide are both approved drugs that have served as part of the standard of care for the treatment of MM for the last 1517 and seven10 years, respectively. Together, this experience clinically validates that Cereblon has been harnessed both safely and effectively by other drugs.
We have developed methods to obtain high resolution structural data with Cereblon bound to novel chemical binders, which allows us to rationally design improved binders with unique chemical features.
◦Cereblon is widely expressed across tissues and is present in all of the cellular compartments, including the cytoplasm and nucleus, potentially allowing for Cereblon-mediated targeted protein degradation across a wide variety of clinical settings and potential targets.
◦We have developed multiple distinct, proprietary Cereblon binders that we have designed for improved drug-like properties, such as enhanced oral bioavailability, solubility, permeability, and stability, and all of our product candidates and programs benefit from these properties of our proprietary Cereblon binders.
Our library of Cereblon binders offers a proprietary and powerful toolkit for degrader discovery. This Cereblon binder toolkit enables a more modular approach to identifying and optimizing degraders, as each of these binder classes encode distinct drug-like properties and, importantly, unique “exit trajectories” from the Cereblon surface following protein degradation, which can promote better target degradation turnover.
Minimizing target toxicity
Degrader design: We seektranscription factors, we can leverage our proprietary MonoDAC library of over 7,000 compounds to optimize catalytic degradation turnover and high selectivity, while also managing safety risk, by focusing our analytical techniques and predictive models onscreen for hits against the relationship between degrader properties and ultimate protein degradation. Our degraders activate the E3 ligase and facilitate target protein binding and ubiquitination, resulting in rapid overall target degradation. The ability of our degraders to repeat this process recursively with many copies of the target protein with the same single degrader molecule allows us to optimize our product candidates for catalytic degradation turnover and, as a result, create candidates that have the potential to provide a greater therapeutic effect. Our MonoDAC degraders and BiDAC degraders need to achieve sufficient binding affinity to initiate brief ternary complex formation, but,
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unlike traditional inhibitors, they do not need to achieve prolonged stable binding to achieve desired physiological effects. In fact, in a number of our pre-clinical research activities,target. Once we have observed that even weaker binders can still result in very efficient degraders since they may allow for higher rates of catalytic degradation turnover, which is something we prioritize to achieve potentially greater activity. We cana confirmed hit on a target, disease-causing proteins to which traditional inhibitors have been unable to sufficiently bind because we are not restricted to selecting compounds that have high target binding affinity. Moreover, in some instances we are able to repurpose molecules developed for traditional inhibitor approaches asleverage the target-protein-binding endother elements of our degraders and improve upon their biologic properties by incorporating them intoTORPEDO platform to optimize either a BiDAC.
We address toxicity driven by degradationMonoDAC or a BiDAC degrader.
Focus on High Unmet Medical Need
We currently focus on indications where there is a clear and high unmet medical need. Given the broad potential applicability of our approach, we believe it is important to prioritize treating diseases where traditional therapeutic modalities have failed or had a suboptimal therapeutic impact. In some cases of significant unmet need, there can be opportunities for expedited product development and a path to accelerated regulatory approval. Pursuing these types of accelerated pathways is a focus of our approach and provides the potential to address patients’ needs expediently while also validating our platform. We believe our platform has broad applicability beyond cancer that we plan to address in the future.
Leveraging our Differentiated Platform and Approach
We believe that these features differentiate our platform from other drug development approaches, including those of others in the targeted protein degradation space. We believe these differentiating features, as exemplified in our four lead programs, will help us succeed in developing novel degraders of disease-causing proteins to address unmet medical need.
Our four lead programs will be delivered orally because, in these indications, against these targets, oral delivery provides potential therapeutic and commercial advantages. Also, oral delivery helps mitigate the risk of adverse events associated with intravenous or intramuscular administration, including pain or extravasation, or leakage into the extravascular tissue, at the infusion site. By focusing on targets with reducedpresent minimized biology and toxicity risk, and pursuing conditions with highwhile also addressing unmet medical need, we have selected four preclinical programs to advance into the clinic.
needs.
IKZF1/3 Is aNHL.
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patients and become an established standard of care for these patients, if approved.
patients, if approved.
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We performed an in vitro analysis of CFT7455 at varying doses in cells lines across MM and PTCL. The figure below on the left depicts CFT7455, in a MM model, degrading up to approximately 90% of the IKZF1 target protein within 24 hours in a dose-dependent fashion. The figure below on the right depicts CFT7455, in a PTCL model, dose dependently degrading up to approximately 90% of IKZF1 in six hours.
CFT7455 is a highly selective degrader of IKZF1 and IKZF3, as demonstrated by the figure below. The figure depicts the standard method for determining degrader selectivity is a global proteomics experiment, which utilizes mass spectrometry to quantify cellular protein levels in DL-40 xenograft tumor cells following drug treatment. Specifically, the total cellular protein pool is extracted and processed from cells treated with a degrader, then each protein is individually identified and its level quantified. Using this process, we analyzed the effect of CFT7455 on over 8,000 proteins. These data were then compared to control samples from cells treated with the dosing solution alone, or vehicle, to provide the relative level changes for each protein in the entire cellular protein pool. The x-axis in the graph represents the relative level of proteins in the treated cells compared to control samples, and the y-axis shows the level of statistical confidence in the difference in relative levels of each protein. The figure below depicts cells treated with CFT7455 degrading only a small subset of the cellular proteins with statistical confidence, which are the proteins highlighted in red falling outside of the shaded area. This analysis shows that CFT7455 is a highly selective degrader of IKZF1 and IKZF3.
Further, we have profiled known Cereblon targets of pomalidomide and lenalidomide, including GSPT1, GSPT2 and SALL4, using target-specific assays. We observed that CFT7455 has no detectable activity against GSPT1 or GSPT2, but it does degrade SALL4, which is not expressed in the cell line used in the analysis reflected in the figure above, and accordingly, its downregulation is not detected in this assay.
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In addition to IKZF1 and IKZF3 degradation and selectivity, we have observed potent activity for CFT7455
Additionally, in the RPMI-8226 MM xenograft model, a MM model that is relatively insensitive to treatment with pomalidomide, CFT7455 demonstrated tumor regression and dose responsiveness, as shown in the graph below, and the combination
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As shown in the figures below, in preclinical studies evaluating various doses of CFT7455 and pomalidomide in MM H929 cells, CFT7455 was up to 10,000-fold more potent than pomalidomide, as measured by impact on cell viability after 96 hours. Further, CFT7455 exhibited a high catalytic turnover rate, as measured by CFT7455’s cellular degradation rate of up to 75% at 1.5 hours.
Based on its pharmacological properties, we believe CFT7455 may have a favorable therapeutic index and has the potential to replace or follow existing standard of care therapies. We have also evaluated varied dose regimens, as shown in the figure below, which suggest the possibility of intermittent dosing of CFT7455. This could further increase the therapeutic index if adverse events are observed, by incorporating drug holidays in the dosing schedule. Preliminary data from 28-day oral toxicity studies conducted in rats and monkeys demonstrated that exposures well above the modeled efficacious exposures in humans have generally been well tolerated. Definitive GLP-toxicity studies are ongoing.
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maximum tolerablePhase 1 dose and a recommended dose for expansion in patients with MM, and a discrete dose for patients with NHL. Identifying discrete doses these two patient populations is done because it has been observed in prior clinical experience that patients with MM may tolerate a higher doseescalation portion of IKZF1/3 targeting agents than do NHL patients. Additionally, specifically in MM, we are exploring CFT7455 as a single agent as well as CFT7455 in combination with dexamethasone, because the clinical activity or therapeutic index of CFT7455 may be increased by dexamethasone, but CFT7455 may also be sufficiently active and tolerable as a single agent to be developed as a dexamethasone-sparing agent. This trial will primarily investigate the safety and tolerability of CFT7455, and key secondary endpoints will be to characterize its PK/PD and anti-tumor activity. We expect thethis ongoing Phase 1/2 results will help us better understandclinical trial.
peripheral T-cell lymphoma, single agent CFT7455; and (4) in mantle cell lymphoma, single agent CFT7455.
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function, or DUF, have not been described. We therefore believe that our approach to targeted protein degradation of BRD9 has the potential to offer a major benefit over currently available therapies for synovial sarcoma and SMARCB1-deletedSMARCB1-null solid tumors.
Synovial Sarcoma
SMARCB1-deleted
MRTs typically present in infancy or early childhood and are often aggressive. If the MRT is found in the central nervous system, MRTs are referred to as atypical teratoid/rhabdoid tumors, or AT/RT. Whether the tumor is classified as MRT or AT/RT, the vast majority of these tumors are characterized by the loss of function of the SMARCB1 subunit of the BAF complex.
BRD9 has been shown to be an attractive target in pediatric MRTs because the loss or inactivation of the SMARCB1 subunit of the BAF complex leads to a dependency on BRD9. Mechanistically, SMARCB1 loss results in the reprogramming of the cBAF complex and makes the ncBAF complex essential, in a similar mechanism to that which drives synovial sarcoma. As a result, SMARCB1-mutant malignant rhabdoid tumors are dependent on the BRD9-containing ncBAF complex. Thus, we are able to target this tumor by degrading BRD9. We believe our BRD9 degrader could reduce tumor cell proliferation and improve patient outcomes.
Intensive, multimodality treatment approaches have improved the clinical outcome of these young patients in a stepwise manner. However, their prognosis remains poor even on these treatment approaches and the median duration of survival in clinical trials does not exceed nine to 17 months. New therapeutic strategies are urgently needed and we believe CFT8634 may have a potentially meaningful clinical impact in these patients.
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well as
PDX.
We expect to file an IND for CFT8634 with the FDA in the second half of 2021 and dose the first patient in
BRAF V600E Degrader Program
Treat Melanoma, Colorectal, and Non-small Cell Lung Cancers
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BRAF V600EV600 mutants activate the MAPK pathway constitutively, meaning that cell proliferation is activated without receiving the extracellular proliferative signals necessary to activate the pathway normally. Constitutive activation occurs because BRAF V600EV600 mutants are able to signal as a single protein, or a monomer, while wild type BRAF proteins must form a complex of two proteins, or a dimer, before downstream signaling can occur. This constitutive activation leads to overactivation of the MAPK cell proliferation pathway, causing oncogenic cell proliferation and tumor growth. Approved small molecule inhibitors of BRAF V600E—V600—vemurafenib, dabrafenib, and encorafenib—block the constitutive activation of
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In addition, two or our BRAF V600E degraders, CFT8442 and CFT8905, showed sustained activity
We believe that ourtreatment; (2) CFT1946 in combination with trametinib in patients with V600 mutant melanoma or NSCLC after prior BRAF V600E degradersinhibitor treatment; and (3) CFT1946 in combination with trametinib in patients with V600 mutant NSCLC who have the potential to improve upon current clinical outcomes, as our novel protein degraders could offernot previously been treated with a potent and selective mechanism to degrade V600E-mutant BRAF and prevent constitutive activation and oncogenic cell proliferation. Furthermore, degrading BRAF V600E may offer a fundamental improvement over inhibiting BRAF V600E because degrading the mutant proteins with our approach may avoid the possibilityinhibitor.
RET Degrader Program
EGFR L858R
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RET
RET
The goal of our RET programEGFR C797S mutation is to design a degrader that covers the full landscape of observed and anticipatedmost common on-target resistance mutants to current and emerging RET therapies in these relapsed/refractory patients. In particular, we have identified compounds that exhibit activity against the wild-type RET fusions and fusions encoding gatekeeper mutations, as well as similar potency and activity against a solvent front resistant mutant, or G810R, whichmechanism.
Further, since 30-40% of mutant EGFR NSCLC patients develop brain metastases, penetration of the central nervous system sufficient to drive therapeutic effect in this compartment was a key factor in our selection of CFT8919 as our development candidate.
Lung cancer, in particular NSCLC, is often driven by alterations in a single driver oncogene, making these tumors well suited for precision therapies. One such example is RET translocation, which is present in one percent
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were diagnosed with NSCLC in 2022 and between 10 and 15% of these patients have mutant EGFR, or mEGFR. The EGFR mutation is particularly common in NSCLC patients of Asian heritage. In China, where approximately 693,000 patients are diagnosed with mutated or rearranged oncogene drivers can beNSCLC annually, approximately 50% of diagnoses are driven by the EGFR mutation. Furthermore, 30 to 40% of mEGFR patients develop brain metastases.
exon19 deletion. The most EGFR-mediated resistance mechanism to osimertinib in this patient population is the C797S mutation. This shorter median PFS rate and resistance demonstrates the unmet medical need for the L858R patient population.
We intend to identify a drug candidate, file an IND with the FDA, and begin a Phase 1 trial in patients with RET-altered tumors by the end of 2022.
central nervous system.
Collaborations and License Agreements
Roche Amended and Restated License Agreement
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Agreement on a target-by-target basis by the entry into a mutual target termination agreement. Upon a termination of this nature, the Roche Agreement, as amended, provides that all rights in know-how and intellectual property in support of products that use inhibition as their mode of action, referred to as the Roche Field, will revert to Roche and all rights in respect of know-how and intellectual property in support of products that use degradation as their mode of action, referred to as the C4T Field, will revert to us. Further, this amendment states that, following the entry into a mutual target termination agreement, Roche will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the Roche Field, and we will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the C4T Field. In support of this allocation of rights, under the amendment, Roche provided us, and we provided Roche, with a perpetual, irrevocable, fully paid up, exclusive (even as to party granting the license), sublicensable (including in multiple tiers) license to the patents that are allocated to a party under the mutual target termination agreement and a perpetual, irrevocable fully paid up, non-exclusive, sublicensable (including in multiple tiers) license to the know-how that is allocable to a party under the mutual termination agreement. Finally,
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cancer, for a five-year research term ending in March 2022. In August 2021, we provided Calico with an option to extend the research term with respect to a certain program for up to a one-year period ending in March 2023 and, in September 2021, Calico exercised this option.
The research term under the Calico Agreement will end in March 2023.
The research term under the Biogen Agreement will end in June 2023.
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to elect a certain number of additional targets, we are eligible for an additional payment of $62.5 million.activities. Upon Biogen’s receipt of degraders directed to each target that satisfy pre-defined criteria, we are eligible to receive payments ranging from $2.0 million to $5.0 million per target. Upon Biogen’s commencement of the first IND-enabling study for a development candidate directed towards each target, Biogen is required to pay us $8.0 million. For each target, Biogen is required to pay us (a) development and commercialization milestone payments totaling up to $35.0 million and (b) sales milestone payments totaling up to $26.0 million for the achievement of certain amounts of net sales of all products directed to such target, each subject to certain reductions. The total development, commercialization, and sales milestone payments will increase if Biogen extends the collaboration term and elects additional targets. In addition, Biogen is required to pay us royalties on a product-by
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As of December 31, 2020, as part of our collaboration with Roche, we co-own one U.S. patent application, two patent applications filed under the Patent Cooperation Treaty and one patent application pending in Europe.
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Portfolio
Product Candidates Solely Owned by Us
adjustments.
Product Candidates
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degraders.
U.S.
•nonclinical laboratory and animal tests that must be conducted in accordance with GLPs;
•submission to the FDA of an investigational new drug, or IND, application, which must become effective before clinical trials may begin;
•approval by an independent institutional review board, or IRB, for each clinical site or centrally before each trial may be initiated;
•adequate and well controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended use, performed in accordance with good clinical practices, or GCPs;
•submission to the FDA of an NDA and payment of user fees;
•satisfactory completion of an FDA advisory committee review, if applicable;
•pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with current good manufacturing practices, or cGMP, and GCP;
•satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPsGCP and the integrity of the clinical data; and
•FDA review and approval of an NDA to permit commercial marketing for particular indications for use.
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becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in FDA authorization to commence a clinical trial.
•Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, structure-activity relationships, mechanism of action, absorption, metabolism, distribution, and excretion in healthy volunteers or subjects with the target disease or condition. If possible, Phase 1 clinical trials may also be used to gain an initial indication of product effectiveness.
•Phase 2—Controlled studies are conducted with groups of subjects with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule, and expanded evidence of safety. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expansive Phase 3 clinical trials.
•Phase 3—These clinical trials are generally undertaken in larger subject populations to provide statistically significant evidence of clinical efficacy and to further test for safety in an expanded subject population at multiple clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. These clinical trials may be done at trial sites outside the United States as long as the global sites are also representative of the U.S. population and the conduct of the study at global sites comports with FDA regulations and guidance, such as compliance with GCPs.
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dissemination on their website. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.
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another product under certain circumstances, including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. Further, the FDA may approve more than one product for the same orphan indication or disease as long as the products contain different active ingredients. Moreover, competitors may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity.
Unless otherwise required by regulation, PREA does not apply to a drug for an indication for which orphan drug designation has been granted, except that PREA will apply to an original NDA for a new active ingredient that is orphan-designated if the drug is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.
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purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance with cGMP requirements and adequate to assure consistent
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and impose reporting and documentation requirements upon the sponsor, and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
States, including the European Union, or EU, and China.
•The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing any remuneration (including any kickback, bride or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward or in return for,
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•The federal civil and criminal false claims laws, including the civil False Claims Act, or FCA, which prohibit individuals or entities from, among other things, knowingly presenting or causing to be presented, to the federal government, claims for payment or approval that are false, fictitious or fraudulent; knowingly making, using or causing to be made or used a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. In addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;
•The federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies;
•The Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for knowingly and willfully executing a scheme or attempting to execute a scheme, to defraud any healthcare benefit program, including private payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense or falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity need not have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, imposes, among other things, specified requirements on covered entities and their business associates relating to the privacy and security of individually identifiable health information including mandatory contractual terms and required implementation of technical safeguards of such information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates in some cases, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;
•The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, imposed new annual reporting requirements for certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, for certain payments and “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made and investment and ownership interested held in the previous year to certain non-physician providers such as physician assistants and nurse practitioners; and
•Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party-payors, including private insurers, and may be broader in scope than their federal equivalents; state and foreign laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to drug pricing and payments and other transfers of value to physicians and other healthcare providers and restrict marketing practices or require disclosure of marketing expenditures and pricing information; state and local laws that require the registration of pharmaceutical sales representatives; state and foreign laws that govern the privacy and security of health information in some circumstances. These data
privacy and security laws may differ from each other in significant ways and often are not pre-empted by HIPAA, which may complicate compliance efforts.35
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In addition, pharmaceutical manufacturers may also be subject to federal and state consumer protection and unfair competition laws and regulations, which broadly regulate marketplace activities and that potentially harm consumers.
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•created an annual, nondeductible fee on any entity that manufactures, or imports specified branded prescription drugs and biologic products, apportioned among these entities according to their market share in certain government healthcare programs;
•expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
•expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices;
•addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
•expanded the types of entities eligible for the 340B drug discount program;
•establishment of a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;
•created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research.
will impact our business.
Further, on December 20, 2019, the 2020 federal spending package permanently eliminated the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. It is impossible to determine whether similar taxes could be instated in the future.
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which has resulted in several Congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. For example, at the federal level, President Biden signed an Executive Order on July 9, 2021 affirming the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowancepolicy to (i) support legislative proposals seekingreforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to reducenegotiate drug prices, increase competition, lower out-of-pocket drug costs for patientsby imposing inflation caps, and, increase patient access toby supporting the development and market entry of lower-cost generic drugs and biosimilar drugs. On March 10, 2020,biosimilars; and (ii) support the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, amongenactment of a public health insurance option. Among other things, capthe Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an optionPrescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to cap Medicare Part D beneficiary monthly out-of-pocket expensesbuild and place limits on pharmaceutical price increases. Further,submit importation plans for drugs from Canada. On September 25, 2020, CMS stated drugs imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Trump administration previously releasedSocial Security Act and manufacturers would not report these
our product pricing.
Employees and
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lives, including health care, retirement planning and paid time off. As part of our promotion and retention efforts, we also invest in ongoing development.
Our success is rooted
In January 2020, Kelly Schick was appointed asbackgrounds and through supporting our Chief People Officerlocal community in their efforts to leadbridge the opportunity gap for underserved communities. With the establishment of our Human Resources function. InDiversity, Equity & Inclusion Council in 2022, this role, in additionwill continue to other areas of focus, Ms. Schick willbe an ongoing effort where we focus on human capital, overseeincorporating our employee engagementdiversity, equity, and retention, and foster and develop our culture.
inclusion initiatives into how we work each day.
02472, Attention: Corporate Secretary.
Risks Related to Our Financial Position and Needneed for Additional Capital
additional capital
•initiate, conduct, and successfully complete a planned first-in-human Phase 1/2and later-stage clinical trialtrials of our lead product candidate, CFT7455, in patients with multiple myeloma, or MM, or non-Hodgkin lymphomas, or NHLs, suchcandidates and as peripheral T cell lymphoma, or PTCL, and mantle cell lymphoma, or MCL;
initiate, conduct, and complete a planned first-in-human Phase 1/2 clinical trialwe expand the scope of our second lead product candidate, CFT8634, in patients with synovial sarcoma or SMARCB1-deleted solid tumors;
•leverage our TORPEDO platform to identify and then advance additional product candidates into preclinical and clinical development, including, without limitation, product candidates arising out of our BRAF, RET and EGFR programs;
•expand the capabilities of our TORPEDO platform;
initiate, conduct and successfully complete later-stage clinical trials;
•seek marketing approvals for any product candidates that successfully complete clinical trials;
•ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any products for which we mayexpect to obtain marketing approval;
•advance, expand, maintain and protect our intellectual property portfolio;
•hire additional personnel, including in areas such as clinical development, regulatory, quality, scientific, and scientific personnel;general and
•add operational, financial and management information systems and personnel, including personnel to support our ongoing research and development and potential future commercialization efforts.
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expenses.
•the timing, progress, costs and results of our ongoing and planned first-in-human Phase 1/2 clinical trials for CFT7455 and CFT8634our product candidates and any future clinical development of CFT7455 and CFT8634;
•the scope, progress, costs and results of our preclinical and clinical development forstage programs and our other product candidates and development programs, including, without limitation, product candidates arising out of our BRAF, RET and EGFR programs;
•the number and development requirements of other product candidates that we pursue;
•the success of our ongoing collaborations with Roche, Biogen Roche and Calico;
•the costs, timing and outcomes of regulatory review of our 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 or expect to receive marketing approval;
•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval and the timing of the receipt of any such revenue;
•any delays or interruptions, including due to the ongoing COVID-19 pandemic, that we experience in our preclinical studies, clinical trials and/or supply chain;
•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; and
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•our ability to establish collaboration arrangements with other biotechnology or pharmaceutical companies on favorable terms, if at all, for the development or commercialization of our product candidates.
Our limited operating history
activities, and general corporate matters.
plans, or other business operations.
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obtain necessary institutional review board, or IRB, or other necessary site approvals, as well as other delays at clinical trial sites, including delays related to site staffing.
For example, in March 2020,staffing and resource limitations. To date, we have experienced delays at certain clinical sites that, due to COVID-19, we closed the office and laboratory spacesstaffing constraints or other internal policy requirements, have not been able to complete site activation activities or enroll patients in our Watertown, Massachusetts facility and transitioned our employees to work from home. During the spring of 2020, we also experienced closures at the locations of some of our Indian CROs due to local lockdown requirements. These shutdowns resulted in delays to our preclinical studies. Due to the COVID-19 pandemic, weclinical trial as quickly as likely would have also seen the risk of delays in production of components used to manufacture our lead degrader candidates increase due to previous delays at one of our China-based manufacturers, which we remediated by working with that manufacturer to change the location of future work to another of the manufacturer’s sites. In June 2020, we reopened our office location to enable a subset of our employees – those whose work can only be performed in our laboratories – to return to the office, and we have required our remaining employees to continue working from home, an arrangement that we expect will continue for some time. Whilebeen possible absent the ongoing impact of this pandemic is uncertain, we believe the redundancies we have in place between our China and India based CROs and our Watertown, Massachusetts-based laboratory staff, as well as the transition of the majority of our employees to remote work arrangements, have mitigated the impact of these disruptions on our business.
The response to the COVID-19 pandemic may result in the redirection of resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. For example, since March 2020, foreign and domestic inspections by FDA have largely been on hold with FDA announcing plans in July 2020 to resume prioritized domestic inspections. The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections. Should the FDA determine that an inspection is necessary for issuing any future marketing approvals and an inspection cannot be completed during the review cycle due to restrictions on travel, the FDA has stated that it generally intends to issue a complete response letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, the FDA may defer action on the application until an inspection can be completed. In 2020, several companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. Additionally, as of June 23, 2020, the FDA also noted that it is continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals, including for oncology product development with its staff teleworking full-time. However, FDA may not be able to continue its current pace and review timelines could be extended. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.
pandemic.
•sell, lease, transfer or otherwise dispose of certain assets;
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•acquire another company or business or enter into a merger or similar transaction with third parties;
•incur additional indebtedness;
•make investments;
•enter into certain inbound and outbound licenses of intellectual property, subject to certain exceptions;
•encumber or permit liens on certain assets; and
•pay dividends and make other restricted payments with respect to our common stock.
As of December 31, 2020, we drew down on $12.5 million of the Delayed Draw Loan Facility. Our ability to draw on the remaining Delayed Draw Loan Facility is contingent on our compliance with the covenants described above and certain other covenants. Even if we meet these conditions, we may elect not to draw on the remaining Delayed Draw Loan Facility.
self-interest.
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our product candidates
•sufficiency of our financial and other resources;
•successful initiations and completion of preclinical studies;
•successful submission and clearance of INDs and initiation of clinical trials;
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•successful patient enrollment in, and conduct and completion of, clinical trials;
•receipt and related terms of marketing approvals from applicable regulatory authorities;
•obtaining and maintaining patent or trade secret protection and regulatory exclusivity for our product candidates;
•making suitable arrangements with third-party manufacturers for both clinical and commercial supplies of our product candidates;
•developing product candidates that achieve the therapeutic properties desired and appropriate for their intended indications;
•establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
•acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
•obtaining and maintaining third-party coverage and adequate reimbursement;
•establishing a continued acceptable safety profile of theour products and maintaining such that a profile following approval; and
•effectively competing with other therapies.
Wedevelopment of three product candidates. In addition, we are planning to submit an IND application for a Phase 1 clinical trial of CFT8919 in EGFR L858R NSCLC in 2023. While this work represents a substantial amount of progress, to date, we still have relatively limited experience as a company in completing IND-enabling preclinical studies and, while we plan to commence clinical development of CFT7455 in the first half of 2021, we presently have no experience as a company in commencing, enrolling and conducting clinical trials. In part because of this, lack of experience,while we continue to make strides in this area, we cannot be certain that our preclinical studies will be completed on time, that we will submit INDs in a timely manner, that any INDs we submit will be cleared by the FDA in a timely manner, if at all, or if our planned clinical trials will begin, enroll or be completed on time, if at all. Large-scaleIn addition, while these are our current expectations, we may experience manufacturing delays or other delays with IND-enabling studies, we may determine that additional IND-enabling studies are warranted or we may face delays due to the ongoing COVID-19 pandemic. Moreover, we cannot be sure that submission of an IND will result in the FDA allowing us to commence clinical trials or that, once begun, issues will not arise that lead to the suspension or termination of our clinical trials. Additionally, even if the applicable regulatory authorities agree with the design and implementation of the clinical trials set forth in our INDs, we cannot guarantee that those regulatory authorities will not change their requirements in the future. These considerations apply to the INDs described above and also to new clinical trials we may submit as amendments to existing INDs or as part of new INDs in the future. Any failure to file INDs on the timelines we expect or to obtain regulatory approvals for our clinical trials may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.
Further, the results of preclinical studies may not be predictive of future results in later studies or trials and initial success in clinical trials may not be indicative of results obtained when these trials are completed or in later stage clinical trials.
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candidates proceeding through preclinical studies and clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety potency, purity and
Any setbacks of this nature in our clinical development could materially harm our business, financial condition, results of operations and prospects. Further, initial success in our clinical trials may not be indicative of results obtained when those trials are completed or in any later stage clinical trials we may conduct. In particular, the small number of patients in our planned early clinical trials or the designs of these trials may make the results of these trials less predictive of the outcome of later clinical trials.
Any of these occurrences may significantly harm our business, financial condition, and prospects.
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numerous unforeseen events during or as a result of clinical trials, which could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
•delays in reaching, or the failure to reach, a consensus with regulators on clinical trial design or the inability to produce acceptable preclinical results to enable entry into human clinical trials;
•the supply or quality of our product candidates or other materials necessary to conduct clinical trials may be insufficient or inadequate, including as a result of delays in the testing, validation, manufacturing and delivery of product candidates to the clinical sites by us or by third parties with whom we have contracted to perform certain of those functions;
•delays in reaching, or the failure to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or CROs;
•the failure of regulators or IRBs to authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
•difficulty in designing clinical trials and in selecting endpoints for diseases that have not been well studied and for which the natural history and course of the disease is poorly understood;
•the selection of certain clinical endpoints that may require prolonged periods of clinical observation or analysis of the resulting data;
•the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or fail to return for post-treatment follow-up or the failurewe may be unable to recruit suitable patients to participate in our clinical trials;
•our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate our clinical trials;
•we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;
•the third parties with whom we contract may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
•the requirement from regulators or IRBs that we or our investigators suspend or terminate clinical trials for various reasons, including noncompliance with regulatory requirements or unacceptable safety risks;
•clinical trials of our product candidates may produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional clinical trials, modify our development plans as to dose level and/pr dose schedule or otherwise, or abandon product development programs;
•the cost of clinical trials of our product candidates may be greater than we anticipate;
•imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, concerns with a class of product candidates or after an inspection of our clinical trial operations, trial sites or manufacturing facilities;
•occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; and
•disruptions caused by the evolvingcontinuing spread and effects of the ongoing COVID-19 pandemic may increase the likelihood that we encounter these types of difficulties or cause other delays in initiating, enrolling, conducting or completing our planned clinical trials.
•be delayed in obtaining marketing approval for our product candidates, if at all;
•obtain approval for indications or patient populations that are not as broad as intended or desired;
•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
•be required to perform additional clinical trials to support marketing approval;
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•have regulatory authorities withdraw or suspend their approval, or impose restrictions on distribution of a product candidate in the form of a modified risk evaluation and mitigation strategy, or REMS;
•be subject to additional post-marketing testing requirements or changes in the way the product is administered; or
•have our product removed from the market after obtaining marketing approval.
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expensive than any product candidate that we may develop. Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. There are generic products currently on the market for certain of the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our product candidates are approved, we expect that they will be priced at a significant premium over competitive generic products.
We may not be able to file INDs to commence additional clinical trials on the timelines we expect and, even if we are able to, the FDA may not permit us to proceed with our planned clinical trials.
We have limited experience as a company in preparing, submitting to and receiving clearance from the FDA on INDs. We submitted our first IND to the FDA in December 2020, for CFT7455 and, in January 2021, the FDA informed us that we are permitted to proceed with our first-in-human clinical trial for this product candidate. We plan to submit an IND for CFT8634 in the second half of 2021. While this is our current expectation, we may not be able to file this planned IND or INDs for other product candidates on the timelines we expect. For example, we may experience manufacturing delays or other delays with IND-enabling studies, we may determine that additional IND-enabling studies are warranted, or we may face delays due to the ongoing global COVID-19 pandemic. Moreover, we cannot be sure that submission of an IND will result in the FDA allowing us to commence clinical trials or that, once begun, issues will not arise that lead to the suspension or termination of our clinical trials. Additionally, even if the applicable regulatory authorities agree with the design and implementation of the clinical trials set forth in our INDs, we cannot guarantee that those regulatory authorities will not change their requirements in the future. These considerations apply to the INDs described above and also to new clinical trials we may submit as amendments to existing INDs or as part of new INDs in the future. Any failure to file INDs on the timelines we expect or to obtain regulatory approvals for our clinical trials may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.
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The results of preclinical studies may not be predictive of future results in later studies or trials. Initial success in clinical trials may not be indicative of results obtained when these trials are completed or in later stage clinical trials.
The results of preclinical studies may not be predictive of the results of clinical trials and the results of any early-stage clinical trials we commence may not be predictive of the results of the later-stage clinical trials. In addition, initial success in clinical trials may not be indicative of results obtained when those trials are completed or in later stage clinical trials. In particular, the small number of patients in our planned early clinical trials or the designs of these trials may make the results of these trials less predictive of the outcome of later clinical trials. For example, even if successful, the results of the dose escalation portion of our future first-in-human Phase 1/2 clinical trials of CFT7455 and CFT8634 may not be predictive of the results of further clinical trials of these product candidates or any of our other product candidates. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Our clinical trials may not ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for product candidates proceeding through clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving encouraging results in earlier studies. Any setbacks of this nature in our clinical development could materially harm our business, financial condition, results of operations and prospects. In addition, we may conduct some of our clinical trials in a combination Phase 1/2 design and, if the Phase 1 portion of the trial is not successful, we will not be allowed to proceed into the Phase 2 portion of the trial.
•the severity of the disease under investigation;
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•the eligibility criteria for the trial in question;
•the perceived risks and benefits of the product candidates offered in the clinical trials;
•the efforts to facilitate timely enrollment in clinical trials;
•the patient referral practices of physicians;
•the burden on patients due to the scope and invasiveness of required procedures under clinical trial protocols, some of which may be inconvenient and/or uncomfortable;
•the ability to monitor patients adequately during and after treatment;
•the proximity and availability of clinical trial sites for prospective patients; and
•the impact of the currentongoing COVID-19 pandemic, which may affect the conduct of a clinical trial, including by slowing potential enrollment or reducing the number of eligible patients for clinical trials or by interfering with patients’ ability to return to the clinical trial site for required monitoring, procedures or follow-up.
The conclusions and analysis drawn from announced or published interim top-line and preliminary data from our clinical trials from time to time may change as more patient data become available. Further, all interim data that we provide remains subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim top-line or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. In addition, preliminary or top-line data also remain subject to audit and verification procedures that may result in the final data being different, potentially in material ways, from the preliminary data we previously announced or published. As a result, interim and preliminary data should be viewed with caution until final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our reputation, business, financial condition, results of operations and prospects.
Onceour product candidates.
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manufacturing or other issues result in a shortage of supply of the drugs with which we determine to combine with CFT7455,our product candidates, we may not be able to complete clinical development of CFT7455our product candidates on our current timeline or at all.
•potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be drugs that will receive marketing approval or achieve market acceptance;
•potential product candidates may not be effective in treating their targeted diseases; or
•the market size for the target indications of a potential product candidate may diminish over time due to improvements in the standard of care to the point that further development is not warranted.
third parties
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GCP compliance extends not only to sponsors of clinical research but also to third parties including CROs and sites involved in the conduct of clinical research.
efforts, including where a pre-approval inspection or an inspection of manufacturing sites is required and due to the ongoing COVID-19 pandemic and travel restrictions, if still then in effect, FDA is unable to complete those required inspections during the review period.
•reliance on the third party for regulatory, compliance, quality assurance and manufacturing success;
•the possible breach of the manufacturing agreement by the third-party CMO;
•the possible risk that the CMO will cease offering the services we require or shut down operations altogether, either temporarily or permanently, due to a regulatory concern, financial insolvency, non-compliance with applicable law or another reason;
•the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
•the possible termination or non-renewal of the agreement by the third party at a time that is costly or inconvenient for us or the inability of the CMO to provide us with a manufacturing slot when we need it.
compounds.
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them. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any replacement manufacturers or we may not be able to reach agreement with any alternative manufacturer. While we have identified alternate vendors for CFT7455 and CFT8634,some of the manufacturing work related to certain of our product candidates, switching vendors could result in significant additional costs of materials and significant delays to our operations and we may be constrained in the vendors we can select, based on theparticularly for compounds that have high OEB designations of our molecules.
designations.
•a collaboration agreement with Roche in December 2015, which we amended and restated in December 2018 and further amended in November 2020;
•a collaboration agreement with Calico in March 2017;2017, which was extended in respect of one program in September 2021 and
•a collaboration agreement with Biogen in December 2018, which was amended in February 2020.
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Risks Related to the Commercialization of Our Product Candidates
•the efficacy and potential advantages compared to alternative treatments;
•the prevalence and severity of any side effects, in particular compared to alternative treatments;
•our ability to offer our products for sale at competitive prices;
•the convenience and ease of administration compared to alternative treatments;
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•the willingness of the target patient population to try new therapies and of physicians treating these patients to prescribe these therapies;
•the strength of marketing, sales and distribution support;
•the availability of third-party insurance coverage and adequate reimbursement;
•the timing of any marketing approval in relation to other product approvals;
•support from patient advocacy groups; and
•any restrictions on the use of our products together with other medications.
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•decreased demand for any product candidates or products that we may develop;
•termination of clinical trials;
•withdrawal of marketing approval, product recall, restriction on the approval or a “black box” warning or contraindication for an approved drug;
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•withdrawal of clinical trial participants;
•significant costs to defend the related litigation and/or increased product liability insurance costs;
•substantial monetary awards to trial participants or patients;
•loss of revenue;
•injury to our reputation and significant negative media attention;
•reduced resources of our management to pursue our business strategy; and
•the inability to commercialize any products that we may develop.
While we plan to put coverage in place prior to commencing our planned first-in-human clinical trial of CFT7455 in the first half of 2021, as a preclinical company, we do not
our intellectual property
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us with any competitive advantage. Our competitors may be able to circumvent our owned, co-owned or licensed patents by developing similar or alternative technologies, product candidates, or products in a non-infringing manner.
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at risk of being or actually invalidated, held unenforceable or interpreted narrowly. Even if we successfully assert our patents, a court may not award remedies that sufficiently compensate us for our losses.
In addition, we may not have sufficient financial or other resources to seek to enforce our patents adequately against perceived infringers, which could have a material and adverse effect on the profitability of our products.
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GlaxoSmithKline PLC, Vertex Pharmaceuticals, Inc., and others. If any of these companies or institutions or others not included in this list were to assert that one of its patents is infringed by any product candidate or product we might develop or its use or manufacture, we or our collaborators may be drawn into expensive litigation, which could adversely affect our business prospects, financial condition and results of operations, require extensive time from and cause the distraction of members of our management team and employees at large. Further, if litigation of this nature were successful, that could have a material and adverse effect on the profitability of our products or prohibit their sale. We may not be aware of patent claims that are currently or may in the future be pending that could affect our business or products. Patent applications are typically published between six and eighteen months from filing and the presentation of new claims in already pending applications can sometimes not be visible to the public, which would include us, for a period of time. In addition, even after a patent application is publicly available, we may not yet have seen that patent application and may, therefore, not be aware of the claims or scope of filed and published patent applications. As a result, we cannot provide any assurance that a third party practicing in the general area of our technology will not present or has not presented a patent claim that covers one or more of our product candidates or products or their methods of use or manufacture. If that were to occur, we or our collaborators, as applicable, may have to take steps to try to invalidate the applicable patent or application and, in a situation of that nature, we or our collaborators may either choose not to do so or our attempt may not be successful. If we determine that we require a license to a third party’s patent or patent application, we may discover that a license may not be available on reasonable terms, or at all, which could prevent us or our collaborators from selling a product or using our proprietary technologies.
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an example, the FTC has taken an aggressive position that anything of value is a payment, whether money is paid or not. Under their approach, if an innovator, as part of a patent settlement, agrees not to launch or delay its launch of an authorized generic during the 180-day period granted to the first generic company to challenge an Orange Book listed patent covering an innovator drug, or negotiates a delay in entry without payment, the FTC may consider it an unacceptable reverse payment. Companies in the pharmaceutical industry have argued that these types of agreements are rational business decisions entered into by drug innovators as a way to address risk and that these settlements should, therefore, be immune from antitrust attack if the terms of the settlement are within the scope of the exclusionary potential of the patent. In 2013, the U.S. Supreme Court in a five-to-three decision in
FTC v. Actavis, Inc. rejected both the pharmaceutical industry’s and FTC’s arguments with regard to so-called reverse payments. Instead, the Supreme Court held that whether a “reverse payment” settlement involving the exchange of consideration for a delay in entry is subject to an anti-competitive analysis depends on five considerations: (a) the potential for genuine adverse effects on competition; (b) the justification of payment; (c) the patentee’s ability to bring about anti-competitive harm; (d) whether the size of the payment is a workable surrogate for the patent’s weakness; and (e) that antitrust liability for large unjustified payments does not prevent litigating parties from settling their lawsuits, for example, by allowing the generic drug to enter the market before the patent expires on the branded drug without the patentee paying the generic manufacturer. Further, whether a reverse payment is justified depends upon its size, scale in relation to the patentee’s anticipated future litigation costs, and independence from other services for which it might represent payment (as was the case in Actavis), as well as the lack of any other convincingIn 1997, as part of the Food & Drug Administration Modernization Act, or FDAMA, Congress enacted a law that provides incentives to drug manufacturers who conduct studies of drugs in children. The law, which provides six-months exclusivity in return for conducting pediatric studies, is referred to as the “pediatric exclusivity provision.” If we were to conduct clinical trials that comply with the FDAMA, we could receive an additional six-month term added to our regulatory data exclusivity period and on the patent term extension period, if received, on our product. However, if we choose not to carry out pediatric studies that comply with the FDAMA, or carry out studies that are not accepted by the FDA for this purpose, we would not receive this additional six-month exclusivity extension to our data exclusivity or our patent term extension.
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supplementary protection certificates, there is no unified legislation among European countries and, as a result, drug developers must apply for supplementary protection certificates on a country-by-country basis. As a result, a company may need to expend significant resources to apply for and receive these certificates in all relevant countries and may receive them in some, but not all, countries, if at all.
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of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
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manufacturers may develop, seek approval for and launch generic versions of our products. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.
Theregulatory matters
•the FDA or foreign regulatory authority, each referred to here as a health authority, may disagree with the design or implementation of our clinical trials;
•we may be unable to demonstrate to the satisfaction of the FDAhealth authority that a product candidate is safe and effective for its proposed indication;
•results of clinical trials may not meet the level of statistical significance required by the FDAhealth authority for approval;
•we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
•the FDAhealth authority may disagree with our interpretation of data from preclinical studies or clinical trials;
•data collected from clinical trials of our product candidates may not be sufficient valid or of sufficient quality to support the submission of an NDA to the FDA or other submission to a foreign regulatory authority or to obtain marketing approval in the United States;
•the FDAhealth authority may find deficiencies with or fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
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•the approval standards, policies, or regulations of the FDAa health authority may significantly change in a manner rendering our clinical data insufficient for approval.
FDA or any other health authority.
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•restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls;
•fines, warning letters or holds on clinical trials;
•refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;
•product seizure or detention or refusal to permit the import or export of our product candidates; and
•injunctions or the imposition of civil or criminal penalties.
We
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condition, the drug sponsor may apply for FDA Fast Track designation for a particular indication. We may seek Fast Track designation for CFT7455one or all of our lead product candidates and/or CFT8634 and certain of our future product candidates, but there is no assurance that the FDA will grant this status to any of our proposed product candidates.candidates and we might only be successful in receiving a Fast Track designation from the FDA for a product candidate after applying on more than one occasion. Marketing applications filed by sponsors of products in Fast Track development may qualify for priority review under the policies and procedures offered by the FDA, but the receipt of a Fast Track designation does not assure any such qualification or ultimate marketing approval by the FDA. The FDA has broad discretion whether or not to grant a Fast Track designation, so even if we believe a particular product candidate is eligible for this designation, there can be no assurance that the FDA would decide to grant it. Even if we do receive a Fast Track designation, and even though Fast
If
Accelerated
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candidates, we may not be able to obtain accelerated approval, and even if we do, that product may not experience a faster development or regulatory review or approval process. Further,In addition, receiving accelerated approval does not provide assuranceassure the product's accelerated approval will eventually be converted to a traditional approval.
conducted pediatric clinical studies and submitted reports that were accepted by the FDA within the statutory time limits, we could receive an additional six-months of regulatory exclusivity beyond all other types of patent and non-patent exclusivity then in effect for all our approved drug products that contain the active moiety for which pediatric exclusivity was granted. However, even if we received a written request for pediatric studies from the FDA for one or more of our drug products, we may determine not to or be unable to carry out pediatric studies that comply with Section 505(A) of the FDC Act, or we may carry out studies that are not accepted by the FDA for this purpose. If this situation were to arise, we would not receive this additional six-month regulatory exclusivity extension.
See the sections entitled “
Business — Other Healthcare Laws” and “Business — Healthcare Reform” included above in this filing.In See the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Healthsection entitled “
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tend to follow CMS to a substantial degree. Factors payors considerReimbursement
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Our ability to successfully commercialize our product candidates will depend in part on the extent to which coverage and adequate reimbursement for our products and related treatments will be available from third-party payors. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. If coverage and adequate reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. A decision by a third-party payor not to cover or not to separately reimburse for our medical products or therapies using our products could reduce physician utilization of our products once approved.
In the United States, no uniform policy for coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for our products can differ significantly from payor to payor. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product. Third-party payors may also limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication. The principal decisions about reimbursement for new medicines in the United States are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the United States Department of Health and Human Services, or HHS. CMS will decide whether and to what extent our products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Factors considered by payors in determining reimbursement are based on whether the product is:
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States
an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
a licensure framework for follow-on biologic products;
creation of a new Patient-Centered Outcomes Research Institute to oversee and conduct comparative clinical effectiveness research, as well as funding for such research; and
establishment of a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
There remain judicial, Congressional and executive branch challenges to certain aspects of the ACA and we expect there will be additional challenges and amendments to the ACA in the future. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. Further, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a U.S. District Court Judge in Texas ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the TCJA. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case and has allotted one hour for oral arguments. Oral arguments on this case have not yet been held. It is also unclear how this litigation and other efforts to repeal and replace the ACA will impact the ACA and our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 unless additional action is taken by Congress. However, pursuant to the CARES Act, these Medicare sequester reductions have been suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the Bipartisan Budget Act of 2018, or BBA, among other things, amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount (from 50% under the ACA to 70%) that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our customers and accordingly, our financial operations.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products,
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which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare and review the relationship between pricing and manufacturer patient programs. The Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses and place limits on pharmaceutical price increases. On May 11, 2018, President Trump laid out his administration’s “Blueprint” to lower drug prices and reduce out-of-pocket costs of prescription drugs that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out-of-pocket costs of drug products paid by consumers. HHS has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. The Trump administration’s recent budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Although such measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, we may face competitionSee the section entitled “
filing.
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TheEuropean Economic Area, or the EEA, adopted the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018 and the EU GDPR and, as transposed into the laws of the UK, the UK GDPR, collectively referred to as the GDPR. The GDPR imposes more stringent data protection compliance requirements on controllers and processors of personal data, including special protections for “special category data,” which includes health, biometric, and genetic information of data subjects located in the EEA and UK and provides for more significant penalties for noncompliance. Further, the GDPR provides a broad right for EEA Member States to create supplemental national laws, such as laws relating to the processing of health, genetic, and biometric data, which could further limit our ability to use and share such data or could cause our costs to increase, and harm our business and financial condition. The GDPR creates new compliance obligations that may be applicable to our business, which could cause us to change our business practices, and increases financial penalties for noncompliance (including possible fines of up to the greater of €20 million (£17.5 million under the UK GDPR) and 4% of our global annual turnover for the preceding financial year for the most
European data protection laws also generally prohibitthe EU and/or the UK.
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Further, the United Kingdom’s decision to leave the EU, often referred to as Brexit, has created uncertainty with regard tohave enacted comprehensive data protection regulationlegislation. In addition, the UK has announced plans to reform the country’s data protection legal framework in the United Kingdom. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated now that the United Kingdom has left the EU.its Data Reform Bill, but these have been put on hold. We may,
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statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act of 2001 and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. In the future, we may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We may also have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of these activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
operational matters
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requirements of being a publicly traded company. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Future growth would impose significant added responsibilities on members of management, including:
•identifying, recruiting, integrating, maintaining, and motivating additional employees;
•managing our internal development efforts effectively, including the clinical and FDA review process for CFT7455, CFT8634our lead product candidates and any other product candidates we develop, while complying with our contractual obligations to contractors and other third parties; and
•improving our operational, financial and management controls, reporting systems, and procedures.
programs and could harm our reputation or subject us to liability, and adversely affect our business and financial results.
•intentional, reckless, or negligent conduct or disclosure of unauthorized activities to us that violate study and trial protocols or the regulations of the FDA or similar foreign regulatory authorities;
•violations of healthcare fraud and abuse laws and regulations in the United States and abroad;
•violations of United StatesU.S. federal securities laws relating to trading in our common stock; and
•failures to report financial information or data accurately.
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ethics and other corporate governance and compliance documents, policies and charters applicable to all of our employees. However, it is not always possible to identify and deter misconduct by employees and other third parties. Further, the precautions we take to detect and prevent this type of activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person could allege fraud or other misconduct, even if none occurred. If any actions of this nature are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, andand/or curtailment of our operations, any of which could adversely affect our business prospects, financial condition, and results of operations.
our common stock
•the degree of success of competitive products or technologies or changes in standard of care regimens;
•results of preclinical studies and clinical trials of our product candidates or those of our competitors;
•regulatory or legal developments in the United States and other countries;
•developments or disputes concerning patent applications, issued patents or other proprietary rights;
•the recruitment or departure of key personnel;
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•the level of expenses related to any of our product candidates or clinical development programs;
•the results of our efforts to discover, develop, acquire or in-license additional technologies or product candidates;
•actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
•variations in our financial results or those of companies that are perceived to be similar to us;
•changes in the structure of healthcare payment systems;
•market conditions in the pharmaceutical and biotechnology sectors;
•effects of public health crises, pandemics and epidemics, such as COVID-19;
•general economic, industry, and market conditions; and
•the other factors described in this “Risk Factors” section.
•delay, defer or prevent a change in control;
•entrench our management and the board of directors; or
•impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.
•a board of directors divided into three classes serving staggered three-year terms, the result of which is that not all members of the board will be elected at one time;
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•a prohibition on stockholder action through written consent, the result of which is that all stockholder actions will have to be taken at a meeting of our stockholders;
•a requirement that special meetings of stockholders be called only by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office;
•advance notice requirements for stockholder proposals and nominations for election to our board of directors;
•a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;
•a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylawsby-laws by stockholder action or to amend specific provisions of our certificate of incorporation; and
•the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Upon the closing of our initial public offering on October 6, 2020, 31,855,560 shares of our outstanding common stock became restricted as a result of securities laws or lock-up agreements. However, those shares will become eligible to be sold at various times in the future, including upon the expiration of these lock-up agreements on April 1, 2021. Further, securityholders holding an aggregate of 30,694,163 shares of our common stock outstanding or issuable upon the exercise of outstanding options have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We have also registered all shares of common stock that we may issue under our equity compensation plans, which means that those shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements signed by holders of our securities prior to our initial public offering.
We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this report;
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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reduced disclosure obligations regarding executive compensation;
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved; and
an exemption from compliance with the requirement of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements.
We may choose to take advantage of some, but not all, of these available exemptions. We have taken advantage of reduced reporting requirements in this report. In particular, we have presented only two years of audited financial statements and correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure. We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
We also are a “smaller reporting company,” meaning that either (i) the market value of our stock held by non-affiliates is less than $250 million as of the prior June 30 or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the prior June 30. If we are a smaller reporting company when we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
We will incur increasedadditional costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
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duties in the process and recording of journal entries. We communicated the material weakness to our audit committee and as of December 31, 2020, remediated the material weakness by taking a number of actions including engaging system controls that prevent one person from initiating and approving the same journal entry and performing additional reviews and other post-closing procedures. While we believe that this material weakness has now been remediated, we cannot assure you that the measures we take to address internal control over financial reporting will be sufficient to prevent future material weaknesses or will prevent any significant deficiencies in our internal control over financial reporting from occurring. Further, we cannot assure you that the measures we have taken in the past or will take in the future will prevent the occurrence of future material weaknesses or significant deficiencies in our internal control over financial reporting. If we identify one or more material weaknesses in the future, it could result in an adverse reaction in the financial markets and restrict our future access to the capital markets due to a loss of confidence in the reliability of our consolidated financial statements.
Provision.
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our business, including weakened demand for our product candidates, and could also impact our ability to raise additional capital when needed on acceptable terms, if at all. Our general business strategy may be adversely affected by any economic downturn of this nature, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, costly and dilutive.
dilutive, or not available at all.
The following list sets forth information regarding all unregistered securities sold by us since January 1, 2020. No underwriters were involved in the sales and the certificates representing the securities sold and issued contain legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.
Issuances of capital stock
In June and July 2020, we issued and sold 142,857,142 shares of Series B preferred stock to investors at $1.05 per share. Jefferies LLC, one of our underwriters, acted as one of the placement agents.
In June 2020, we issued a warrant to purchase 2,857,142 shares of Series B preferred stock to our lender Perceptive Credit Holdings III, LP at an exercise price of $1.05 per share.
All sales of securities described above were made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act for transactions by an issuer not involving a public offering. Each series of Preferred Stock automatically converted into shares of our common stock upon the closing of the IPO of our common stock in October 2020 on an 8.4335-to-1 basis.
Grants of stock options and restricted stock
During the year ended December 31, 2020, prior to our IPO, we granted stock options to purchase an aggregate of 1,467,424 shares of our common stock, to employees, directors and consultants pursuant to the 2015 Plan.
The issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans. The shares of common stock issued upon the exercise of options are deemed to be restricted securities for purposes of the Securities Act.
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[Reserved]
MM. We are also developingpresented initial clinical data from Arm A at the American Association for Cancer Research Annual Meeting in April 2022. These data showed that single agent CFT7455 resulted in deep and durable degradation of IKZF1/3, as quantified by mass spectrometry, and meaningful decreases in serum free light chain. Neutropenia, a known on-target toxicity associated with IKZF1/3 degraders, was dose-limiting at the 50 μg starting dose on a dosing schedule with a seven-day drug holiday over a a 28-day cycle. As a result, the dosing schedule was modified to include a 14-day drug holiday over a 28-day cycle. We continue to enroll patients in the Phase 1 dose escalation portion of the ongoing Phase 1/2 clinical trial at the modified schedule.
In addition to our lead
Financial Operations Overview
General
We commenced operations in October 2015, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, establishing development collaborationscollaboration with Roche, Biogen and Calico, conducting discovery and research activities, filing patent applications, identifying potential product candidates, undertakingCalico. We have engineered degraders that have successfully achieved blood-brain barrier penetration in preclinical studies, and establishing arrangements with third parties for the manufacture of initial quantities of our product candidates. To date, we have not generated any revenue from product sales and have financed our operations primarily through sales of our equity interests and proceeds from our collaborations. Through December 31, 2020, we have raised approximately $224.0 millionwhich is a key step in gross proceeds from the sale of our preferred stock, $209.8 million in gross proceeds from our initial public offering, and have received an aggregate of $167.5 million in payments from collaboration partners.
Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Since inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses were $66.3 million and $34.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $183.8 million.
Our total operating expenses were $93.6 million and $56.8 million for the years ended December 31, 2020 and 2019, respectively. We anticipate that our expenses will increase substantially in the future due to costs including those associateddeveloping medicines with the following:
our preclinical activities for our lead product candidates and the advancement of these candidates into first-in-human Phase 1/2 clinical trial in the United States, which we expectpotential to initiate in the first half of 2021 for CFT755 and in 2022 for CFT8634;
development activities associated with our other product candidates;
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research activitiestreat brain metastases in oncology, neurologicalas well as in therapeutic areas such neurodegenerative diseases. We also believe there are many other therapeutic areas and other disease areasindications where leveraging our TORPEDO platform to expand our pipeline;
hiring additional personnel in research, clinical trials, quality and other functional areas;
increased activities by our CMOs to supply us with product for our preclinical studies and clinical trials;
the management of our intellectual property portfolio; and
operating as a public company.
In addition, our net losses and cash flows may fluctuate significantly from period to period depending on, among other things, variations in the level of our expenses and the execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under these types of arrangements.
As a result of these anticipated expenditures, we will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval and prepare for and, if any of our product candidates are approved, proceed to commercialization. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, debt offerings, reimbursements and potential milestones earned under our existing collaboration agreements and potential license and development agreements with third parties, including but not limited to our existing collaboration partners. Adequate funding may not be available to us on acceptable terms, or at all.
COVID-19
The impact of the COVID-19 coronavirus outbreak on our financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. There are multiple causes of these delays, including laboratory closures, reluctance of patients to enroll or continue in trials for fear of exposure to COVID-19, local and regional shelter-in-place and work from home orders and regulations that discourage, hamper or prohibit patient visits, healthcare providers and health systems shifting away from clinical trials toward the acute care of COVID-19 patients and the FDA and other regulators making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to the pandemic.
In terms of the impact on our operations, we have seen increased risk of delays in production of components used to manufacture our lead degrader candidates due to previous delays at one of our China-based manufacturers, periodic shipping delays and resourcing constraints and, therefore, somewhat higher costs to compete our discovery activities on one or more of our lead projects, and one of our contract research organizations, or CROs, in India was forced to temporarily shut down due to local lockdown orders. In addition, we temporarily closed the office and laboratory spaces at our corporate headquarters in Watertown, Massachusetts, and we transitioned our employees to work from home. We are working closely with our CROs, manufacturers, investigators and preclinical and clinical trial sites to assess the full impact of the COVID-19 pandemic on the timelines and expected costs for each of our programs. While the ongoing impact of the pandemic is uncertain, we believe our CRO redundancies in China, India and Boston and the transition of the majority of our employees to remote work arrangements have helped mitigate the impact of these types of disruptions on our business.
Given the breadth and duration of the global COVID-19 pandemic, it is possible that our directors or employees could, at any time, have been or become infected with this novel coronavirus, especially since methods and availability of testing are continuing to evolve. To date, we have not experienced or had to impose any material shutdowns as a result of positive test results for this novel coronavirus.
We note the high level of difficulty in projecting the effects of COVID-19 on our programs and our company, given the rapid and dramatic evolution in the course and impact of the pandemic and the societal and governmental response to it.
Financial Operations Overview
Revenues
As previously discussed, 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 ourthe 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.
In March 2016, we entered into the Original Roche Agreement with Roche, whereby Roche provided us with a non-refundable upfront payment of $15.0 million, which was creditable against our target initiation fees of either $1.0 million or
87
$4.0 million, depending on the compound selected. Pursuantlicense agreements
On December 22, 2018, we amended and restated the Original Roche Agreement, or the Roche Agreement. Under the Roche Agreement, we have a more active role in the manufacturing and commercialization of the targets included in the collaboration, whereby if we opt into certain co-development and co-detailing rights, the parties will split future development costs in return for our having rights to a larger share of future earnings from commercialization of the relevant target. The target structure was revised to six potential targets, three of which had been nominated as of the execution of the Roche Agreement and represent continuations of the initial preclinical researchForm 10-K.
Under the Roche Agreement, we received additional upfront consideration of $40.0 million from Roche. Roche will make annual research plan payments of $1.0 million for each active research plan. Finally, adjustments were made to the option exercise fees, whereby targets that have progressed through GLP toxicology studies at the time of exercise now have option exercise fees of $7.0 million to $12.0 million and those progressed through Phase 1 trials have option exercise fees of $20.0 million.
For certain targets, Roche is required to pay us fees of $2.0 million and $3.0 million upon the identification of a lead series and the commencement of GLP toxicology studies, respectively. For each target option exercised by Roche, we are eligible to receive up to $275 million in research, development and commercial milestone payments per target. Roche is also required to pay us up to $150 million per target in one-time sales-based payments if the target achieves certain levels of net sales. Roche is also required to pay us royalties, at percentages from the mid-single digits to the low double-digits, on a licensed product-by licensed product basis, on worldwide net product sales.
In November 2020, we signed a further amendment to the Roche Agreement that provides a mechanism through which we and Roche can mutually agree to terminate the Roche Agreement on a target-by-target basis by the entry into a mutual target termination agreement. Upon a termination of this nature, the Roche Agreement, as amended, provides that all rights in know-how and intellectual property in support of products that use inhibition as their mode of action, referred to as the Roche Field, will revert to Roche and all rights in respect of know-how and intellectual property in support of products that use degradation as their mode of action, referred to as the C4T Field, will revert to us. Further, this amendment states that, following the entry into a mutual target termination agreement, Roche will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the Roche Field and we will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the C4T Field. In support of this allocation of rights, under the amendment, Roche provided us, and we provided Roche, with a perpetual, irrevocable, fully paid up, exclusive (even as to party granting the license), sublicensable (including in multiple tiers) license to the patents that are allocated to a party under the mutual target termination agreement and a perpetual, irrevocable fully paid up, non-exclusive, sublicensable (including in multiple tiers) license to the know-how that is allocable to a party under the mutual termination agreement. Finally, through the entry into this amendment, we and Roche mutually agreed to terminate the Roche Agreement as to the target EGFR. As a result, Roche is now free to pursue the target EGFR in the Roche Field and we are free to pursue the target EGFR in the C4T Field and all rights in and responsibility for know-how and intellectual property related to EGFR in the Roche Field reverted to the Roche parties and all rights in and responsibility for know-how and intellectual property related to EGFR in the C4T Field reverted to us, with Roche assigning the relevant patents in the C4T Field to us.
Biogen Collaboration Research and License Agreement
On December 28, 2018, we entered into the Biogen Agreement, with Biogen, whereby we agreed to collaborate on research and development efforts for up to five targets to discover and develop potential new treatments for neurological conditions, such as Alzheimer’s disease and Parkinson’s disease. The Biogen Agreement also has an option for Biogen to nominate additional targets and extend the Biogen Agreement. In February 2020, we entered into an amendment to the Biogen Agreement that provided further clarity around Biogen’s ownership of target binding moieties, which are portions of molecules, and any related intellectual property that are directed at or bind to collaboration targets. This amendment further provides that Biogen licenses to us rights to use these Biogen target binding moieties and any related intellectual property as needed in order to conduct the research and development activities contemplated under the Biogen Agreement.
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
88
commercialize 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 with Biogen having an option to extend the Biogen Agreement for 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 $62.5 million and would be entitled to nominate up to five additional targets.
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 $45.0 million for access to our technology and research services through the discovery research phase. The nonrefundable upfront cash payment of $45.0 million is not creditable against any of the target development milestone fees.
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 $35.0 million per target in development milestones and $26.0 million per target in one-time sales-based payments for the first product to achieve certain levels of net sales. In addition, Biogen is required to pay us royalties on a licensed product-by-licensed product basis, on worldwide net product sales, at percentages in the mid-single digits. All milestone and sales-based payments are made after we have met the defined criteria in the joint research plan for that target, at which time Biogen will have control of the targets for commercialization; the receipt of these payments is contingent on the further development of the targets to commercialization by Biogen, without any additional research and development efforts from us.
Biogen also has the option to fund additional discovery activities, whereby we will perform 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. Revenues earned under this option, if initiated, will be recognized as services are performed and are not included in the transaction price at the outset of the arrangement. These research activities will be reimbursed on a full-time equivalent, or FTE, basis at specified market rates. These additional discovery activities can be purchased up to a maximum amount by Biogen on an à la carte basis at an amount consistent with standalone selling price. If Biogen were to exercise these options, we would recognize revenue as those options are exercised.
Calico License Agreement
In March 2017, we entered into the Calico Agreement, with Calico whereby we agreed to collaborate to develop and commercialize a set number of targets for small molecule protein degraders for diseases of aging, including cancer, for a five-year period ending in March 2022, or the research term.
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 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.
Under this agreement, Calico paid us a nonrefundable upfront amount of $5.0 million and certain annual payments of $5.0 million through December 31, 2020. Upon our completion of the required discovery research and development services on any target, Calico is entitled to pursue commercial development of that target. For each target, we are eligible to receive potential research, development and commercial milestone payments aggregating up to $132.0 million. Calico is also required to pay one-time sales-based payments aggregating up to $65.0 million for the first product to achieve certain levels of net sales. In addition, Calico is required to pay us royalties, on a licensed product-by-licensed product basis, on worldwide net product sales, at percentages in the mid-single digits. All milestone and sales-based payments are made after we have met the defined criteria in the joint research plan for that target, at which time Calico will have control of the targets for commercialization; the receipt of these payments by us is contingent on the further development of the targets to commercialization by Calico, without any additional research and development efforts required by us.
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Research and Development Expenses
•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 preclinicalclinical activities on our behalf as well as third parties that manufacture our product candidates for use in our preclinical and potential future clinical trials;
•costs of outside consultants, including their fees, unit-based compensation and related travel expenses;
•the 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.
administrative expenses
Other (Expense) Income
In addition to changes in the fair value of our warrant liability, other income (expense) also includes following:
Finally,
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operations
2021
|
| Years Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Roche Agreement |
| $ | 9,051 |
|
| $ | 6,409 |
|
| $ | 9,112 |
|
Biogen License Agreement |
|
| 9,913 |
|
|
| 2,432 |
|
|
| — |
|
Calico License Agreement |
|
| 14,231 |
|
|
| 12,540 |
|
|
| 10,252 |
|
Total |
| $ | 33,195 |
|
| $ | 21,381 |
|
| $ | 19,364 |
|
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Revenue from collaboration agreements: | |||||||||||||||||
Biogen Agreement | $ | 19,214 | $ | 15,720 | |||||||||||||
Calico Agreement | 6,943 | 10,686 | |||||||||||||||
Roche Agreement | 4,939 | 19,379 | |||||||||||||||
Total revenue from collaboration agreements | $ | 31,096 | $ | 45,785 |
$2.6•a $14.4 million increasedecrease in revenue recognized under the Roche Agreement dueprimarily as a result of the termination of the Roche Agreement as to increased effort made on three targets;
$7.5These were offset by a $3.5 million increase in revenue recognized under the Biogen Agreement, due toprimarily driven by continued progress against the consideration to be recognized as revenue increasing bynominated targets and the $4.0 million milestone earned in June 2020 and as a resultachievement of increased effort made on the initial three targets nominated and an increase in sandbox related revenue of $2.3 million; and
$1.7 million increase in revenue recognized under the Calico Agreement primarily related to additional FTE reimbursement received in 2020 resulting from increased effort made on Calico targets.
The $2.0 million increase in the year ended December 31, 2019 as compared to the year ended December 31, 2018 primarily stems from:
$2.4 million of revenue recognized under the Biogen Agreement for collaboration efforts conducted under Biogen agreement, which was executedmilestone in December 2018, including sandbox revenue of $0.5 million;
A $2.3 million increase in revenue recognized under the Calico Agreement due to additional collaboration efforts conducted in 2019;
offset by a $2.7 million decrease in the revenue recognized under the Roche Agreement executed in December 2018. The Roche Agreement was considered a modification of the Original Roche Agreement and upon its execution we identified additional performance obligations that have yet to be satisfied, resulting in additional revenue being deferred pending the satisfaction of those performance obligations.
Research and Development Expenses
|
| Years Ended December 31, |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| Years Ended December 31, | |||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Research and development expenses: | Research and development expenses: | ||||||||||||||||||||||||||||
Preclinical and development expenses |
| $ | 42,025 |
|
| $ | 22,202 |
|
| $ | 8,504 |
| Preclinical and development expenses | $ | 42,033 | $ | 46,012 | ||||||||||||
Personnel expenses |
|
| 20,135 |
|
|
| 14,085 |
|
|
| 9,734 |
| Personnel expenses | 41,068 | 29,142 | ||||||||||||||
Facilities and supplies |
|
| 9,496 |
|
|
| 8,933 |
|
|
| 7,885 |
| Facilities and supplies | 13,978 | 8,805 | ||||||||||||||
Clinical expenses | Clinical expenses | 10,643 | 2,661 | ||||||||||||||||||||||||||
Professional fees |
|
| 4,816 |
|
|
| 1,573 |
|
|
| 1,167 |
| Professional fees | 7,047 | 5,625 | ||||||||||||||
Intellectual property |
|
| 1,599 |
|
|
| 798 |
|
|
| 866 |
| Intellectual property | 2,493 | 2,108 | ||||||||||||||
Other expenses |
|
| 369 |
|
|
| 468 |
|
|
| 436 |
| Other expenses | 579 | 312 | ||||||||||||||
Total |
| $ | 78,440 |
|
| $ | 48,059 |
|
| $ | 28,592 |
| |||||||||||||||||
Total research and development expenses | Total research and development expenses | $ | 117,841 | $ | 94,665 |
•a $19.8 million increase in preclinical and development costs, consisting of $11.9 million increase in external FTEs used in preclinical development of our various programs, and $9.1 million of costs related to the IND submission for our CFT7455 and CFT8634 programs;
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a $6.1 million increase in personnel expenses, representing salary and benefit costs, including a $0.6$5.6 million increase in stock-based compensation expense, driven primarily due toby the buildoutbuild-out of our clinical development team;team to support a greater number of clinical-stage programs;
•a $3.2$5.2 million increase in facilities and supplies costs, primarily driven by our additional leased space; and
The $19.5
a $13.7 million increasedecrease in preclinical and development costs driven primarily by an $8.3 million increase in external FTE resources used in preclinical development of our various programs, and a $5.7 million increase in external preclinical studies for our product candidates; and
a $4.4 million increase in personnel expenses, related to personnel costs attributableadditional programs progressing to an increase in headcount.
|
| Years Ended December 31, |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| Years Ended December 31, | |||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
General and administrative expenses: | General and administrative expenses: | ||||||||||||||||||||||||||||
Personnel expenses |
| $ | 7,929 |
|
| $ | 5,587 |
|
| $ | 3,949 |
| Personnel expenses | $ | 30,546 | $ | 23,013 | ||||||||||||
Professional fees |
|
| 6,174 |
|
|
| 2,036 |
|
|
| 2,019 |
| Professional fees | 8,576 | 8,781 | ||||||||||||||
Facilities and supplies |
|
| 351 |
|
|
| 454 |
|
|
| 471 |
| Facilities and supplies | 2,371 | 548 | ||||||||||||||
Other expenses |
|
| 750 |
|
|
| 697 |
|
|
| 722 |
| Other expenses | 1,296 | 912 | ||||||||||||||
Total |
| $ | 15,204 |
|
| $ | 8,774 |
|
| $ | 7,161 |
| |||||||||||||||||
Total general and administrative expenses | Total general and administrative expenses | $ | 42,789 | $ | 33,254 |
•a $2.3$7.5 million increase in personnel expenses, representing salary and benefit costs, including a $1.2$4.3 million increase in salaries and wages, mainly driven by the full-year 2022 impact of the build-out of our general and administrative team, including our executive team and Business Development function, and a $2.9 million increase in stock-based compensation expenses, resulting from additional G&A personnel hired during the year;compensation; and
•a $4.1 increase in professional fees, which primarily includes a $2.3$1.8 million increase in consultant fees,facilities and higher legal and audit and insurance expenses, resulting fromsupplies, which is primarily driven by our transition to a public company.
The $1.6 million increase in general and administrative expense in the year ended December 31, 2019 from the year ended December 31, 2018 was primarily due to:
a $1.6 million increase in personnel expenses resulting from $0.8 million increase in stock-based compensation expense due to increase in personnel expenses and a $0.8 million increase in other personnel-related expenses.
Other Income (Expenses) Income
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Other income (expense), net | |||||||||||||||||
Interest expense and amortization of long-term debt—related party | $ | (2,216) | $ | (2,145) | |||||||||||||
Interest and other income, net | 3,575 | 387 | |||||||||||||||
Total other income (expense), net | $ | 1,359 | $ | (1,758) |
|
| Years Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Change in fair value of warrant liability—related party |
| $ | (5,676 | ) |
| $ | — |
|
| $ | — |
|
Interest expense and amortization of long-term debt—related party |
|
| (1,229 | ) |
|
| — |
|
|
| — |
|
Interest and other income, net |
|
| 393 |
|
|
| 2,157 |
|
|
| 678 |
|
Total other (expense) income |
| $ | (6,512 | ) |
| $ | 2,157 |
|
| $ | 678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $8.7 million change in other (expenses) income for the years ending December 31, 20202022 as compared to the year endingended December 31, 20192021 was driven by the following:
a $5.7$3.2 million charge due to the increase in fair value of warrant liability associated with our long-term debt, which, prior to our IPO, was revalued at each reporting period
a $1.2 million change resulting from interest expense and amortization of the discount related to our long-term debt; and
a $1.8 million change in interest and other income resulting from lowerhigher interest rates earned on our investments.
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The $1.5 million increase in interest and other income (expenses) for the years ending December 31, 2019 as compared to the year ending December 31, 2018 was primarily due to increased interest income resulting from a higher average cash balance.
Income Taxes
The following table summarizes our income tax benefit (expense) for the years ended December 31, 2020, 2019, and 2018 (in thousands):
In the year ended December 31, 2020, we recognized $0.6 million of income tax benefit related to an anticipated refund to be received for federal taxes under the corporate provisions of the CARES Act.
For the year ended December 31, 2019, we recognized income tax expense of $0.8 million resulting from taxable income primarily caused by the Roche Agreement and Biogen Agreement, both entered into in December 2018.
Liquidity and Capital Resources
capital resources
liquidity
In addition, in June 2020, we secured a $20.0 million credit arrangement with Perceptive Credit Holdings III, LP, or Perceptive Credit, an affiliate of one of the Series B Financing investors, whereby we borrowed $12.5 million at closing, bearing a variable interest rate of 11.25%, and have the opportunity to draw down another $7.5 million subject to the satisfaction of certain milestones relating to the filing of an IND for certain of our pipeline targets, which was met with the filing of our IND for CFT7455 in December 2020. Our ability to draw down on this second tranche expires on June 30, 2021. In connection with the Credit Agreement, we issued Perceptive Credit a warrant to purchase 2,857,142 shares of Series B Preferred Stock exercisable for $1.05 per share. Upon completion of the IPO, this warrant converted to a warrant to purchase 338,784sold 4,887,500 shares of our common stock, for $8.86 per share. The loans extended under the Credit Agreement will be repaid beginning in December 2022 in monthly installments of interest plus principal equal to 2.0% of the initial principal amount through June 2024. We paid a closing fee of $0.3 million related to the loan and have the right to prepay the loan in its entirety prior to the maturity date by paying the applicable prepayment fee. Per the terms of the Credit Agreement, the prepayment fee is $5.0 million, less any interest paid as of the prepayment date, which totaled $4.2 million as of December 31, 2020. If we do not prepay the loan, the entire unpaid principal balance becomes due on the maturity date, which is June 5, 2024. We are also subject to customary financial covenants in the Credit Agreement that dictate accelerated repayment upon the occurrence of certain events of default, none of which are expected to occur based on our current liquidity.
In October 2020, we completed our IPO in which we issued and sold 11,040,000number includes 637,500 shares of common stock including 1,440,000 shares of our common stock sold pursuantthat were issued to the underwriters’underwriters when they exercised in full their overallotment option. Net proceeds from the follow-on offering, including the exercise in full of theirthe underwriters’ option to purchase additional shares, at a price to the public of $19.00. The proceeds from our IPO, including the full exercise of the underwriter’s overallotment option, were approximately $191.2$169.5 million, after deducting underwriting discounts and commissions, of $14.7 million and expenses of $3.9$11.3 million.
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flows
|
| Years Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net cash (used in) provided by operating activities |
| $ | (67,249 | ) |
| $ | 55,614 |
|
| $ | (16,981 | ) |
Net cash (used in) provided by investing activities |
|
| (190,505 | ) |
|
| (1,620 | ) |
|
| 36,921 |
|
Net cash provided by financing activities |
|
| 348,932 |
|
|
| 244 |
|
|
| 1,961 |
|
Net increase in cash, cash equivalents, and restricted cash |
| $ | 91,178 |
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| $ | 54,238 |
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| $ | 21,901 |
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Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Net change in cash, cash equivalents and restricted cash: | |||||||||||||||||
Net used in operating activities | $ | (105,939) | $ | (86,965) | |||||||||||||
Net cash provided by (used in) investing activities | 58,422 | (189,336) | |||||||||||||||
Net cash provided by financing activities | 1,147 | 171,400 | |||||||||||||||
Net change in cash, cash equivalents and restricted cash | $ | (46,370) | $ | (104,901) |
activities
•our net loss of $66.3$128.2 million;
•a $12.2$22.7 million change in deferred revenue due to the recognition of revenue under our collaboration agreements in 2020;agreements; and
•a $3.3 million change in prepaid expenses and other current assets.
•a $11.9$37.6 million of non-cash expense related to depreciation, stock compensation expense, depreciation and amortization, and reduction in carrying amount of our right-of-use asset, and change in fair value of warrant liability; and
•a $2.6$5.1 million change in accrued expenses and other liabilities.
an $81.8 million decrease in accounts receivable related to the collection of up-front payments from our collaboration partners received in 2019;
$8.0 million due to changes in operating assets and liabilities, including increases in accounts payable and accrued expenses, stemming from increased clinical and preclinical efforts to advance our product candidates in 2019; and
$4.3 million of non-cash expenses related to stock-based compensation expenses, depreciation expense, and reduction in right-of-use asset.
These were offset by:
•our net loss of $34.1$83.9 million;
a change in deferred revenue due to the recognition of revenue under our collaboration agreementsagreements;
Net
our2022 was attributable to $63.9 million for the proceeds from maturities of marketable securities, net loss of $15.7 million;purchases, and
a change of $84.9 million in accounts receivable, was offset by a change$5.5 million for the purchases of $81.0 million in deferred revenue both changes driven by $85.0 million in up-front payments due to us under the Roche Agreementproperty and the Biogen Agreement, both of which were recorded as accounts receivable and deferred revenue as of December 31, 2018.
Investing Activities
•$189.9188.1 million for the purchases of marketable securities, net of maturities; and
•$0.71.3 million for the purchases of property and equipment.
The $1.6 million
The $36.9 million of net cash provided by investing activities for the year ended December 31, 2018 was attributable to:
$39.6 million from maturities of marketable securities, net of purchases; and
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$2.7 million for the purchases of property and equipment.
Financing Activities
The $348.9$1.1 million of net cash provided by financing activities for the year ended December 31, 20202022 is primarily driven by:
$191.5 million ofby proceeds from our IPO, netexercises of underwriting discount and offering costs paid in 2020;
$145.5 million of proceeds from our Series B issuance, net of issuance costs; and
$12.0 million of proceeds from issuance of long-term debt and warrant, net of issuance costs.
The $0.2$171.4 million of net cash provided by financing activities for the year ended December 31, 2019 was2021 is primarily attributable todriven by:
The $2.0 million of net cash provided by financing activities for the year ended December 31, 2018 was primarily attributable to net proceeds received from the issuance of Series A redeemable convertible preferred stock in December 2018.
requirements
•continue our ongoing first-in-human Phase 1/2 trials and initiate and conduct planned first-in-human Phase 1/2 trials offor our other lead product candidates, CFT7455 and CFT8634;
•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.
•the progress, costs and results of ourongoing 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;
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•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.
To the extent that
obligations
|
| Total |
|
| Less than 1 Year |
|
| 1 to 3 Years |
|
| 4 to 5 Years |
|
| More than 5 Years |
| |||||
Operating lease commitments (1) |
| $ | 18,339 |
|
| $ | 2,272 |
|
| $ | 4,750 |
|
| $ | 5,040 |
|
| $ | 6,277 |
|
Long-term debt |
|
| 12,500 |
|
|
| — |
|
|
| 3,000 |
|
|
| 9,500 |
|
|
| — |
|
Total |
| $ | 30,839 |
|
| $ | 2,272 |
|
| $ | 7,750 |
|
| $ | 14,540 |
|
| $ | 6,277 |
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Total | Less than 1 Year | 1 to 3 Years | 4 to 5 Years | More than 5 Years | |||||||||||||||||||||||||
Contractual obligations: | |||||||||||||||||||||||||||||
Operating lease commitments (see Note 6) | $ | 97,617 | $ | 8,571 | $ | 17,921 | $ | 19,012 | $ | 52,113 | |||||||||||||||||||
Long-term debt (see Note 9) | 12,500 | 3,000 | 9,500 | — | — | ||||||||||||||||||||||||
Total contractual obligations | $ | 110,117 | $ | 11,571 | $ | 27,421 | $ | 19,012 | $ | 52,113 |
accounting estimates
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Identify
pattern of satisfaction of the performance obligations under step (v) above to be a critical accounting estimate. More specifically, the determination of the level of achievement of research and development service performance obligations, whose pattern of satisfaction is measured using costs incurred to date as compared to total costs incurred and expected to be incurred in the future is driven by a critical accounting estimate.
The partiesour research and development activities based on several factors, such as additional work needed to the contract have approved the contract, whether written, orally,support advancement of product candidate or in accordance with other customary business practices, and are committed to perform their respective obligations.
The entity can identify each party’s rights regarding the goods or services to be transferred.
The entity can identify the payment terms for the goods or services to be transferred.
The contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change because of the contract).
It is probable that the entity will collect substantially all the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.
In determining whether the criteria above have been met, management confirms that the agreement has been signed by both parties or approved in another acceptable manner, reviews that the agreement identifies rights and obligations of each party, both written and implied, determines whether the contract has economic consequences for all parties, and whether we will be able to collect substantially all the consideration that is due or will become due under the contract. The determination of collectability requires the most judgement and, in establishing collectability, management considers payment terms, ability to stop transferring goods or service to customer in the eventnumber of nonpayment, experience with the customer, class of customer,patients in trials. Further, research and expectations about the customer’s financial stability, as well as other factors.
Identify the Performance Obligations
Once a contract is determined todevelopment services may no longer be within the scope of ASC 606, we identify all promised goodsa collaboration agreement, as has been the case with certain of our programs. The timing of when research and services in the contract, which includes those thatdevelopment costs are explicitly stated within the contract and those that are implied. Once all promised goods and services within the contract are identified, we evaluate whether each promised good or service is immaterial in the contextexpected to be incurred may change as a result of the contract. In assessing materiality, management considers quantitative factors by comparing standalone selling price of the promised good or service to the total consideration in the contract and qualitativeexternal factors, such as the importance of the promised gooddelays caused by manufacturing or service to the customer.
We assess whether each material promised goodsupply chain, or service is distinct for the purpose of identifying the performance obligationsdifficulty in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goodsenrolling patients; or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, we considerinternal factors, such as the research, manufacturing and commercialization capabilitiesprioritization of the collaboration partner and the availability of the associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.
Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and if so, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.
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Determine the Transaction Price
In determining the transaction price, we consider fixed considerations, variable considerations, non-cash considerations, significant financing components, and any consideration payable to the customer. If the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which we will be entitled in exchange for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the most likely amount method. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust ourprograms. Our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.
If an arrangement includes developmentscope and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.
In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assess our revenue generating arrangements in order to determine whether a significant financing component exists.
Allocate the Transaction Price to the Performance Obligations
Once the transaction price is then determined, it is allocated to the identified performance obligations in proportion to their standalone selling prices, or SSP, on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.
Determine When to Recognize Revenue
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.
For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.
For arrangements with research and development services performed relative to be performed by us, revenue allocated to our performance obligation is generally recognized basedthe actual scope and timing may have a significant impact on an appropriate measure of progress. We utilize judgment to determine the appropriate method of measuring progress for purposes of recognizing revenue, which is generally an input measure, such as costs incurred. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the arrangement.
development expenses
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expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or the amount of prepaid expenses accordingly.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and couldhave a significant impact on reported amounts.
options
Expected term: We consider the expected volatility to be a critical accounting estimate. As we do not have sufficient trading history, we use the “simplified method” as prescribed by Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share Based Payments, to estimate the expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the contractual term of ten years and the weighted-average vesting term of the stock options, taking into consideration multiple vesting tranches. We utilize this method due to lack of historical data and the plain-vanilla nature of our share-based awards.
Volatility: We use a weighted-average of expected volatility for a period equal to the expected term of the option grant, based on the volatilities of a representative group of publicly traded biopharmaceutical companies. For options granted subsequent to our IPO, the volatility is based on volatilities of a representative group of publicly traded biopharmaceutical companies, andincluding our own, volatility.
Risk-free rate: The risk-free rate is based on the yield curve of U.S. Treasury securities with periods commensurate withto calculate the expected term of the options being valued.
Dividends: We have never paid, and do not anticipate paying, any cash dividends in the foreseeable future, and, therefore,volatility for use an expected dividend yield of zero in the option-pricing model.
Forfeitures: We account for forfeitures as they occur and, therefore, do not estimate forfeitures.
In addition to the above, inputs, the fair value of the underlying common stock represents the exercise price utilized in the Black-Scholes option pricing model. These assumptions reflectThis assumption reflects our best estimates,estimate, but they involveit involves inherent uncertainties based on market conditions generally outside our control. As a result, if other assumptionsa different volatility had been used, stock-based compensation cost could have been materially impacted. Furthermore, if we use different assumptions for future grants, stock-based compensation cost could be materially impacted in future periods.
Determination of
As there has been no public market for our common stock prior to our IPO, the estimated fair value of our common stock was determinedheld by our board of directorsnon-affiliates as of the date of each stock award, with input from management, considering our most recently available third-party valuations of our common stock. Valuations were updated when facts and circumstances indicated that the most recent valuation was no longer valid, such as changes in the stage of our development efforts, various exit strategies and their timing, and other scientific developments that could be related to the valuation of our company or, at a minimum, annually. Third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations in 2019 were prepared using a market approach, specifically the guideline public company method, which “back-solves” to a common stock price. We allocated equity value to our common stock and shares of our redeemable convertible preferred stock, using either an option-pricing method, or OPM, or a hybrid method, which is a hybrid between the OPM and the probability-weighted expected return method. The hybrid method estimates the probability-weighted value across multiple scenarios. In addition to the OPM, the hybrid method considers liquidity scenarios in which the shares of our redeemable convertible preferred stock are assumed to convert into
99
common stock. The future valuelast day of the common stocksecond quarter in the applicable scenario was discounted back2022. Prior to the valuation date at an appropriate risk-adjusted discount rate. In the hybrid method, the present value indicated for each scenario was probability-weighted to arrive at an indication of value for the common stock. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stockthat, we were a large accelerated filer as of each grant date including:
prices at whichWe gained the ability to delay adoption of new or revised accounting pronouncements when we sold sharesbecame a smaller reporting company as of our preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;
the progress of our preclinical and clinical development, including the status and results of preclinical studies for our product candidates;
our stage of development and our business strategy and the material risks related to our business and industry;
external market conditions affecting the biopharmaceutical industry and the material risks related to our business and industry; and trends within the biopharmaceutical industry;
our financial position, including cash on hand, and our historical and forecasted performance and operating results;
the lack of an active public market for our common stock and our preferred stock;
the likelihood of achieving a liquidity event, such as an IPO or sale of our company in light of prevailing market conditions; and
the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.
The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgement. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.
Determination of the fair value of our common stock issued subsequent to our IPO
Following our IPO, the fair value of our common stock was determined based on the quoted market price of our common stock.
New Accounting Pronouncements
December 31, 2022.For information on new accounting standards, see Note 2, Summary of significant accounting policies, to our consolidated financial statements in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
Internal Control over Financial Reporting
In the preparation of our consolidated financial statements to meet the requirements of our IPO, we determined that a material weakness in our internal control over financial reporting existed as of December 31, 2019. The material weakness identified in our internal control over financial reporting arose because we did not maintain effective segregation of duties in the process and recording of journal entries. As of December 31, 2020, we remediated the material weakness by engaging system controls that prevent one person from initiating and approving the same journal entry. In addition, we implemented and performed additional reviews and other post-closing procedures. While we believe that this material weakness has now been remediated, we cannot assure you that these measures will be sufficient to prevent future material weaknesses or significant deficiencies in our internal control over financial reporting from occurring. See “Risk Factors—We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.”
Emerging Growth Company Status
As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, allows us to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. We have elected to avail ourselves of this extended transition period for complying with new or revised accounting standards until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of this extended transition period. Accordingly, the information contained herein may be different from the information you receive from other public companies that are not emerging growth companies. in which you hold stock.
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In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
being permitted to only provide two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
reduced disclosure about the compensation paid to our executive officers;
not being required to submit to our stockholders’ advisory votes on executive compensation or golden parachute arrangements; and
an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.
We may take advantage of these exemptions for up to the last day of 2025 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (2) the last day of 2025; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We may choose to take advantage of some but not all of these exemptions.
In the preparation of our consolidated financial statements to meet the requirements of our IPO, we determined that a material weakness in our internal control over financial reporting existed as of December 31, 2019. The material weakness identified
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in our internal control over financial reporting arose because we did not maintain effective segregation of duties in the process and recording of journal entries. We communicated the material weakness to our audit committee and took measures to remediate the material weakness during 2020, including engaging system controls that prevent one person from initiating and approving the same journal entry. In addition, we have implemented and performed additional reviews and other post-closing procedures.
This Annual Report on Form 10-K does not include a report of management’s assessment regarding
its 2013 Internal Control – Integrated Framework. Based on our assessment, our management has concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on those criteria.
Except as noted above, there
We cannot assure you that the steps and measures we have implemented to remediate our material weakness will be sufficient to prevent future material weaknesses or significant deficiencies in our
Exhibit Number |
| Description of Exhibit |
Form | File Number | Date of Filing | Exhibit Number | Filed Herewith | Exhibit Number | Description of Exhibit | Form | File Number | Date of Filing | Exhibit Number | Filed Herewith | |||||||||||||
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3.1 |
| Fifth Amended and Restated Certificate of Incorporation of the Registrant, current in effect | 8-K | 001–39567 | 10/06/2020 | 3.3 |
| 3.1 | 8-K | 001–39567 | 10/06/2020 | 3.3 | |||||||||||||||
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3.2 |
| Form of Second Amended and Restated Bylaws of the Registrant | S-1 | 333–248719 | 09/10/2020 | 3.5 |
| 3.2 | S-1 | 333–248719 | 09/10/2020 | 3.5 | |||||||||||||||
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4.1 |
| S-1 | 333–248719 | 09/10/2020 | 3.1 |
| 4.1 | S-1 | 333–248719 | 09/10/2020 | 4.1 | ||||||||||||||||
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4.2 |
| S-1 | 333–248719 | 09/10/2020 | 4.2 |
| 4.2 | S-1/A | 333–248719 | 09/28/2020 | 4.3 | ||||||||||||||||
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4.3 |
| S-1/A | 333–248719 | 09/28/2020 | 4.3 |
| 4.3 | 10-K | 001-39567 | 03/11/2021 | 4.4 | ||||||||||||||||
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4.4 |
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10.1# |
| 2015 Stock Option and Grant Plan, as amended and forms of award agreements thereunder | S-1 | 333–248719 | 09/10/2020 | 10.1 |
| 10.1# | S-1 | 333–248719 | 09/10/2020 | 10.1 | |||||||||||||||
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10.2# |
| 2020 Stock Option and Incentive Plan and forms of award agreements thereunder | S-1/A | 333–248719 | 09/28/2020 | 10.2 |
| 10.2# | X | ||||||||||||||||||
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10.3# |
| S-1/A | 333–248719 | 09/28/2020 | 10.3 |
| 10.3# | S-1/A | 333–248719 | 09/28/2020 | 10.3 | ||||||||||||||||
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10.4# |
| S-1 | 333–248719 | 09/10/2020 | 10.4 |
| 10.4# | S-1 | 333–248719 | 09/10/2020 | 10.4 | ||||||||||||||||
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| ||||||||||||||||||||
10.5# |
| S-1 | 333–248719 | 09/10/2020 | 10.5 |
| 10.5# | S-1 | 333–248719 | 09/10/2020 | 10.5 | ||||||||||||||||
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| ||||||||||||||||||||
10.6# |
| S-1 | 333–248719 | 09/10/2020 | 10.6 |
| 10.6# | S-1 | 333–248719 | 09/10/2020 | 10.6 | ||||||||||||||||
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| ||||||||||||||||||||
10.7# |
| S-1 | 333–248719 | 09/10/2020 | 10.7 |
| 10.7# | S-1 | 333–248719 | 09/10/2020 | 10.7 | ||||||||||||||||
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| ||||||||||||||||||||
10.8# |
| Employment Agreement between the Registrant and Andrew Hirsch, dated September 6, 2020 | S-1 | 333–248719 | 09/10/2020 | 10.8 |
| 10.8# | S-1 | 333–248719 | 09/10/2020 | 10.8 | |||||||||||||||
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| ||||||||||||||||||||
10.9# |
| Consulting Agreement between the Registrant and MBJC Associates, LLC, effective March 31, 2020 | S-1 | 333–248719 | 09/10/2020 | 10.9 |
| ||||||||||||||||||||
10.9† | 10.9† | S-1 | 333–248719 | 09/10/2020 | 10.10 | ||||||||||||||||||||||
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| ||||||||||||||||||||
10.10† |
| S-1 | 333–248719 | 09/10/2020 | 10.10 |
| 10.10† | 10-K | 001-39567 | 03/11/2021 | 10.11 | ||||||||||||||||
10.11† | 10.11† | S-1 | 333–248719 | 09/10/2020 | 10.11 |
104
Exhibit Number |
| Description of Exhibit |
Form | File Number | Date of Filing | Exhibit Number | Filed Herewith |
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10.11† |
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| X | |
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|
10.12† |
| S-1 | 333–248719 | 09/10/2020 | 10.11 |
| |
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|
|
10.13† |
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| X | |
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|
10.14† |
| S-1 | 333–248719 | 09/10/2020 | 10.12 |
| |
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|
10.15† |
| S-1 | 333–248719 | 09/10/2020 | 10.13 |
| |
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|
10.16 |
| Lease by 480 Arsenal Group LLC to the Registrant, dated July 5, 2017, as amended | S-1 | 333–248719 | 09/10/2020 | 10.14 |
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21.1 |
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| X | |
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23.1 |
| Consent of KPMG LLP, Independent Registered Public Accounting Firm |
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| X |
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|
31.1 |
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| X | |
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31.2 |
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| X | |
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32.1* |
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| X | |
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32.2* |
|
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| X | |
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101.INS |
| XBRL Instance Document |
|
|
|
| X |
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|
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
| X |
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|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
| X |
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|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
| X |
105
Exhibit Number | Description of Exhibit | Form | File Number | Date of Filing | Exhibit Number | Filed Herewith | ||||||||||||||
10.12† | 10-K | 001-39567 | 03/11/2021 | 10.13 | ||||||||||||||||
10.13† | S-1 | 333–248719 | 09/10/2020 | 10.12 | ||||||||||||||||
10.14† | S-1 | 333–248719 | 09/10/2020 | 10.13 | ||||||||||||||||
10.15 | S-1 | 333–248719 | 09/10/2020 | 10.14 | ||||||||||||||||
10.16 | 8-K | 001-39567 | 11/30/2021 | 10.1 | ||||||||||||||||
21.1 | X | |||||||||||||||||||
23.1 | X | |||||||||||||||||||
31.1 | X | |||||||||||||||||||
31.2 | X | |||||||||||||||||||
32.1* | X | |||||||||||||||||||
32.2* | X | |||||||||||||||||||
101.INS | Inline XBRL Instance Document | X | ||||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X |
| |||||||||||||||||||||
Exhibit Number | Description of Exhibit | Form | File
| Date of
| Exhibit
| Filed
| |||||||||||||||
| Cover Page Interactive Data File (formatted as Inline XBRL document and contained in Exhibit 101) |
|
| ||||||||||||||||||
|
|
|
| |||||
# | Indicates a management contract or any compensatory plan, contract or arrangement. |
† | Portions of this exhibit (indicated by asterisks) will be omitted in accordance with the rules of the Securities and Exchange Commission. |
* | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act, or the Exchange Act, except as otherwise stated in such filing. |
C4 Therapeutics, Inc. | |||||||||
Date: | By: |
| /s/ Andrew J. Hirsch | ||||||
Andrew J. Hirsch | |||||||||
President and Chief Executive Officer |
|
|
| ||||||||||||
Name | Title | Date | ||||||||||||
/s/ Andrew J. Hirsch | President, Chief Executive Officer, and Director |
| ||||||||||||
Andrew J. Hirsch | (Principal Executive Officer) | |||||||||||||
/s/ | Chief Financial Officer and Treasurer |
| ||||||||||||
| (Principal Financial | |||||||||||||
|
|
| ||||||||||||
|
| |||||||||||||
/s/ |
|
| ||||||||||||
| ||||||||||||||
/s/ Kenneth C. Anderson, M.D. | Director |
| ||||||||||||
Kenneth C. Anderson, M.D. | ||||||||||||||
/s/ Laura Bessen, M.D. | Director | February 23, 2023 | ||||||||||||
|
|
| ||||||||||||
| Director | February 23, 2023 | ||||||||||||
Glenn Dubin | ||||||||||||||
/s/ | Director |
| ||||||||||||
| ||||||||||||||
/s/ Utpal Koppikar | Director | February 23, 2023 | ||||||||||||
|
|
| ||||||||||||
| ||||||||||||||
/s/ Malcolm Salter | Director |
| ||||||||||||
Malcolm Salter |
F-2
|
| December 31, |
| December 31, | |||||||||||||||
| 2020 |
|
| 2019 |
| 2022 | 2021 | ||||||||||||
Assets |
|
|
|
|
|
|
|
| Assets | ||||||||||
Current assets: |
|
|
|
|
|
|
|
| Current assets: | ||||||||||
Cash and cash equivalents |
| $ | 181,727 |
|
| $ | 90,549 |
| Cash and cash equivalents | $ | 29,754 | $ | 76,124 | ||||||
Marketable securities |
|
| 189,962 |
|
|
| — |
| |||||||||||
Marketable securities, current | Marketable securities, current | 246,399 | 233,155 | ||||||||||||||||
Accounts receivable |
|
| 4,484 |
|
|
| 4,623 |
| Accounts receivable | 1,473 | 5,716 | ||||||||
Prepaid expenses and other current assets |
|
| 4,836 |
|
|
| 1,595 |
| Prepaid expenses and other current assets | 9,931 | 10,694 | ||||||||
Total current assets |
|
| 381,009 |
|
|
| 96,767 |
| Total current assets | 287,557 | 325,689 | ||||||||
Marketable securities, non-current | Marketable securities, non-current | 60,962 | 142,200 | ||||||||||||||||
Property and equipment, net |
|
| 3,323 |
|
|
| 4,463 |
| Property and equipment, net | 7,400 | 3,108 | ||||||||
Right-of-use asset |
|
| 13,229 |
|
|
| 14,453 |
| Right-of-use asset | 70,116 | 31,945 | ||||||||
Restricted cash |
|
| 2,577 |
|
|
| 2,577 |
| Restricted cash | 3,279 | 3,279 | ||||||||
Other assets | Other assets | 1,526 | 544 | ||||||||||||||||
Total assets |
| $ | 400,138 |
|
| $ | 118,260 |
| Total assets | $ | 430,840 | $ | 506,765 | ||||||
Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) |
|
|
|
|
|
|
|
| |||||||||||
Liabilities and stockholders’ equity | Liabilities and stockholders’ equity | ||||||||||||||||||
Current liabilities: |
|
|
|
|
|
|
|
| Current liabilities: | ||||||||||
Accounts payable |
| $ | 5,683 |
|
| $ | 5,385 |
| Accounts payable | $ | 1,172 | $ | 4,506 | ||||||
Accrued expenses and other current liabilities |
|
| 9,524 |
|
|
| 6,671 |
| Accrued expenses and other current liabilities | 19,769 | 13,606 | ||||||||
Deferred revenue, current |
|
| 27,603 |
|
|
| 20,705 |
| Deferred revenue, current | 16,618 | 31,800 | ||||||||
Operating lease liability, current |
|
| 1,042 |
|
|
| 880 |
| Operating lease liability, current | 4,700 | 1,334 | ||||||||
Long-term debt, net of debt discount—related party, current | Long-term debt, net of debt discount—related party, current | 2,287 | — | ||||||||||||||||
Total current liabilities |
|
| 43,852 |
|
|
| 33,641 |
| Total current liabilities | 44,546 | 51,246 | ||||||||
Deferred revenue, net of current |
|
| 53,617 |
|
|
| 72,718 |
| Deferred revenue, net of current | 16,895 | 24,368 | ||||||||
Operating lease liability, net of current |
|
| 11,826 |
|
|
| 12,869 |
| Operating lease liability, net of current | 70,970 | 30,777 | ||||||||
Long-term debt—related party |
|
| 10,052 |
|
|
| — |
| |||||||||||
Long-term debt, net of debt discount—related party, net of current | Long-term debt, net of debt discount—related party, net of current | 9,195 | 10,768 | ||||||||||||||||
Total liabilities |
|
| 119,347 |
|
|
| 119,228 |
| Total liabilities | 141,606 | 117,159 | ||||||||
Commitments and contingencies (See Note 6 and Note 9) |
|
|
|
|
|
|
|
| Commitments and contingencies (See Note 6 and Note 9) | ||||||||||
Redeemable convertible preferred stock (See Note 10) |
|
| — |
|
|
| 110,995 |
| |||||||||||
Stockholders’ equity (deficit): |
|
|
|
|
|
|
|
| |||||||||||
Preferred stock, par value of $0.0001 per share; 10,000,000 and no shares authorized, and no shares issued or outstanding as of December 31, 2020 and 2019, respectively |
|
| — |
|
|
| — |
| |||||||||||
Common stock, par value of $0.0001 per share; 150,000,000 and 21,343,452 shares authorized, and 43,059,632 and 1,426,641 shares issued and outstanding as of December 31, 2020 and 2019, respectively |
|
| 4 |
|
|
| — |
| |||||||||||
Stockholders’ equity: | Stockholders’ equity: | ||||||||||||||||||
Preferred stock, par value of $0.0001 per share; 10,000,000 shares authorized, and no shares issued or outstanding as of December 31, 2022 and 2021, respectively | Preferred stock, par value of $0.0001 per share; 10,000,000 shares authorized, and no shares issued or outstanding as of December 31, 2022 and 2021, respectively | — | — | ||||||||||||||||
Common stock, par value of $0.0001 per share; 150,000,000 shares authorized, and 48,966,216 and 48,688,875 shares issued and outstanding as of December 31, 2022 and 2021, respectively | Common stock, par value of $0.0001 per share; 150,000,000 shares authorized, and 48,966,216 and 48,688,875 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 5 | 5 | ||||||||||||||||
Additional paid-in capital |
|
| 464,597 |
|
|
| 5,525 |
| Additional paid-in capital | 689,256 | 658,091 | ||||||||
Accumulated other comprehensive loss |
|
| 13 |
|
|
| — |
| Accumulated other comprehensive loss | (4,137) | (775) | ||||||||
Accumulated deficit |
|
| (183,823 | ) |
|
| (117,488 | ) | Accumulated deficit | (395,890) | (267,715) | ||||||||
Total stockholders’ equity (deficit) |
|
| 280,791 |
|
|
| (111,963 | ) | |||||||||||
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) |
| $ | 400,138 |
|
| $ | 118,260 |
| |||||||||||
|
|
|
|
|
|
|
|
| |||||||||||
Total stockholders’ equity | Total stockholders’ equity | 289,234 | 389,606 | ||||||||||||||||
Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 430,840 | $ | 506,765 |
|
| Years Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Revenue from collaboration agreements |
| $ | 33,195 |
|
| $ | 21,381 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 78,440 |
|
|
| 48,059 |
|
General and administrative |
|
| 15,204 |
|
|
| 8,774 |
|
Total operating expenses |
|
| 93,644 |
|
|
| 56,833 |
|
Operating loss |
|
| (60,449 | ) |
|
| (35,452 | ) |
Other (expense) income |
|
|
|
|
|
|
|
|
Change in fair value of warrant liability—related party |
|
| (5,676 | ) |
|
| — |
|
Interest expense and amortization of long-term debt—related party |
|
| (1,229 | ) |
|
| — |
|
Interest and other income, net |
|
| 393 |
|
|
| 2,157 |
|
Total other (expense) income |
|
| (6,512 | ) |
|
| 2,157 |
|
Loss before income taxes |
|
| (66,961 | ) |
|
| (33,295 | ) |
Income tax benefit (expense) |
|
| 626 |
|
|
| (804 | ) |
Net loss |
| $ | (66,335 | ) |
| $ | (34,099 | ) |
Unrealized gain on marketable securities |
|
| 13 |
|
|
| — |
|
Comprehensive loss |
| $ | (66,322 | ) |
| $ | (34,099 | ) |
Reconciliation of net loss to net loss attributable to common stockholders: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (66,335 | ) |
| $ | (34,099 | ) |
Accrual of preferred stock dividends |
|
| — |
|
|
| (8,468 | ) |
Net loss attributable to common stockholders—basic and diluted |
| $ | (66,335 | ) |
| $ | (42,567 | ) |
Net loss per share attributable to common stockholders—basic and diluted |
| $ | (5.83 | ) |
| $ | (31.03 | ) |
Weighted-average common stock outstanding—basic and diluted |
|
| 11,370,328 |
|
|
| 1,371,905 |
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Revenue from collaboration agreements | $ | 31,096 | $ | 45,785 | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 117,841 | 94,665 | |||||||||||||||
General and administrative | 42,789 | 33,254 | |||||||||||||||
Total operating expenses | 160,630 | 127,919 | |||||||||||||||
Loss from operations | (129,534) | (82,134) | |||||||||||||||
Other income (expense), net | |||||||||||||||||
Interest expense and amortization of long-term debt—related party | (2,216) | (2,145) | |||||||||||||||
Interest and other income, net | 3,575 | 387 | |||||||||||||||
Total other income (expense), net | 1,359 | (1,758) | |||||||||||||||
Net loss | $ | (128,175) | $ | (83,892) | |||||||||||||
Net loss per share - basic and diluted | $ | (2.62) | $ | (1.82) | |||||||||||||
Weighted-average number of shares - basic and diluted | 48,861,665 | 46,041,733 | |||||||||||||||
Other Comprehensive loss: | |||||||||||||||||
Unrealized loss on marketable securities | (3,362) | (788) | |||||||||||||||
Comprehensive loss | $ | (131,537) | $ | (84,680) | |||||||||||||
|
| Redeemable Convertible Preferred Stock |
|
|
| Common Stock |
|
| Additional Paid-In |
|
| Accumulated Other Comprehensive |
|
| Accumulated |
|
| Total Stockholders’ Equity |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| (Deficit) |
| ||||||||
Balance as of December 31, 2018 |
|
| 113,145,900 |
|
| $ | 110,995 |
|
|
|
| 1,338,956 |
|
| $ | — |
|
| $ | 3,639 |
|
| $ | — |
|
| $ | (83,389 | ) |
| $ | (79,750 | ) |
Exercise of stock options |
|
| — |
|
|
| — |
|
|
|
| 93,797 |
|
|
| — |
|
|
| 274 |
|
|
| — |
|
|
| — |
|
|
| 274 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 1,642 |
|
|
| — |
|
|
| — |
|
|
| 1,642 |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
|
|
| (6,112 | ) |
|
| — |
|
|
| (30 | ) |
|
| — |
|
|
| — |
|
|
| (30 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,099 | ) |
|
| (34,099 | ) |
Balance as of December 31, 2019 |
|
| 113,145,900 |
|
| $ | 110,995 |
|
|
|
| 1,426,641 |
|
| $ | — |
|
| $ | 5,525 |
|
| $ | — |
|
| $ | (117,488 | ) |
| $ | (111,963 | ) |
Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $4.5 million |
|
| 142,857,142 |
|
| $ | 145,525 |
|
|
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Conversion of redeemable convertible preferred stock to common stock upon closing of initial public offering |
|
| (256,003,042 | ) |
|
| (256,520 | ) |
|
|
| 30,355,379 |
|
|
| 3 |
|
|
| 256,517 |
|
|
| — |
|
|
| — |
|
|
| 256,520 |
|
Reclassification of warrant liability to equity |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 8,001 |
|
|
|
|
|
|
|
|
|
|
| 8,001 |
|
Issuance of common stock upon closing of initial public offering, net of issuance costs of $18.6 million |
|
| — |
|
|
| — |
|
|
|
| 11,040,000 |
|
|
| 1 |
|
|
| 191,172 |
|
|
| — |
|
|
| — |
|
|
| 191,173 |
|
Exercise of stock options |
|
| — |
|
|
| — |
|
|
|
| 281,584 |
|
|
| — |
|
|
| 887 |
|
|
| — |
|
|
| — |
|
|
| 887 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 3,432 |
|
|
| — |
|
|
| — |
|
|
| 3,432 |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
|
|
| (43,972 | ) |
|
| — |
|
|
| (210 | ) |
|
| — |
|
|
| — |
|
|
| (210 | ) |
Vested stock option settlement |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| (727 | ) |
|
| — |
|
|
| — |
|
|
| (727 | ) |
Unrealized gain on investments |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
|
Net loss |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (66,335 | ) |
|
| (66,335 | ) |
Balance as of December 31, 2020 |
|
| — |
|
| $ | — |
|
|
|
| 43,059,632 |
|
| $ | 4 |
|
| $ | 464,597 |
|
| $ | 13 |
|
| $ | (183,823 | ) |
| $ | 280,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | 43,059,632 | $ | 4 | $ | 464,597 | $ | 13 | $ | (183,823) | $ | 280,791 | ||||||||||||||||||||||||
Follow-on common stock offering, net of issuance costs of $11.3 million | 4,887,500 | 1 | 169,464 | — | — | 169,465 | |||||||||||||||||||||||||||||
Shares issued upon warrant exercise—related party | 256,038 | — | — | — | — | — | |||||||||||||||||||||||||||||
Exercise of stock options | 474,850 | — | 2,330 | — | — | 2,330 | |||||||||||||||||||||||||||||
Issuance of common stock under the 2020 ESPP | 6,640 | — | 180 | — | — | 180 | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 21,340 | — | — | 21,340 | |||||||||||||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (788) | — | (788) | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (83,892) | (83,892) | |||||||||||||||||||||||||||||
Other | 4,215 | — | 180 | — | — | 180 | |||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 48,688,875 | $ | 5 | $ | 658,091 | $ | (775) | $ | (267,715) | $ | 389,606 | ||||||||||||||||||||||||
Exercise of stock options and release of stock units | 235,450 | — | 777 | — | — | 777 | |||||||||||||||||||||||||||||
Issuance of common stock under the 2020 ESPP | 31,402 | — | 372 | — | — | 372 | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 29,858 | — | — | 29,858 | |||||||||||||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (3,362) | — | (3,362) | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (128,175) | (128,175) | |||||||||||||||||||||||||||||
Other | 10,489 | — | 158 | — | — | 158 | |||||||||||||||||||||||||||||
Balance as of December 31, 2022 | 48,966,216 | $ | 5 | $ | 689,256 | $ | (4,137) | $ | (395,890) | $ | 289,234 |
|
| Years Ended December 31, |
| Years Ended December 31, | |||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||||||||
Cash flows used in operating activities: |
|
|
|
|
|
|
|
| Cash flows used in operating activities: | ||||||||||||||||
Net loss |
| $ | (66,335 | ) |
| $ | (34,099 | ) | Net loss | $ | (128,175) | $ | (83,892) | ||||||||||||
Adjustments to reconcile net loss to cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
| |||||||||||||||||
Adjustments to reconcile net loss to cash used in operating activities: | Adjustments to reconcile net loss to cash used in operating activities: | ||||||||||||||||||||||||
Stock-based compensation expense | Stock-based compensation expense | 30,016 | 21,512 | ||||||||||||||||||||||
Depreciation and amortization |
|
| 1,617 |
|
|
| 1,595 |
| Depreciation and amortization | 1,676 | 1,492 | ||||||||||||||
Stock-based compensation expense |
|
| 3,432 |
|
|
| 1,642 |
| |||||||||||||||||
Gain on disposal of fixed assets |
|
| — |
|
|
| 16 |
| |||||||||||||||||
Accretion of (premium) discount on investments |
|
| (95 | ) |
|
| 334 |
| |||||||||||||||||
Reduction in carrying amount of right-of-use assets |
|
| 1,224 |
|
|
| 1,144 |
| |||||||||||||||||
Amortization of debt discount |
|
| 409 |
|
|
| — |
| |||||||||||||||||
Change in fair value of warrant liability |
|
| 5,676 |
|
|
| — |
| |||||||||||||||||
Reduction in carrying amount of right-of-use asset | Reduction in carrying amount of right-of-use asset | 5,896 | 1,415 | ||||||||||||||||||||||
Accretion of discount on marketable securities | Accretion of discount on marketable securities | 714 | 1,879 | ||||||||||||||||||||||
Amortization of debt discount—related party | Amortization of debt discount—related party | 713 | 719 | ||||||||||||||||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable |
|
| 139 |
|
|
| 81,815 |
| Accounts receivable | 4,244 | (1,232) | ||||||||||||||
Prepaid expenses and other current assets |
|
| (3,257 | ) |
|
| (814 | ) | |||||||||||||||||
Prepaid expenses and other current and long-term assets | Prepaid expenses and other current and long-term assets | 388 | (6,116) | ||||||||||||||||||||||
Accounts payable |
|
| 467 |
|
|
| 4,231 |
| Accounts payable | (3,333) | (1,179) | ||||||||||||||
Accrued expenses and other liabilities |
|
| 2,558 |
|
|
| 3,719 |
| |||||||||||||||||
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 5,083 | 4,377 | ||||||||||||||||||||||
Operating lease liability |
|
| (881 | ) |
|
| (734 | ) | Operating lease liability | (507) | (888) | ||||||||||||||
Deferred revenue |
|
| (12,203 | ) |
|
| (3,235 | ) | Deferred revenue | (22,654) | (25,052) | ||||||||||||||
Net cash (used in) provided by operating activities |
|
| (67,249 | ) |
|
| 55,614 |
| |||||||||||||||||
Cash flows used in investing activities: |
|
|
|
|
|
|
|
| |||||||||||||||||
Proceeds received from maturities of marketable securities |
|
| 104,000 |
|
|
| 78,666 |
| |||||||||||||||||
Net cash used in operating activities | Net cash used in operating activities | (105,939) | (86,965) | ||||||||||||||||||||||
Cash flows provided by (used in) investing activities: | Cash flows provided by (used in) investing activities: | ||||||||||||||||||||||||
Proceeds from maturities of marketable securities | Proceeds from maturities of marketable securities | 283,445 | 349,681 | ||||||||||||||||||||||
Purchase of marketable securities |
|
| (293,855 | ) |
|
| (79,000 | ) | Purchase of marketable securities | (219,527) | (537,740) | ||||||||||||||
Purchases of property and equipment |
|
| (650 | ) |
|
| (1,349 | ) | Purchases of property and equipment | (5,496) | (1,277) | ||||||||||||||
Proceeds from sale of property and equipment |
|
| — |
|
|
| 63 |
| |||||||||||||||||
Net cash used in investing activities |
|
| (190,505 | ) |
|
| (1,620 | ) | |||||||||||||||||
Net cash provided by (used in) investing activities | Net cash provided by (used in) investing activities | 58,422 | (189,336) | ||||||||||||||||||||||
Cash flows provided by financing activities: |
|
|
|
|
|
|
|
| Cash flows provided by financing activities: | ||||||||||||||||
Proceeds from issuance of Series B shares, net of issuance costs of $4.5 million |
|
| 145,525 |
|
|
| — |
| |||||||||||||||||
Proceeds from long-term debt and warrant, net of issuance costs of $0.5 million |
|
| 11,973 |
|
|
| — |
| |||||||||||||||||
Proceeds from initial public offering, net of underwriting discount of $14.7 million |
|
| 195,074 |
|
|
| — |
| |||||||||||||||||
Proceeds from follow-on offering, net of issuance costs paid of $11.3 million | Proceeds from follow-on offering, net of issuance costs paid of $11.3 million | — | 169,465 | ||||||||||||||||||||||
Proceeds from exercises of stock options | Proceeds from exercises of stock options | 777 | 2,330 | ||||||||||||||||||||||
Payment of initial public offering costs |
|
| (3,606 | ) |
|
| — |
| Payment of initial public offering costs | — | (286) | ||||||||||||||
Proceeds from exercises of stock options |
|
| 887 |
|
|
| 274 |
| |||||||||||||||||
Repurchase of common stock |
|
| (194 | ) |
|
| (30 | ) | |||||||||||||||||
Vested stock option settlement |
|
| (727 | ) |
|
| — |
| |||||||||||||||||
Other | Other | 370 | (109) | ||||||||||||||||||||||
Net cash provided by financing activities |
|
| 348,932 |
|
|
| 244 |
| Net cash provided by financing activities | 1,147 | 171,400 | ||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net change in cash, cash equivalents and restricted cash |
|
| 91,178 |
|
|
| 54,238 |
| Net change in cash, cash equivalents and restricted cash | (46,370) | (104,901) | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period |
|
| 93,126 |
|
|
| 38,888 |
| Cash, cash equivalents and restricted cash at beginning of period | 79,403 | 184,304 | ||||||||||||||
Cash, cash equivalents and restricted cash at end of period |
| $ | 184,304 |
|
| $ | 93,126 |
| Cash, cash equivalents and restricted cash at end of period | $ | 33,033 | $ | 79,403 | ||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
| Reconciliation of cash, cash equivalents and restricted cash: | ||||||||||||||||
Cash, cash equivalents and restricted cash at end of year |
| $ | 184,304 |
|
| $ | 93,126 |
| Cash, cash equivalents and restricted cash at end of year | $ | 33,033 | $ | 79,403 | ||||||||||||
Less: restricted cash |
|
| (2,577 | ) |
|
| (2,577 | ) | Less: restricted cash | (3,279) | (3,279) | ||||||||||||||
Cash and cash equivalents at end of the year |
| $ | 181,727 |
|
| $ | 90,549 |
| Cash and cash equivalents at end of the year | $ | 29,754 | $ | 76,124 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 820 |
|
| $ | — |
|
Cash paid for taxes |
| $ | 143 |
|
| $ | 1,088 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Conversion of redeemable convertible preferred stock to common stock upon closing of the initial public offering |
| $ | 256,520 |
|
| $ | — |
|
Reclassification of warrant liability to equity |
| $ | 8,001 |
|
| $ | — |
|
Initial public offering costs in accounts payable and accrued expenses |
| $ | 296 |
|
| $ | — |
|
Capital expenditures in accounts payable |
| $ | — |
|
| $ | 172 |
|
Stock option repurchases included in accrued expenses |
| $ | — |
|
| $ | 16 |
|
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||||
Cash paid for interest - related party | $ | 1,624 | $ | 1,308 | |||||||||||||
Supplemental disclosures of non-cash investing and financing activities: | |||||||||||||||||
Operating lease liabilities arising from obtaining right-of-use assets | $ | 44,067 | $ | 20,131 | |||||||||||||
Capital expenditures in accounts payable and accrued expenses | $ | 473 | $ | — | |||||||||||||
Aggregate exercise price of warrant net exercised - related party (Note 10) | $ | — | $ | 3,002 |
On October 6, 2020, the Company completed its initial public offering, or the IPO, at which time the Company issued 11,040,000 shares of its common stock at a price to the public of $19.00 per share, which number includes 1,440,000 shares of common stock that were issued to the underwriters for the IPO when they exercised in full their overallotment option. Upon the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 30,355,379 shares of common stock. Net proceeds from the IPO, including the exercise in full of the underwriters’ option to purchase additional shares, were $191.2 million, after deducting underwriting discounts and commissions of $14.7 million and expenses of $3.9 million.
Reverse Stock Split
On September 25, 2020, the Company effected a one-for-8.4335 reverse stock split of its issued and outstanding common stock and stock options, and a proportional adjustment to the existing conversion ratios for the Company’s redeemable convertible preferred stock. Additionally, upon closing of the IPO a warrant issued to purchase up to 2,857,142 shares of the Company’s Series B redeemable convertible preferred stock converted into a warrant exercisable for 338,784 shares of the Company’s common stock. Accordingly, all issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented, except as otherwise stated.
uncertainties
F-8
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
COVID-19 Pandemic
The impact of the coronavirus, or COVID-19, pandemic on the Company’s business, results of operations and financial condition is uncertain and will depend on future developments, including the duration and spread of the outbreak, the impact of vaccines and new strains of COVID-19, and any governmental advisories and restrictions.
presentation
consolidation
Emerging Growth Company
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
estimates
equivalents
F-9
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
cash
credit risk
financial instruments
•Level 1—Quoted market prices in active markets for identical assets or liabilities.
•Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.
•Level 3—Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.
Cash, cash equivalents and restricted cash are Level 1 assets which are comprised The Company evaluates transfers between levels at the end of funds held in checking and money market accounts. Marketable securities are Level 2 assets which are comprised of US treasury funds with maturity dates of less than one year. The carrying amounts of accounts receivable, which relate to the Company’s collaboration agreements, accounts payable, and accrued expenses approximate their fair values due to their short-term nature.
each reporting period.
equipment
F-10
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
resulting gain or loss is included in the determination of net loss.
Asset category | Estimated useful life | |||||||
Laboratory equipment | 5 years | |||||||
Computer equipment | 3 years | |||||||
Office equipment, furniture and fixtures | 5 years | |||||||
Leasehold improvements | Lesser of useful life or remaining lease term |
long-lived assets
contingencies
recognition
F-11
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
contract for the allocation of transaction price in step (iv) above; and (d) the contract term and pattern of satisfaction of the performance obligations under step (v) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.
license fees
options
development services
payments
F-12
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
license agreements.
development
Stock-Based Compensation
Warrant Liability Expense
In connection with the Company’s completion of a financing involving the sale of shares of Series B redeemable convertible preferred stock, or the Series B Financing, in June and July 2020 and the entry into the Term Loan (see Note 9, Long-term debt and warrant liability), the Company issued a warrant to purchase shares of its Series B redeemable convertible preferred stock. Upon issuance, the Company classified the warrant as a liability on its consolidated balance sheet and remeasured this warrant liability to fair value at each reporting date and recognized changes in the fair value of the warrant liability, determined using Black-Scholes, as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.
Upon completion of the IPO, the warrant converted into a warrant to purchase shares of the Company’s common stock, as described in Note 9, Long-term debt and warrant liability. Upon conversion into a warrant exercisable for shares of the Company’s stock, management concluded that the warrant meets the definition of an equity instrument and the fair value of the warrant at the time of conversion, determined using Black-Scholes, was recorded as an increase in additional paid-in capital.
As noted above, the Company utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value the warrant. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying redeemable convertible Series B Preferred Stock or common stock issuable upon exercise of the
F-13
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
warrant, remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying redeemable convertible preferred stock or common stock.
taxes
loss
loss per share
Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common stock equivalent shares, including outstanding stock options and Preferred Stock.
unvested restricted stock that are outstanding during the period, except where such securities would be anti-dilutive.
concern
and marketable securities balances.
In June 2016 the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional
F-14
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.
This standard became effective for the Company on January 1, 2020 and, based on the composition of the Company’s receivables and available-for-sale debt securities, current economic conditions and historical credit loss activity, the adoption of this standard did not have a material impact on its consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12, which is intended to simplify various aspects related toadopted accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 is not expected to have a material effect on the Company’s consolidated financial statements.
standards
|
| Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 180,078 |
|
| $ | 180,078 |
|
| $ | — |
|
| $ | — |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
| 189,962 |
|
|
| — |
|
|
| 189,962 |
|
|
| — |
|
Total assets |
| $ | 370,040 |
|
| $ | 180,078 |
|
| $ | 189,962 |
|
| $ | — |
|
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | 28,705 | $ | 28,705 | $ | — | $ | — | |||||||||||||||
U.S. Treasury securities | 799 | — | 799 | — | |||||||||||||||||||
Marketable securities: | |||||||||||||||||||||||
Corporate debt securities | 234,327 | — | 234,327 | — | |||||||||||||||||||
U.S. government debt securities | 47,641 | — | 47,641 | — | |||||||||||||||||||
U.S. Treasury securities | 25,393 | — | 25,393 | — | |||||||||||||||||||
Total cash equivalents and marketable securities | $ | 336,865 | $ | 28,705 | $ | 308,160 | $ | — |
|
| Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 80,902 |
|
| $ | 80,902 |
|
| $ | — |
|
| $ | — |
|
Total assets |
| $ | 80,902 |
|
| $ | 80,902 |
|
| $ | — |
|
| $ | — |
|
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | 59,162 | $ | 59,162 | $ | — | $ | — | |||||||||||||||
Corporate debt securities | 11,649 | — | 11,649 | — | |||||||||||||||||||
U.S. Treasury securities | 5,000 | — | 5,000 | — | |||||||||||||||||||
Marketable securities: | |||||||||||||||||||||||
Corporate debt securities | 308,300 | — | 308,300 | — | |||||||||||||||||||
U.S. government debt securities | 37,883 | — | 37,883 | — | |||||||||||||||||||
U.S. Treasury securities | 29,172 | — | 29,172 | — | |||||||||||||||||||
Total cash equivalents and marketable securities | $ | 451,166 | $ | 59,162 | $ | 392,004 | $ | — |
As further discussed in Note 9, Long-term debt and warrant liability, during the year ended December 31, 2020, the Company issued a warrant to purchase shares of its Series B redeemable convertible preferred stock to Perceptive Credit Holdings III, LP, an affiliate of Perceptive Advisors LLC, or Perceptive. Perceptive is a considered a related party to the Company based on its ownership of the Company’s common stock. Upon issuance, the Company classified the warrant as a liability on its consolidated balance sheet and remeasured this warrant liability to fair value at each reporting date. The warrant is considered within Level 3 of the fair value hierarchy because the fair value uses management’s own assumptions
F-15
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
about the assumptions that market participants would use in pricing the liability. Upon the completion of the Company’s IPO on October 6, 2020, the warrant was automatically converted into a warrant exercisable for 338,784 shares of the Company’s common stock and was reclassified as equity. The fair value of the warrant was determined on October 6, 2020 using the following assumptions:
Stock price |
| $ | 26.96 |
|
Exercise price |
| $ | 8.86 |
|
Expected term (in years) |
|
| 9.75 |
|
Volatility |
|
| 75.00 | % |
Risk-free interest rate |
|
| 0.76 | % |
Dividend yield |
|
| — |
|
The following table presents the changes in Level 3 instruments, redeemable convertible preferred stock warrant, for the year ended December 31, 2020:
|
|
| ||
|
| |||
|
| |||
|
|
| ||
|
|
|
As of December 31, 2020, the warrant has not been exercised.
There have been no transfers between fair value levels during the years ended December 31, 2020 and 2019.
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Loss |
|
| Fair Value |
| ||||
U.S. Treasury securities |
| $ | 189,949 |
|
| $ | 13 |
|
| $ | — |
|
| $ | 189,962 |
|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
Marketable securities, current: | |||||||||||||||||||||||
Corporate debt securities | $ | 183,270 | $ | 2 | $ | (2,068) | $ | 181,204 | |||||||||||||||
U.S. government debt securities | 40,986 | — | (1,184) | 39,802 | |||||||||||||||||||
U.S. Treasury securities | 25,650 | — | (257) | 25,393 | |||||||||||||||||||
Marketable securities, non-current | |||||||||||||||||||||||
Corporate debt securities | 53,592 | 2 | (471) | 53,123 | |||||||||||||||||||
U.S. government debt securities | 8,000 | — | (161) | 7,839 | |||||||||||||||||||
Total marketable securities, current and non-current | $ | 311,498 | $ | 4 | $ | (4,141) | $ | 307,361 |
As
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
Marketable securities, current: | |||||||||||||||||||||||
Corporate debt securities | $ | 219,414 | $ | 1 | $ | (250) | $ | 219,165 | |||||||||||||||
U.S. government debt securities | 8,987 | — | (3) | 8,984 | |||||||||||||||||||
U.S. Treasury securities | 5,006 | — | — | 5,006 | |||||||||||||||||||
Marketable securities, non-current | |||||||||||||||||||||||
Corporate debt securities | 89,538 | — | (403) | 89,135 | |||||||||||||||||||
U.S. government debt securities | 32,982 | — | (105) | 32,877 | |||||||||||||||||||
U.S. Treasury securities | 20,203 | — | (15) | 20,188 | |||||||||||||||||||
Total marketable securities, current and non-current | $ | 376,130 | $ | 1 | $ | (776) | $ | 375,355 |
Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||
Marketable securities in continuous unrealized loss position for less than 12 months: | |||||||||||||||||
Corporate debt securities | 63 | $ | 134,027 | $ | (1,262) | ||||||||||||
U.S. government debt securities | 6 | 15,748 | (245) | ||||||||||||||
U.S. Treasury securities | 4 | 5,575 | (11) | ||||||||||||||
Marketable securities in continuous unrealized loss position for greater than 12 months: | |||||||||||||||||
Corporate debt securities | 36 | 82,375 | (1,277) | ||||||||||||||
U.S. government debt securities | 7 | 31,892 | (1,100) | ||||||||||||||
U.S. Treasury securities | 4 | 19,817 | (246) | ||||||||||||||
Total marketable securities in unrealized loss position | 120 | $ | 289,434 | $ | (4,141) |
Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||
Marketable securities in continuous unrealized loss position for less than 12 months: | |||||||||||||||||
Corporate debt securities | 110 | $ | 303,450 | $ | (653) | ||||||||||||
U.S. government debt securities | 8 | 37,883 | (108) | ||||||||||||||
U.S. Treasury securities | 5 | 24,172 | (15) | ||||||||||||||
Total marketable securities in unrealized loss position | 123 | $ | 365,505 | $ | (776) |
The Company did not have any marketable securitiesrecord an allowance for credit losses at December 31, 2019.
|
| As of December 31, |
| ||||||||||||||||
|
| 2020 |
|
| 2019 |
| As of December 31, | ||||||||||||
2022 | 2021 | ||||||||||||||||||
Property and equipment | Property and equipment | ||||||||||||||||||
Laboratory equipment |
| $ | 7,207 |
|
| $ | 6,766 |
| Laboratory equipment | $ | 8,757 | $ | 8,276 | ||||||
Leasehold improvements | Leasehold improvements | 4,682 | 541 | ||||||||||||||||
Furniture and fixtures |
|
| 805 |
|
|
| 797 |
| Furniture and fixtures | 1,181 | 805 | ||||||||
Leasehold improvements |
|
| 541 |
|
|
| 520 |
| |||||||||||
Office equipment | Office equipment | 529 | 179 | ||||||||||||||||
Computer equipment |
|
| 223 |
|
|
| 167 |
| Computer equipment | 191 | 223 | ||||||||
Office equipment |
|
| 179 |
|
|
| 167 |
| |||||||||||
Total |
|
| 8,955 |
|
|
| 8,417 |
| |||||||||||
Construction in progress | Construction in progress | 183 | — | ||||||||||||||||
Total property and equipment | Total property and equipment | 15,523 | 10,024 | ||||||||||||||||
Less: accumulated depreciation |
|
| (5,632 | ) |
|
| (3,954 | ) | Less: accumulated depreciation | (8,123) | (6,916) | ||||||||
Property and equipment, net |
| $ | 3,323 |
|
| $ | 4,463 |
| |||||||||||
Total property and equipment, net | Total property and equipment, net | $ | 7,400 | $ | 3,108 |
|
| Years Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Depreciation expense |
| $ | 1,617 |
|
| $ | 1,595 |
|
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Depreciation expense | $ | 1,676 | $ | 1,492 |
F-16
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
Years Ended December 31, | |||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||||||||
Lease cost: |
|
|
|
|
|
|
|
| Lease cost: | ||||||||||||||||
Operating lease cost |
| $ | 2,550 |
|
| $ | 2,550 |
| Operating lease cost | $ | 10,031 | $ | 2,686 | ||||||||||||
Variable lease cost |
|
| 1,066 |
|
|
| 1,020 |
| Variable lease cost | 2,026 | 857 | ||||||||||||||
Sublease income | Sublease income | (1,481) | — | ||||||||||||||||||||||
Total lease cost |
| $ | 3,616 |
|
| $ | 3,570 |
| Total lease cost | $ | 10,576 | $ | 3,543 | ||||||||||||
Other information: |
|
|
|
|
|
|
|
| |||||||||||||||||
Operating cash flows for operating liabilities |
| $ | 2,206 |
|
| $ | 2,141 |
| |||||||||||||||||
Remaining lease term |
| 7.3 years |
|
| 8.3 years |
| |||||||||||||||||||
Discount rate |
|
| 10 | % |
|
| 10 | % |
As of December 31, | |||||||||||
2022 | 2021 | ||||||||||
Remaining lease term | 9.1 years | 10.2 years | |||||||||
Incremental borrowing rate | 5.3 | % | 5.2 | % |
2021 |
| $ | 2,272 |
| |||||
2022 |
|
| 2,340 |
| |||||
Undiscounted lease payments: | Undiscounted lease payments: | ||||||||
2023 |
|
| 2,410 |
| 2023 | $ | 8,571 | ||
2024 |
|
| 2,483 |
| 2024 | 8,828 | |||
2025 |
|
| 2,557 |
| 2025 | 9,093 | |||
2026 | 2026 | 9,366 | |||||||
2027 | 2027 | 9,646 | |||||||
Thereafter |
|
| 6,277 |
| Thereafter | 52,113 | |||
Total undiscounted lease payments |
|
| 18,339 |
| Total undiscounted lease payments | 97,617 | |||
Less: imputed interest |
|
| (5,471 | ) | Less: imputed interest | (21,947) | |||
Total operating lease liability at December 31, 2020 |
| $ | 12,868 |
| |||||
|
|
|
|
| |||||
Total operating lease liability as of December 31, 2022 | Total operating lease liability as of December 31, 2022 | $ | 75,670 |
|
| 2020 |
|
| 2019 |
| |||||||||||||
As of December 31, | |||||||||||||||||||
2022 | 2021 | ||||||||||||||||||
Accrued expenses and other current liabilities: | Accrued expenses and other current liabilities: | ||||||||||||||||||
Accrued research and development |
| $ | 3,799 |
|
| $ | 2,615 |
| Accrued research and development | $ | 9,824 | $ | 6,863 | ||||||
Accrued compensation and benefits |
|
| 3,724 |
|
|
| 3,048 |
| Accrued compensation and benefits | 6,831 | 5,084 | ||||||||
Accrued professional fees |
|
| 1,532 |
|
|
| 728 |
| Accrued professional fees | 1,062 | 1,246 | ||||||||
Other |
|
| 469 |
|
|
| 280 |
| Other | 2,052 | 413 | ||||||||
Total accrued expenses and other current liabilities |
| $ | 9,524 |
|
| $ | 6,671 |
| Total accrued expenses and other current liabilities | $ | 19,769 | $ | 13,606 |
F-17
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
Financial information related to the collaboration and license agreements consisted of the following as of and for the year ended December 31, 2020 (in thousands):
|
| Accounts Receivable |
|
| Collaboration Revenue |
|
| Deferred Revenue, Current |
|
| Deferred Revenue, Net of Current |
|
| Deferred Revenue, Total |
| |||||
Roche Agreement |
| $ | 750 |
|
| $ | 9,051 |
|
| $ | 11,238 |
|
| $ | 26,991 |
|
| $ | 38,229 |
|
Biogen License Agreement |
|
| 776 |
|
|
| 9,913 |
|
|
| 13,965 |
|
|
| 26,026 |
|
|
| 39,991 |
|
Calico License Agreement |
|
| 2,958 |
|
|
| 14,231 |
|
|
| 2,400 |
|
|
| 600 |
|
|
| 3,000 |
|
|
| $ | 4,484 |
|
| $ | 33,195 |
|
| $ | 27,603 |
|
| $ | 53,617 |
|
| $ | 81,220 |
|
Financial information related to the collaboration and license agreements consisted of the following as of and for the year ended December 31, 2019 (in thousands):
Description |
| Accounts Receivable |
|
| Collaboration Revenue |
|
| Deferred Revenue, Current |
|
| Deferred Revenue, Net of Current |
|
| Deferred Revenue, Total |
| |||||
Roche Agreement |
| $ | — |
|
| $ | 6,409 |
|
| $ | 12,164 |
|
| $ | 32,784 |
|
| $ | 44,948 |
|
Biogen License Agreement |
|
| — |
|
|
| 2,432 |
|
|
| 6,141 |
|
|
| 36,934 |
|
|
| 43,075 |
|
Calico License Agreement |
|
| 4,348 |
|
|
| 12,540 |
|
|
| 2,400 |
|
|
| 3,000 |
|
|
| 5,400 |
|
|
| $ | 4,348 |
|
| $ | 21,381 |
|
| $ | 20,705 |
|
| $ | 72,718 |
|
| $ | 93,423 |
|
Other financial information related to the collaboration and license agreements for the years ended December 31, 2020 and 2019 are (in thousands):
|
| 2020 |
|
| 2019 |
| ||
Revenue recognized that was included in the contract liability at the beginning of the period |
| $ | 17,570 |
|
| $ | 11,948 |
|
Revenue recognized from performance obligations fully or partially satisfied in previous periods |
|
| 348 |
|
|
| — |
|
Aggregate amount of the transaction price allocated to the performance obligations that are partially or fully unsatisfied as of the end of the reporting period |
|
| 91,137 |
|
|
| 103,923 |
|
Roche Collaboration and License Agreement
Original Roche Agreement Structure
In exchangeproprietary TORPEDO platform for a $15.0 million nonrefundable upfront paymentthe treatment of cancers and additional fees for dedicated personnel, the Company performed initial research and development services for drug discovery and preclinical development, provided a non-exclusive research and development license to its technology and participated on the joint research committee, or the Roche JRC.
Restated Roche Agreement Structure
On December 22, 2018, the Company and Roche executed the Amended and Restated Roche License Agreement, or the Roche Agreement.other indications. Under the Roche Agreement, the Company has a more active role in the manufacturing and commercialization of the targets, whereby ifmay elect to opt into certain co-development andrights, in which case the Company will receive an increased royalty rate on future product sales from products directed to that target. In addition, if the Company opts into certain co-detailing rights, are optedit is also entitled to reimbursement of certain commercialization costs. Upon entry into by the Company, the parties will split future development costs in return for the rights to a larger share of future earnings from commercialization of the target. The target structure was revised to six potential targets, three of which were nominated as of the execution of the Roche Agreement, and represent continuationsthe Company received additional upfront consideration of $40.0 million from Roche.
F-18
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
the Company is eligible to receive upmilestone payments ranging from $260.0 million to $275.0 million in research andupon the achievement of certain development milestones per target and commercial milestone payments,milestones with the commercial milestones being dependentrespect to corresponding products, subject to certain reductions and exclusions based on underlying net sales.intellectual property coverage. Roche is also required to pay the Company up to $150.0 million per target in one-time sales-based milestone payments ifupon the target achieves certainachievement of specified levels of net sales. In addition,sales of a product directed to such target. Finally, Roche is required to pay the Company tiered royalties at percentagesranging from the mid-single digits to the low double-digits,mid-teen percentages on a licensed product-by licensed product basis, on worldwide net product sales.
Under thesales of products sold by Roche Agreement:
pursuant to its exercise of its option rights, subject to certain reductions. For sales of products for which the Company received additional upfront considerationexercises its co-development right, the applicable royalty rates will be increased by a low-single digit percentage.
the Company has an option for co-development and co-detailing rights, whereby it would be required to provide additional financial support in return for the rights to a larger share of future earnings from commercializing one or more of the six targets;
Roche will no longer provide FTE reimbursement; rather, it will make annual research plan payments of $1.0 million for each active research plan; and
Adjustments were made to the option exercise fees, whereby certain targets now have option exercise fees of $7.0 million to $12.0 million (those progressed up to Phase 1 or through the GLP Tox studies, respectively) and others have $20.0 million (those progressed through clinical trials).
The collaboration is managed by a joint research committee. The Company has control over the joint research committee prior to Roche’s exercise of its option rights as to a particular target, with Roche assuming control of the joint research committee thereafter, and may terminate the Roche Agreement on a target-by-target or product-by-product basis under several scenarios, upon at least 90 days’ prior written notice.
In November 2020,
Roche Agreement Accounting
The Roche Agreement is a modification of the Original Roche Agreement under ASC 606 as both the scope and price of the contract were changed under the Roche Agreement and new, distinct performance obligations were created for targets that have different standalone selling prices based on the Company’s revised obligations. The Roche Agreement was not determined to be a separate contract for accounting purposes. The modification was accounted for as if it were a termination of the existing contract and the creation of a new contract, for which the unrecognized consideration from the Original Roche Agreement is added to the new transaction price promised as part of the Roche Agreement and will be recognized as revenue prospectively, as the new performance obligations are satisfied. The Company made this determination after considering the performance obligations under the Roche Agreement. When the amendment was signed, the contract was restructured such that the Company would pursue some of the same targets, but would have additional material responsibility to potentially develop the targets beyond the option exercise point, to either Phase 1 completion or to a point where the Company will exercise its co-development and co-detailing options and more fully share in the costs and future revenues. The $40.0 million upfront payment, $13.5 million of expected research plan funding payments, plus $6.4 million of remaining deferred revenue from the Original Roche Agreement represent the transaction price as of the outset of the arrangement.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Roche, is a customer. The Company identified the following promises at the outset of the Roche Agreement: (1) athose six targets. A non-exclusive royalty-free license to use the Company’s intellectual property to conduct research and development activities; (2) researchactivities and development services under the research plan for the three initial targets; (3) participation on the Roche JRC; (4) option rights to initiate ajoint research plan for three additional targets; (5) an option to obtain a non-exclusive commercial license to intellectual property and know-how generated from the collaboration, subject to certain exclusivity requirements; (6) option
F-19
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
rights to develop, commercialize and manufacture products related to any of the six targets; and (7) rights for Roche to substitute targets prior to completion of a research plan, limited to six exchanges in total across the arrangement and subject to approval by the Roche JRC. The Roche JRC has equal representation from both parties, but the Company holds final decision-making authority in the event of a disagreement until the time at which Roche licenses a target and leads development efforts.
The six potential targetscommittee were determined to be distinct from one another,identified as Roche can derive benefit from each target independent of the others. For each target,promised services. However, the Company determined that the research and development license and research and development services were not distinct from one another, because the research and development services are essential to the license. Roche would receive little to no economic benefit from the license if it did not obtain the research services. Participationparticipation on the Roche JRC to oversee thejoint research and development activities and the technology transfer associated with the Original Roche Agreement werecommittee was determined to be quantitatively and qualitatively immaterial.
Based on these assessments, the Company identified twelve performance obligations, including three research services performance obligations, six material rights for the options to purchase a commercial license for six targets, and three material rights for the option to initiate research services for the uninitiated three targets as of the outset of the arrangement. The first three performance obligations primarily comprise: (1) the non-exclusive research and development license and (2) the research and development services for the target, including the related substitution rights.
The Company included the $40.0 million upfront payment, $13.5 million of expected research plan funding payments ($1.0 million per active target per year, for a maximum of $3.0 million per target), and $6.4 million of remaining deferred revenue from the Original Roche Agreement in the transaction price as of the outset of the arrangement. The Company also achieved a milestone for the identification of lead series for target 2 in April 2019, resulting in a milestone payment of $2.0 million, which was added to the transaction price and recognized cumulatively. Thetotal transaction price of $61.9 million wasthe Roche Agreement is allocated to the performance obligations based on the estimated stand-alonetheir relative standalone selling prices at the timeprice. The allocated transaction price is recognized as revenue from collaboration agreements in one of the amendment. For each performance obligation, the stand-alone selling price was determined considering the expected cost of the researchtwo ways:
targets: The Company allocated the following amounts of the total transaction price to the performance obligations as of the amendment date, including the $2.0 million milestone achieved in April 2019:
$29.0 million to the research and development performance obligations for targets 1-3;
$4.1 million to the three material rights, related to the three targets initiated at the outset of the Roche Agreement, which will not begin revenue recognition until the option is exercised or expires; and
$28.8 million to the option to nominate targets 4-6 and the three material rights related to these options.
The Company will recognizerecognizes the portion of the transaction price allocated to each of the research and development performance obligations as the research and development services are provided, using an input method, accordingin proportion to costs incurred as related to the research and development activitiesdate for each individual programresearch development target as compared to total costs incurred and the costs expected to be incurred in the future to satisfy that individual performance obligation.the underlying obligation related to said research and development target. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.
Transaction Price Allocated | Transaction Price Unsatisfied | ||||||||||
Performance obligations: | |||||||||||
Research and development targets | $ | 61,074 | $ | 25,542 | |||||||
Option rights | 6,748 | 2,502 | |||||||||
Total | $ | 67,822 | $ | 28,044 |
F-20
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
Consolidated Financial Statements — Continued
All milestone and sales-based payments are made after the Company has met the defined criteria in the joint research plan for that target, at which time Biogen will have control of the products related to the targets for commercialization; the receipt of these payments is contingent on the further development of products directed to the targets to commercialization by Biogen, without any additional research and development efforts from the Company.
Biogen License Agreement Accounting
The Company assessed this arrangement in accordance with ASC 606from two types of services: 1) research and concluded that the contract counterparty, Biogen, is a customer.development services, and 2) sandbox activities, which are discovery-type research services.
phase for each target. The Company determined that the licenses and research activities were not distinct from one another, as the licenses have limited value without the performance of the research activities by the Company. Participation on the Biogen JSC to oversee the research activities and the technology transfer associated with the Biogen License Agreement were determined to be quantitatively and qualitatively immaterial and therefore are excluded from performance obligations.
Based on these assessments, the Company identified one performance obligation at the outset of the Biogen License Agreement, representing a combined performance obligation consisting of (1) the licenses, (2) the research activities for the target evaluation phase for all five targets and (3) the joint research plan phase for each target.
The Company will recognizerecognizes the transaction price allocated to this performance obligation as the research and development services are provided, using an input method, accordingin proportion to costs incurred to date for each research development target as relatedcompared to the researchtotal costs incurred and development activities for the costs expected to be incurred in the future to satisfy that individual performance obligation.the underlying obligation related to said research and development target. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.
F-21
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
The Company recognizes FTE reimbursement related toreceived for sandbox activities as revenue as the hours are incurred each quarter. As noted above, sandbox activities fully concluded on August 31, 2021.
The Company achieved $4.0 million in milestones under the Biogen Agreement in June 2020, which amount was recorded as accounts receivable and deferred revenue at that time. The Company received payment
term with respect to a certain program for up to a one-year period ending in March 2023. In September 2021, Calico exercised the option resulting in a $1.0 million extension payment to the Company. In addition, Calico will continue to reimburse the Company for a number of FTEs, depending on the stage of the research, at specified market rates.
Under the Calico LicenseAgreement, the Company is required to perform initial research and development activities for the nominated targets for drug discovery and preclinical development 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. In addition, the Company provides Calico with a non-exclusive research and commercial license to its intellectual property and will participate on the Calico joint research committee, or the Calico JRC. Once Calico nominates a target and pays the applicable target initiation fee, the Company will commence research and development activities for that target. Calico is obligated to reimburse the Company for its research and development activities for each target at specified levels through the identification of a development candidate, after which time Calico shall assume full responsibility for candidate development and Calico is entitled to pursue commercial development of products related to that target.
All milestone and sales-based payments are made after the Company has met the defined criteria in the joint research plan for that target, at which time Calico will have control of the products related to targets for commercialization; the receipt of these payments by the Company is contingent on the further development of the targets to commercialized products by Calico, without any additional research and development efforts required by us.
The nonrefundable upfront and
at specified market rates.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Calico, is a customer. accounting
F-22
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
performance of the research activities by the Company. Participation on the CJRC to oversee the R&D activities and the technology transfer associated with the Calico License Agreement were determined to be quantitatively and qualitatively immaterial and therefore are excluded from performance obligations.
Based on these assessments, the Company identified one performance obligation at the outset of the Calico License Agreement, which consists of: (1) the non-exclusive license and (2) the research activities for the target evaluation phase for all five targets and the joint research plan phase for targets 1 and 2.
Under the Calico License Agreement, the transaction price determined by the Company isconsists of the upfront amount, plus the committed anniversary payments, and the target initiation fees related to the targets nominated at the execution of the Calico License Agreement. Based onAgreement, and the abilityextension payment upon exercise of Calico to cancel the arrangement for any reason, Calico effectively has anextension option for continued access to the Company’s research license and procurement of research services that they can cancel at any time. Under the Calico License Agreement,discussed above. Initially, the Company amortized the upfront fee receivedtransaction price on a straight-line basis over the period services are available to the counterparty (i.e., the contractualinitial five-year term of five years).the Calico Agreement. Beginning in September 2021, as a result of the extension of the research term for one program and Calico’s obligation to pay an additional $1.0 million in transaction price, the Company now amortizes the revised transaction price on a straight-line basis over the six-year term of the Calico Agreement. Straight-line amortization of the upfront paymenttransaction price was considered the best measure of progress because the customer has access to research and development services throughout the period. Incremental fees for research and development services are paid at agreed upon FTE rates and recognized in the period incurred.
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Revenue from collaboration agreements: | |||||||||||||||||
Roche Agreement | $ | 4,939 | $ | 19,379 | |||||||||||||
Biogen Agreement | 19,214 | 15,720 | |||||||||||||||
Calico Agreement | 6,943 | 10,686 | |||||||||||||||
Total revenue from collaboration agreements | $ | 31,096 | $ | 45,785 |
Accounts Receivable | Deferred Revenue, Current | Deferred Revenue, Net of Current | Deferred Revenue, Total | ||||||||||||||||||||
Supplemental information: | |||||||||||||||||||||||
Roche Agreement | $ | 417 | $ | 4,649 | $ | 16,895 | $ | 21,544 | |||||||||||||||
Biogen Agreement | — | 11,427 | — | 11,427 | |||||||||||||||||||
Calico Agreement | 1,056 | 542 | — | 542 | |||||||||||||||||||
Total | $ | 1,473 | $ | 16,618 | $ | 16,895 | $ | 33,513 |
Accounts Receivable | Deferred Revenue, Current | Deferred Revenue, Net of Current | Deferred Revenue, Total | ||||||||||||||||||||
Supplemental information: | |||||||||||||||||||||||
Roche Agreement | $ | 1,215 | $ | 5,601 | $ | 17,215 | $ | 22,816 | |||||||||||||||
Biogen Agreement | 3,000 | 24,032 | 6,611 | 30,643 | |||||||||||||||||||
Calico Agreement | 1,501 | 2,167 | 542 | 2,709 | |||||||||||||||||||
Total | $ | 5,716 | $ | 31,800 | $ | 24,368 | $ | 56,168 |
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Revenue recognized that was included in the contract liability at the beginning of the period | $ | 25,412 | $ | 34,363 | |||||||||||||
Revenue recognized from performance obligations fully or partially satisfied in previous periods | 518 | 1,654 |
– related party
2022.
Upon the completion of the Company’s IPO on October 6, 2020, the warrant was effected for one-for-8.4335 reverse stock split and automatically converted intoheld a warrant to purchase up to 338,784 shares of the Company’s common stock at an exercise price of $8.86 per share of $8.86. Basedshare. As further described in Note 10,
F-23
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
Company recognized $5.7 million in change in the fair value of the warrant liability as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.
As of December 31, 2020, the outstanding long-term debt was $12.5 million. The outstanding amount is reduced by the unamortized portions of 1) issuance costs, and 2) the issuance date fair value2022 for each of the warrantyears ending December 31 and a reconciliation to arrive at the carrying value of long-term debt as of December 31, 2020, which was determined to be $10.1 million.
As of December 31, 2020, the Company had met the criteria to draw down on the second tranche of $7.5 million. It has the ability, but not the obligation, to draw down the second tranche until June 30, 2021.
Anticipated future minimum payments on long-term debt for the years ending December 31 areCompany’s consolidated balance sheets (in thousands):
Undiscounted, minimum long-term debt payments: | |||||
2023 | $ | 3,000 | |||
2024 | 9,500 | ||||
Total undiscounted, minimum long-term debt payments | 12,500 | ||||
Less: Unamortized debt issuance costs and debt discount | (1,018) | ||||
Total long-term debt—related party | $ | 11,482 |
2021 |
| $ | — |
|
2022 |
|
| — |
|
2023 |
|
| 3,000 |
|
2024 |
|
| 9,500 |
|
Total minimum long-term debt payments |
|
| 12,500 |
|
Less: Unamortized debt issuance costs, and debt discount related to warrant |
|
| (2,448 | ) |
Carrying value of long-term debt—related party at December 31, 2020 |
| $ | 10,052 |
|
Certificate of Incorporation
Prior to the IPO, the terms of the Company’s equity securities were defined in the Company’s Fourth Amended and Restated Certificate of Incorporation, which was filed with the Secretary of the State of Delaware on June 3, 2020, or the Fourth Charter. Under the Fourth Charter, the Company was authorized to issue Series Seed Preferred Stock, Series A Preferred Stock and Series B Preferred Stock, each of which had a par value of $0.0005 per share and which are referred to collectively as Preferred Stock. On
Reverse Stock Split
As described in Note 1, Nature of the business and basis of presentation, on September 25, 2020, the Company effected a one-for-8.4335 reverseauthorized preferred stock splitissuable of 10,000,000 shares and increased its issued and outstandingauthorized common stock stock options and common stock warrant andissuable to 150,000,000 shares, both with a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. Accordingly, all issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.
Common Stock
Under the Fourth Charter, the Company’s common stock had a$0.0001 par value of $0.0001 and theper share.
Preferred Stock
In June and July 2020, the Company closed a $150.0 million Series B Financing with existing and new investors. As part
As of December 31, 2019, Preferred Stock consisted ofsales have been made under the following (in thousands, except share data):
|
| Preferred Stock Authorized |
|
| Preferred Stock Issued and Outstanding |
|
| Carrying Value |
|
| Liquidation Value |
|
| Common Stock Issuable Upon Conversion |
| |||||
Series Seed Preferred Stock |
|
| 4,000,000 |
|
|
| 4,000,000 |
|
| $ | 1,000 |
|
| $ | 1,000 |
|
|
| 474,298 |
|
Series A Preferred Stock |
|
| 110,000,000 |
|
|
| 109,145,900 |
|
|
| 109,995 |
|
|
| 109,995 |
|
|
| 12,941,857 |
|
FF Preferred Stock |
|
| 32,760,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| 146,760,000 |
|
|
| 113,145,900 |
|
| $ | 110,995 |
|
| $ | 110,995 |
|
|
| 13,416,155 |
|
Stock-based compensation expense for the year ended December 31, 2020 and 2019 was classified in the consolidated statement
|
| 2020 |
|
| 2019 |
| ||
Research and development |
| $ | 972 |
|
| $ | 395 |
|
General and administrative |
|
| 2,460 |
|
|
| 1,247 |
|
Total stock-based compensation expense |
| $ | 3,432 |
|
| $ | 1,642 |
|
F-25
C4 Therapeutics, Inc.
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Stock-based compensation expense: | |||||||||||||||||
Research and development | $ | 13,108 | $ | 7,526 | |||||||||||||
General and administrative | 16,908 | 13,986 | |||||||||||||||
Total stock-based compensation expense | $ | 30,016 | $ | 21,512 |
|
| Number of Options |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value (in thousands) |
| ||||
Outstanding as of December 31, 2019 |
|
| 2,310,886 |
|
| $ | 4.42 |
|
|
| 8.11 |
|
| $ | 4,801 |
|
Granted |
|
| 4,222,179 |
|
|
| 14.27 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (281,584 | ) |
|
| 3.15 |
|
|
|
|
|
|
|
|
|
Forfeited/expired |
|
| (1,222,117 | ) |
|
| 4.58 |
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2020 |
|
| 5,029,364 |
|
| $ | 12.72 |
|
|
| 9.25 |
|
| $ | 102,635 |
|
Exercisable as of December 31, 2020 |
|
| 455,633 |
|
| $ | 4.28 |
|
|
| 7.34 |
|
| $ | 13,144 |
|
Vested and expected to vest as of December 31, 2020 |
|
| 5,029,364 |
|
| $ | 12.72 |
|
|
| 9.25 |
|
| $ | 102,635 |
|
Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
Outstanding as of December 31, 2021 | 5,983,425 | $ | 22.33 | 8.64 | $ | 75,538 | |||||||||||||||||
Granted | 2,296,800 | 18.93 | |||||||||||||||||||||
Exercised | (181,354) | 4.67 | |||||||||||||||||||||
Forfeited/expired | (1,105,819) | 23.98 | |||||||||||||||||||||
Outstanding as of December 31, 2022 | 6,993,052 | $ | 21.57 | 7.78 | $ | 1,031 | |||||||||||||||||
Exercisable as of December 31, 2022 | 2,750,625 | $ | 21.69 | 6.86 | $ | 570 | |||||||||||||||||
Vested and expected to vest as of December 31, 2022 | 6,993,052 | $ | 21.57 | 7.78 | $ | 1,031 |
Years Ended December 31, | |||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||||||||
Weighted-average fair value of options granted |
| $ | 9.24 |
|
| $ | 4.13 |
| Weighted-average fair value of options granted | $ | 13.44 | $ | 29.54 | ||||||||||||
Intrinsic value of options exercised (in thousands) |
| $ | 2,587 |
|
| $ | 337 |
| Intrinsic value of options exercised (in thousands) | $ | 1,796 | $ | 17,321 |
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Expected option life (years) | 5.50 - 6.11 | 5.50 - 6.11 | |||||||||||||||
Risk-free interest rate | 1.47% - 4.22% | 0.59% - 1.34% | |||||||||||||||
Expected volatility | 81.36% - 88.75% | 80.45% - 86.20% | |||||||||||||||
Expected dividend yield | 0.00% | 0.00% |
|
| 2020 |
|
| 2019 |
| |
Expected option life (years) |
| 5.23 - 6.35 |
|
|
| 6.35 |
|
Risk-free interest rate |
| 0.32% - 0.57% |
|
| 1.71% - 2.36% |
| |
Expected volatility |
| 69.54% - 83.76% |
|
| 65.50% - 76.80% |
| |
Expected dividend yield |
| 0.00% |
|
| 0.00% |
|
Shares | Weighted-Average Grant Date Fair Value | ||||||||||
Outstanding as of December 31, 2021 | — | $ | — | ||||||||
Granted | 563,500 | 25.47 | |||||||||
Vested (1) | (64,383) | 25.01 | |||||||||
Forfeited | (33,826) | 31.58 | |||||||||
Outstanding as of December 31, 2022 | 465,291 | $ | 25.09 |
On
To participate in the 2020 ESPP, eligible employees may authorize payroll deductions of up to 15% of their eligible compensation during an offering period. The Company may hold one or more offering periods each year during which employees will be able to purchase shares under the 2020 ESPP. As of December 31, 2020, the Company had not held any offering periods and no shares had been issued under the 2020 ESPP.
President and Chief Executive Officer Termination
On March 3, 2020, or the Separation Date, the employment of the Company’s then current president and chief executive officer, or the Former CEO, terminated. The Company repurchased all of the Former CEO’s outstanding shares of common stock, which had been issued upon his exercise of previously granted stock options, for total consideration of $0.1 million. The Former CEO also relinquished his right to purchase shares of common stock upon the exercise of stock options that were vested as of his Separation Date, in exchange for total consideration paid by the Company of $0.7 million. The Company recognized the repurchase price of these shares of common stock and the relinquishment of these vested options in additional-paid-in-capital.
F-26
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
Years Ended December 31, | |||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||||||||
Current tax provision: |
|
|
|
|
|
|
|
| Current tax provision: | ||||||||||||||||
Current federal provision |
| $ | (673 | ) |
| $ | 669 |
| Current federal provision | $ | — | $ | — | ||||||||||||
Current state provision |
|
| 47 |
|
|
| 135 |
| Current state provision | — | — | ||||||||||||||
Total current provision |
|
| (626 | ) |
|
| 804 |
| Total current provision | — | — | ||||||||||||||
Deferred tax provision: |
|
|
|
|
|
|
|
| Deferred tax provision: | ||||||||||||||||
Deferred federal provision |
|
| — |
|
|
| — |
| Deferred federal provision | — | — | ||||||||||||||
Deferred state provision |
|
| — |
|
|
| — |
| Deferred state provision | — | — | ||||||||||||||
Total tax provision |
| $ | (626 | ) |
| $ | 804 |
| Total tax provision | $ | — | $ | — |
(a)
rate reconciliation
Years Ended December 31, | |||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||||||||
Income tax benefit computed at federal statutory tax rate |
|
| 21.0 | % |
|
| 21.0 | % | Income tax benefit computed at federal statutory tax rate | 21.0 | % | 21.0 | % | ||||||||||||
State tax—net of federal | State tax—net of federal | 8.0 | % | 6.0 | % | ||||||||||||||||||||
Federal credits | Federal credits | 1.4 | % | 3.1 | % | ||||||||||||||||||||
State credits | State credits | 0.1 | % | 1.7 | % | ||||||||||||||||||||
Other permanent differences | Other permanent differences | (0.8) | % | (0.3) | % | ||||||||||||||||||||
Stock-based compensation |
|
| (0.1 | )% |
|
| (0.4 | )% | Stock-based compensation | (3.0) | % | (1.3) | % | ||||||||||||
State tax—net of federal |
|
| 8.1 | % |
|
| 6.6 | % | |||||||||||||||||
State credits |
|
| 1.2 | % |
|
| 0.6 | % | |||||||||||||||||
Federal credits |
|
| 3.5 | % |
|
| 1.1 | % | |||||||||||||||||
Valuation allowance |
|
| (34.1 | )% |
|
| (32.1 | )% | Valuation allowance | (26.7) | % | (30.2) | % | ||||||||||||
Rate change |
|
| 3.1 | % |
|
| (0.1 | )% | |||||||||||||||||
Net operating loss carryback benefits |
|
| 1.0 | % |
|
| 0.0 | % | |||||||||||||||||
Tax attributes true up due to net operating loss carryback |
|
| (1.0 | )% |
|
| 0.0 | % | |||||||||||||||||
Other permanent differences |
|
| (1.8 | )% |
|
| 0.9 | % | |||||||||||||||||
Total |
|
| 0.9 | % |
|
| (2.4 | )% | Total | — | % | — | % |
(b)
deferred taxes
As of December 31, | |||||||||||||||||||
|
| 2020 |
|
| 2019 |
| 2022 | 2021 | |||||||||||
Deferred tax assets: |
|
|
|
|
|
|
|
| Deferred tax assets: | ||||||||||
Capitalized start-up costs |
| $ | 1,075 |
|
| $ | 1,151 |
| |||||||||||
Net operating losses | Net operating losses | $ | 54,300 | $ | 46,339 | ||||||||||||||
Capitalized Research and Experimental Expenditures | Capitalized Research and Experimental Expenditures | 27,568 | — | ||||||||||||||||
Operating lease liability |
|
| 3,859 |
|
|
| 3,821 |
| Operating lease liability | 21,443 | 9,290 | ||||||||
Stock-based compensation |
|
| 1,344 |
|
|
| 542 |
| |||||||||||
Net operating losses |
|
| 19,399 |
|
|
| 575 |
| |||||||||||
R&D and investment tax credits |
|
| 5,578 |
|
|
| 441 |
| R&D and investment tax credits | 11,519 | 9,560 | ||||||||
Deferred revenue |
|
| 23,157 |
|
|
| 25,271 |
| Deferred revenue | 8,457 | 15,053 | ||||||||
Stock-based compensation | Stock-based compensation | 6,296 | 3,675 | ||||||||||||||||
Unrealized gain/loss | Unrealized gain/loss | 1,090 | 195 | ||||||||||||||||
Capitalized start-up costs | Capitalized start-up costs | 699 | 875 | ||||||||||||||||
Other |
|
| 168 |
|
|
| — |
| Other | 354 | 426 | ||||||||
Total gross deferred tax assets |
|
| 54,580 |
|
|
| 31,801 |
| Total gross deferred tax assets | 131,726 | 85,413 | ||||||||
Deferred tax liabilities: |
|
|
|
|
|
|
|
| Deferred tax liabilities: | ||||||||||
Right-of-use asset |
|
| (3,967 | ) |
|
| (4,017 | ) | Right-of-use asset | (19,868) | (9,242) | ||||||||
Fixed assets |
|
| (744 | ) |
|
| (726 | ) | Fixed assets | (1,738) | (725) | ||||||||
Unrealized gain/loss |
|
| (3 | ) |
|
|
|
| |||||||||||
Less: valuation allowance |
|
| (49,866 | ) |
|
| (27,058 | ) | Less: valuation allowance | (110,120) | (75,446) | ||||||||
Net deferred taxes |
| $ | — |
|
| $ | — |
| Net deferred taxes | $ | — | $ | — |
F-27
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
full valuation allowance for the deferred tax assets as of December 31, 20202022 and 2019.2021. The valuation allowance for deferred tax assets as of December 31, 20202022 and 20192021 was $49.9$110.1 million and $27.1$75.4 million, respectively. The net valuation allowance increase of $22.8increased $34.7 million and $25.6 million during the years ended December 31, 2022 and 2021, respectively. The change during the year ended December 31, 20202022 was primarily due to the increase in net operating loss and tax credits carryforward, capitalization of research and experimental expenditures, and a decrease in deferred revenue recognized during the year.
2042.
Under the provisions of the IRC, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service. 2037.
Given the continued loss position, the Company has not currently undertaken an analysis for IRC Section 382 purposes of any activities post December 31, 2020. A full valuation allowance has been provided against the Company’s net operating loss and tax credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.
The CARES Act was enacted on March 27, 2020. The CARES Act contains a significant number of provisions that may impact on the Company’s accounting for income taxes. The Company has considered several key corporate provisions within the CARES Act, has evaluated its potential impact and as a result recorded a tax benefit of $0.6 million related to an anticipated refund to be received for federal taxes incurred for the tax year ended December 31, 2019. The refund is expected to be received in 2021 after the Company files the tax year 2020 net operating loss carryback claim upon the completion of its tax year 2020 tax returns, which are due October 15, 2021.
F-28
C4 Therapeutics, Inc.
Notes to Consolidated Financial Statements — Continued
|
| 2020 |
|
| 2019 |
| ||
Series Seed Preferred Stock |
|
| — |
|
|
| 474,298 |
|
Series A Preferred Stock |
|
| — |
|
|
| 12,941,857 |
|
Options to purchase common stock |
|
| 5,029,364 |
|
|
| 2,310,886 |
|
Warrant to purchase common stock |
|
| 338,784 |
|
|
| — |
|
|
|
| 5,368,148 |
|
|
| 15,727,041 |
|
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Options to purchase common stock | 6,993,052 | 5,983,425 | |||||||||||||||
All redeemable, convertible preferred stock, including those that were outstanding as
Consolidated Financial Statements — Continued
|
| 2020 |
|
| 2019 |
| ||
Numerator: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (66,335 | ) |
| $ | (34,099 | ) |
Accrual of preferred stock dividends |
|
| — |
|
|
| (8,468 | ) |
Net loss attributable to common stockholders—basic and diluted |
| $ | (66,335 | ) |
| $ | (42,567 | ) |
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average common stock outstanding—basic and diluted |
|
| 11,370,328 |
|
|
| 1,371,905 |
|
Net loss per share attributable to common stockholders—basic and diluted |
| $ | (5.83 | ) |
| $ | (31.03 | ) |
Years Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Numerator: | |||||||||||||||||
Net loss —basic and diluted | $ | (128,175) | $ | (83,892) | |||||||||||||
Denominator: | |||||||||||||||||
Weighted-average common stock outstanding—basic and diluted | 48,861,665 | 46,041,733 | |||||||||||||||
Net loss per share —basic and diluted | $ | (2.62) | $ | (1.82) |
F-29