UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________

FORM 10-Q

_____________________

(Mark One)

☒ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~

2021

☐ ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 001-39634

______________________

Foghorn Therapeutics Inc.

(Exact Name of Registrant as Specified in its Charter)

______________________


Delaware				~~47-5271393~~
(State or other jurisdiction of incorporation or organization)				47-5271393 (I.R.S. Employer Identification No.)

500 Technology Square, Ste 700 Cambridge MA				~~02139~~
(Address of principal executive offices)				02139 (Zip Code)

Registrant’s telephone number, including area code: 617-586-3100

______________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

FHTX

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐x No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐¨

Non-accelerated filer

☒

Smaller reporting company

☒x

Emerging growth company

☒x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐¨ No ☒

As of ~~October 31, 2020,~~July 30, 2021, the registrant had ~~35,813,580~~36,936,886 shares of common stock, $0.0001 par value per share, outstanding.

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Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:

•the initiation, timing, progress and results of our research and development programs, preclinical ~~studies~~ and clinical ~~trials, including the timing and clearance of our investigational new drug application, or IND, filings for~~ ~~FHD-286~~ ~~and~~ ~~FHD-609;~~

studies;

•our ability to advance any product candidates that we may develop and successfully complete preclinical and clinical studies;

•our ability to leverage our initial programs to develop additional product candidates using our Gene Traffic Control platform;

•the impact of the COVID-19 pandemic on our and our collaborators’ business operations, including our research and development programs and preclinical and clinical studies;

•developments related to our competitors and our industry;

•our ability to expand the target populations of our programs and the availability of patients for clinical testing;

•our ability to obtain regulatory approval for FHD-286, FHD-609, and any future product candidates from the U.S. Food and Drug Administration, or FDA, and other regulatory authorities;

•our ability to identify and enter into future license agreements and collaborations;

•our ability to continue to rely on our contract development and manufacturing organizations, or CDMOs, and contract research organizations, or CROs, for our manufacturing and research needs;

•regulatory developments in the United States and foreign countries;

•our ability to attract and retain key scientific and management personnel; and

•the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering FHD-286, FHD-609, our future products and our Gene Traffic Control platform.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the section entitled “Risk Factors” in our ~~Registration Statement~~Annual Report on Form ~~S-1~~ ~~(File~~ ~~No. 333-249264),~~ ~~as amended, or~~10-K for the ~~Registration Statement.~~fiscal year ended December 31, 2020. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and it is not possible for management to predict all risks and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Foghorn Therapeutics Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

           September 30,                 December 31,
   2020 2019
Assets

Current assets:

Cash and cash equivalents
   $ 74,620 $ 14,981
Restricted cash
   541 541
Prepaid expenses and other current assets
   2,603 1,363


Total current assets
   77,764 16,885
Property and equipment, net
   16,848 2,683
Restricted cash
   1,733 1,733
Deferred offering costs
   1,970 —
Other assets
   211 11
Operating lease right-of-use assets
   43,902 1,030


Total assets
   $ 142,428 $ 22,342


Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

Current liabilities:

Accounts payable
   $ 3,554 $ 3,439
Accrued expenses
   9,970 3,701
Operating lease liabilities
   91 1,360
Notes payable, net of discount
   5,990 4,152
Deferred revenue
   1,696 —


Total current liabilities
   21,301 12,652
Notes payable, net of discount and current portion
   8,801 10,960
Operating lease liabilities, net of current portion
   56,005 157
Deferred revenue, net of current portion
   13,125 —
Preferred stock warrant liability
   114 45


Total liabilities
   99,346 23,814


Commitments and contingencies (Note 10)

Convertible preferred stock (Series A-1, A-2 and B), $0.0001 par value; 43,296,288 and 28,629,622 shares authorized at September 30, 2020 and December 31, 2019, respectively; 40,623,413 and 28,615,546 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; liquidation preference of $176,841 at September 30, 2020
   176,405 86,544


Stockholders’ deficit:

Common stock, $0.0001 par value; 62,000,000 and 46,600,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 6,244,154 and 5,762,745 shares issued and 6,021,177 and 4,870,851 shares outstanding at September 30, 2020 and December 31, 2019, respectively
   1 —
Additional paid-in capital
   8,854 6,120
Accumulated deficit
   (142,178 ) (94,136 )


Total stockholders’ deficit
   (133,323 ) (88,016 )


Total liabilities, convertible preferred stock and stockholders’ deficit
   $ 142,428 $ 22,342

June 30,
2021 December 31,
2020
Assets
Current assets:
Cash and cash equivalents $ 125,166 $ 92,795
Marketable securities 16,107 92,975
Prepaid expenses and other current assets 3,399 4,917
Total current assets 144,672 190,687
Property and equipment, net 19,002 19,528
Restricted cash 1,733 1,733
Other assets 2,445 842
Operating lease right-of-use assets 40,674 42,804
Total assets $ 208,526 $ 255,594
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 3,406 $ 3,680
Accrued expenses 5,152 9,161
Operating lease liabilities 6,840 $ 3,981
Financing lease liability 106 0
Deferred revenue 910 2,024
Total current liabilities 16,414 18,846
Notes payable, net of discount and current portion 19,826 19,654
Operating lease liabilities, net of current portion 54,803 58,361
Financing lease liability, net of current portion 198 0
Deferred revenue, net of current portion 13,095 12,546
Total liabilities 104,336 109,407
Commitments and contingencies (Note 11) 0 0
Stockholders’ equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued or outstanding 0 0
Common stock, $0.0001 par value; 175,000,000 shares authorized at June 30, 2021 and December 31, 2020; 36,861,350 shares issued and outstanding at June 30, 2021; 36,790,946 shares issued and outstanding at December 31, 2020 4 4
Additional paid-in capital 313,229 309,126
Accumulated other comprehensive loss (10) (7)
Accumulated deficit (209,033) (162,936)
Total stockholders’ equity $ 104,190 $ 146,187
Total liabilities and stockholders’ equity $ 208,526 $ 255,594

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Foghorn Therapeutics Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

   Three Months Ended September 30,      Nine Months Ended September 30,
           2020                 2019                      2020                 2019
Collaboration revenue
   $ 179 $ —      $ 179 $ —




Operating expenses:

Research and development
   16,113 11,292      41,244 30,842
General and administrative
   2,555 1,808      6,687 5,056




Total operating expenses
   18,668 13,100      47,931 35,898




Loss from operations
   (18,489 ) (13,100 )      (47,752 ) (35,898 )




Other income (expense):

Interest expense
   (202 ) (113 )      (658 ) (362 )
Interest income and other income (expense), net
   394 121      437 424
Change in fair value of preferred stock warrant liability
   (70 ) —      (69 ) —




Total other income (expense), net
   122 8      (290 ) 62




Net loss and comprehensive loss
   $ (18,367 ) $ (13,092 )      $ (48,042 ) $ (35,836 )




Net loss per share attributable to common stockholders—basic and diluted
   $ (3.12 ) $ (3.05 )      $ (8.76 ) $ (8.96 )




Weighted average common shares outstanding—basic and diluted
   5,884,027 4,294,663      5,487,154 4,000,939


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Collaboration revenue	$	279	$	0	$	565	$	0
Operating expenses:
Research and development	18,642		13,628		37,368		25,131
General and administrative	4,898		1,911		9,588		4,132
Total operating expenses	23,540		15,539		46,956		29,263
Loss from operations	(23,261)		(15,539)		(46,391)		(29,263)
Other income (expense):
Interest expense	(495)		(198)		(981)		(456)
Interest income and other income (expense), net	645		14		1,275		43
Change in fair value of preferred stock warrant liability	0		0		0		1
Total other income (expense), net	150		(184)		294		(412)
Net loss	$	(23,111)	$	(15,723)	$	(46,097)	$	(29,675)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.63)	$	(2.90)	$	(1.25)	$	(5.61)
Weighted average common shares outstanding—basic and diluted	36,847,435		5,418,845		36,832,439		5,286,537
Comprehensive loss:
Net loss	$	(23,111)	$	(15,723)	$	(46,097)	$	(29,675)
Other comprehensive loss:
Unrealized losses on marketable securities	(16)		0		(3)		0
Total other comprehensive loss	(16)		0		(3)		0
Total comprehensive loss	$	(23,127)	$	(15,723)	$	(46,100)	$	(29,675)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Foghorn Therapeutics Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ ~~Deficit~~

Equity

(In ~~thousands)~~

thousands, except share amounts)

(Unaudited)

   Series A-1, A-2 and B
   Convertible          Additional    Total
   Preferred Stock    Common Stock    Paid-in    Accumulated Stockholders’
   Shares    Amount    Shares    Amount    Capital    Deficit Deficit
   Three Months Ended September 30, 2020
Balances at June 30, 2020
   35,023,413    $ 134,480    5,434,649    $ 1    $ 7,399    $ (123,811 ) $ (116,411 )
Issuance of Series B convertible preferred stock, net of issuance costs of $75
   5,600,000    41,925    —    —    —    — —
Issuance of common stock upon exercise of stock options
   —    —    363,556    —    578    — 578
Vesting of restricted stock
   —    —    222,972    —    —    — —
Stock-based compensation expense
   —    —    —    —    877    — 877
Net loss
   —    —    —    —    —    (18,367 ) (18,367 )












Balances at September 30, 2020
   40,623,413    $ 176,405    6,021,177    $ 1    $ 8,854    $ (142,178 ) $ (133,323 )












   Three Months Ended September 30, 2019
Balances at June 30, 2019
   28,615,546    $ 86,544    4,014,627    $ —    $ 4,469    $ (65,752 ) $ (61,283 )
Issuance of common stock upon exercise of stock options
   —    —    212,322    —    138    — 138
Vesting of restricted stock
   —    —    222,973    —    —    — —
Stock-based compensation expense
   —    —    —    —    443    — 443
Net loss
   —    —    —    —    —    (13,092 ) (13,092 )












Balances at September 30, 2019
   28,615,546    $ 86,544    4,449,922    $ —    $ 5,050    $ (78,844 ) $ (73,794 )


	Series A-1, A-2 and B Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balances at December 31, 2020	0	$	0	36,790,946	$	4	$	309,126	$	(7)	$	(162,936)	$	146,187
Issuance of common stock upon exercise of stock options	—	—		35,829	—		62		—		—		62
Stock-based compensation expense	—	—		—	—		1,888		—		—		1,888
Unrealized gains on marketable securities	—	—		—	—		—		13		—		13
Net loss	—	—		—	—		—		—		(22,986)		(22,986)
Balances at Balances at March 31, 2021	0	$	0	36,826,775	$	4	$	311,076	$	6	$	(185,922)	$	125,164
Issuance of common stock upon exercise of stock options	—	—		34,575	—		111		—		—		111
Stock-based compensation expense	—	—		—	—		2,042		—		—		2,042
Unrealized losses on marketable securities	—	—		—	—		—		(16)		—		(16)
Net loss	—	—		—	—		—		—		(23,111)		(23,111)
Balances at June 30, 2021	0	$	0	36,861,350	$	4	$	313,229	$	(10)	$	(209,033)	$	104,190


Balances at December 31, 2019	28,615,546	$	86,544	4,870,851	$	0	$	6,120	$	0	$	(94,136)	$	(88,016)
Issuance of common stock upon exercise of stock options	—	—		97,034	—		247		—		—		247
Vesting of restricted stock	—	—		222,973	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		517		—		—		517
Net loss	—	—		—	—		—		—		(13,952)		(13,952)
Balances at Balances at March 31, 2020	28,615,546	$	86,544	5,190,858	$	0	$	6,884	$	0	$	(108,088)	$	(101,204)
Issuance of Series B convertible preferred stock, net of issuance costs of $123	6,407,867	47,936		—	—		—		—		—		0
Issuance of common stock upon exercise of stock options	—	—		20,819	—		27		—		—		27
Vesting of restricted stock	—	—		222,972	1		(1)		—		—		0
Stock-based compensation expense	—	—		—	—		489		—		—		489
Net loss	—	—		—	—		—		—		(15,723)		(15,723)
Balances at June 30, 2020	35,023,413	$	134,480	5,434,649	$	1	$	7,399	$	0	$	(123,811)	$	(116,411)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Foghorn Therapeutics Inc.

Condensed Consolidated Statements of ~~Convertible Preferred Stock and Stockholders’ Deficit~~

Cash Flows

(In thousands)

(Unaudited)

   Series A-1, A-2 and B
   Convertible          Additional Total
   Preferred Stock    Common Stock    Paid-in Accumulated Stockholders’
   Shares    Amount    Shares    Amount    Capital Deficit Deficit
   Nine Months Ended September 30, 2020
Balances at December 31, 2019
   28,615,546    $ 86,544    4,870,851    $ —    $ 6,120 $ (94,136 ) $ (88,016 )
Issuance of Series B convertible preferred stock, net of issuance costs of $198
   12,007,867    89,861    —    —    — — —
Issuance of common stock upon exercise of stock options
   —    —    481,409    —    852 — 852
Vesting of restricted stock
   —    —    668,917    1    (1 ) — —
Stock-based compensation expense
   —    —    —    —    1,883 — 1,883
Net loss
   —    —    —    —    — (48,042 ) (48,042 )










Balances at September 30, 2020
   40,623,413    $ 176,405    6,021,177    $ 1    $ 8,854 $ (142,178 ) $ (133,323 )










   Nine Months Ended September 30, 2019
Balances at December 31, 2018
   26,575,544    $ 71,250    3,475,152    $ —    $ 3,735 $ (43,008 ) $ (39,273 )
Issuance of Series B convertible preferred stock, net of issuance costs of $6
   2,040,002    15,294    —    —    — — —
Issuance of common stock upon exercise of stock options
   —    —    305,852    —    191 — 191
Vesting of restricted stock
   —    —    668,918    —    — — —
Stock-based compensation expense
   —    —    —    —    1,124 — 1,124
Net loss
   —    —    —    —    — (35,836 ) (35,836 )










Balances at September 30, 2019
   28,615,546    $ 86,544    4,449,922    $ —    $ 5,050 $ (78,844 ) $ (73,794 )


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(46,097)	$	(29,675)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	3,930		1,006
Depreciation and amortization expense	1,556		509

Change in fair value of preferred stock warrant liability	0		(1)
Noncash lease expense	2,162		1,659
Noncash interest expense	172		126
Accretion of discount on marketable securities	(18)		0
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(87)		(774)
Accounts payable	(259)		(285)
Accrued expenses and other current liabilities	(1,699)		819
Operating lease liabilities	(725)		3,259
Deferred revenue	(565)		0
Net cash used in operating activities	(41,630)		(23,357)
Cash flows from investing activities:
Purchases of property and equipment	(3,003)		(3,269)

Purchases of marketable securities	(42,639)		0
Proceeds from the sale of marketable securities	119,470		0
Net cash provided by (used in) investing activities	73,828		(3,269)
Cash flows from financing activities:
Proceeds from issuance of convertible preferred stock, net of issuance costs	0		47,936
Proceeds from issuance of common stock upon exercise of stock options	173		274



Net cash provided by financing activities	173		48,210
Net increase in cash, cash equivalents and restricted cash	32,371		21,584
Cash, cash equivalents and restricted cash at beginning of period	94,528		17,255
Cash, cash equivalents and restricted cash at end of period	$	126,899	$	38,839


Supplemental cash flow information:
Cash paid for interest	$	810	$	341
Supplemental disclosure of noncash investing and financing information:
Purchases of property and equipment included in accounts payable and accrued expenses	$	75	$	3,115
Deferred offering costs included in accounts payable and accrued expenses	$	0	$	75
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	125,166	$	36,563
Restricted cash (current and non-current)	1,733		2,276
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	126,899	$	38,839

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Foghorn Therapeutics Inc.

~~Condensed Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~

     Nine Months Ended September 30,
   2020 2019
Cash flows from operating activities:

Net loss
   $ (48,042 ) $ (35,836 )
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense
   1,883 1,124
Depreciation and amortization expense
   764 460
Loss on disposal of property and equipment
   — 11
Change in fair value of preferred stock warrant liability
   69 —
Noncash lease expense
   3,103 820
Noncash interest expense
   179 58
Changes in operating assets and liabilities:

Prepaid expenses and other current assets
   (1,725 ) (507 )
Accounts payable
   (374 ) 559
Accrued expenses and other current liabilities
   (198 ) 942
Operating lease liabilities
   8,889 (782 )
Deferred revenue
   14,821 —


Net cash used in operating activities
   (20,631 ) (33,151 )


Cash flows from investing activities:

Purchases of property and equipment
   (8,694 ) (840 )
Proceeds from sale of property and equipment
   — 4


Net cash used in investing activities
   (8,694 ) (836 )


Cash flows from financing activities:

Proceeds from issuance of convertible preferred stock, net of issuance costs
   89,861 15,294
Proceeds from issuance of common stock upon exercise of stock options
   852 191
Repayment of notes payable
   (500 ) —
Payment of initial public offering costs
   (1,249 ) —
Payment of notes payable issuance costs
   — (16 )


Net cash provided by financing activities
   88,964 15,469


Net increase (decrease) in cash, cash equivalents and restricted cash
   59,639 (18,518 )
Cash, cash equivalents and restricted cash at beginning of period
   17,255 40,585


Cash, cash equivalents and restricted cash at end of period
   $ 76,894 $ 22,067


Supplemental cash flow information:

Cash paid for interest
   $ 490 $ 312
Supplemental disclosure of noncash investing and financing information:

Purchases of property and equipment included in accounts payable and accrued expenses
   $ 6,602 $ —
Deferred offering costs included in accounts payable and accrued expenses
   $ 721 $ —
Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents
   $ 74,620 $ 21,501
Restricted cash (current and non-current)
   2,274 566


Total cash, cash equivalents and restricted cash shown in the statement of cash flows
   $ 76,894 $ 22,067

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Foghorn Therapeutics Inc.~~

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	~~Nature of Business and Basis of Presentation~~

1.Nature of Business and Basis of Presentation

Foghorn Therapeutics Inc. (the “Company”) is a ~~development-stage~~clinical-stage biopharmaceutical company discovering and developing a new class of medicines targeting ~~genetically determined~~genetically-determined dependencies within the chromatin regulatory system. The Company uses its proprietary Gene Traffic Control platform to identify, validate and potentially drug targets within the system. The Company was founded in October 2015 as a Delaware corporation. The Company is headquartered in Cambridge, Massachusetts.

The Company is subject to risks similar to those of other ~~development-stage~~early-stage companies in the biopharmaceutical industry, including dependence on key individuals, the need to develop commercially viable products, competition from other companies, many of whom are larger and better capitalized, the impact of the COVID-19 pandemic and the need to obtain adequate additional financing to fund the development of its products. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any products developed will obtain required regulatory approval or that any approved products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from the sale of its products.

In March 2020, the World Health Organization declared the global novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic. The Company’s operations have not been significantly impacted by the COVID-19 pandemic. However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its financial condition and operations, including ongoing and planned clinical trials. The impact of the COVID-19 outbreak on the Company’s financial performance will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be materially adversely affected.

Going concern

On October 27, 2020, the Company completed its initial public offering (“IPO”) pursuant to which it issued and sold 7,500,000 shares of its common stock at a public offering price of $16.00 per share, resulting in net proceeds of $108.0 million, after deducting underwriting discounts and commissions and other offering expenses. On November 19, 2020, the Company issued and sold an additional 951,837 shares of common stock at the IPO price of $16.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $14.2 million after deducting underwriting discounts and commissions. ~~Upon the closing of the IPO, all of the Company’s outstanding convertible preferred stock automatically converted into shares of common stock.~~

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations primarily with proceeds from sales of preferred stock, debt financing, ~~and~~ an upfront payment of $15.0 million the Company received in July 2020 under a collaboration agreement with Merck Sharp & Dohme Corp. (see Note 9), and most recently, with proceeds from the sale of common stock in the IPO completed in October 2020. The Company has incurred ~~recurring~~ losses ~~including net losses~~since inception and as of ~~$48.0 million for the nine months ended September~~June 30, ~~2020 and $51.1 million for the year ended December 31, 2019. As of September 30, 2020,~~2021, the Company had an accumulated deficit of ~~$142.2~~$209.0 million. The Company expects to continue to generate operating losses in the foreseeable future. As of the issuance date of these interim condensed consolidated financial statements the Company expects that ~~the net proceeds it received from its IPO, together with~~ its cash, ~~and~~ cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months.

The Company will need to obtain additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborative or strategic alliances or licensing arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or programs. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, pipeline expansion or commercialization efforts, which could adversely affect its business prospects. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations when needed or at all.

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Basis of presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

~~Unaudited interim~~

2.Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 2 to the consolidated financial ~~information~~

statements contained in the Company’s 2020 Annual Report on Form 10-K. The ~~accompanying condensed~~Company includes herein certain updates to those policies.

Leases

In accordance with ASC 842, Leases, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and thereafter if modified. The lease term includes any renewal or purchase options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The Company’s policy is to not record leases with an original term of twelve months or less on its consolidated balance ~~sheet~~sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease term. The Company’s existing leases are for office and laboratory space and equipment leases.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of ~~September 30, 2020,~~a right-of-use asset and liability.

Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the condensed consolidated statements of operations and comprehensive ~~loss, convertible preferred stock~~loss.

For the Company's financing lease, amortization of the right-of-use asset is recognized on a straight-line basis over the shorter of the useful life of the asset or the lease term and ~~stockholders’ deficit and cash flows for~~is included in operating expenses on the ~~three and nine months ended September 30, 2020 and 2019 are unaudited. The unaudited interim~~ condensed consolidated ~~financial~~ statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020 and the results of its operations for the three and nine months ended September 30, 2020 and 2019 and its cash flows for the nine months ended September 30, 2020 and 2019. The results for the three or nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

2.	~~Summary of Significant Accounting Policies~~

~~Use of estimates~~

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the valuation of stock-based awards and the accrual of research and development expenses. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

~~Concentrations of credit risk and of significant suppliers~~

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. As of September 30, 2020, the Company maintained cash balances in excess of federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company relies, and expects to continue to rely, on a small number of vendors to provide services, supplies and materials for certain activities related to its discovery programs. These programs could be adversely affected by a significant interruption in these services or the availability of materials.

~~Deferred offering costs~~

~~The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with~~ ~~in-process~~ equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the carrying value of the preferred stock or, for issuances of common stock, in stockholder’s equity (deficit) as a reduction of ~~additional paid-in capital~~ generated as a result of the offering. Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. ~~As of December 31, 2019,~~Interest on the ~~Company had no deferred offering costs. As of September 30, 2020,~~finance lease liability is recognized in interest expense on the ~~Company had $2.0 million of deferred offering costs on its~~ condensed consolidated ~~balance sheet.~~

~~Property~~statements of operations and ~~equipment~~

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:


		~~Estimated Useful Life~~

~~Laboratory equipment~~		~~5 years~~
~~Furniture and fixtures~~		~~5 years~~
~~Computer equipment and software~~		~~3 years~~
~~Leasehold improvements~~		~~Shorter of useful life or remaining term of lease~~

Costs for capital assets not yet placed into service are capitalized and depreciated once placed into service. During the nine months ended September 30, 2020, the Company capitalized $14.5 million of assets not yet placed in service related to leasehold improvements for its new lease.

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are charged to expense as incurred.

~~Fair value measurements~~

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

comprehensive loss.

~~Level 1—Quoted prices in active markets for identical assets or liabilities.~~

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and preferred stock warrant liability are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt approximates its fair value (a level 2 measurement) due to its variable interest rate.

~~Revenue recognition~~

~~The Company accounts for its one collaboration arrangement, entered into in July 2020, under ASC Topic 606,~~ ~~Revenue From Contracts With Customers~~ (ASC 606). For additional information on the Company’s collaboration agreement, see Note 8, Collaboration Agreement, to these condensed consolidated financial statements. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

The Company assesses the goods or services promised within each contract and determines those that are performance obligations. The promised goods or services in the Company’s arrangements would likely consist of licenses, rights to the Company’s intellectual property, research and development services and related supporting activities. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations.

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods 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, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the customer and the availability of the associated expertise in the general marketplace. The Company also considers 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.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“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, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The Company validates 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.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes 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, the ~~Company re-evaluates the~~ estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its 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 development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates 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 the Company’s control such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

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, the Company recognizes 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.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded for deferred revenue.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between the transfer of the promised goods or services to the customer and the payment by the customer will be one year or less. The Company then recognizes 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.

~~Net loss per share~~

~~The Company follows~~ ~~the two-class method~~ ~~when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities.~~ ~~The two-class method~~ ~~determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.~~ ~~The two-class method~~ ~~requires income (loss) available to common stockholders for the period to be allocated between common stock and~~

~~participating securities based upon their respective rights to share in the earnings as if all income (loss) for the period had been distributed.~~

Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares.

The Company’s participating securities contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the three and nine months ended September 30, 2020 and 2019.

The following common stock equivalents presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

   September 30,
               2020                            2019
Convertible preferred stock (as converted to common stock)
   21,958,588    15,467,863
Warrants to purchase convertible preferred stock
(as converted to common stock)
   7,608    7,608
Unvested restricted common stock
   222,977    1,114,867
Stock options to purchase common stock
   4,931,761    4,084,445




   27,120,934    20,674,783

Recently issued accounting pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company can adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

3.	~~Fair Value Measurements~~

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3.Marketable Securities and Fair Value Measurements

As of June 30, 2021, available for sale marketable securities by security type consisted of (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

Commercial paper (due within one year)	$	8,995	$	0	$	(3)	$	8,992
Corporate notes and bonds (due within one year)	7,122		0		(7)		7,115
Total	$	16,117	$	0	$	(10)	$	16,107

As of December 31, 2020, available for sale marketable securities by security type consisted of (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. treasury notes (due within one year)	$	92,982	$	0	$	(7)	$	92,975
Total	$	92,982	$	0	$	(7)	$	92,975

The following tables present ~~information about~~ the Company’s ~~financial~~fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis ~~and indicate the level of the fair value hierarchy utilized to determine such fair values~~ (in thousands):

   Fair Value Measurements at September 30, 2020 Using:
             Level 1                        Level 2                        Level 3                        Total
Assets:

Cash equivalents:

Money market funds
   $ 74,521    $ —    $ —    $ 74,521








Liabilities:

Preferred stock warrant liability
   $ —    $ —    $ 114    $ 114








   Fair Value Measurements at December 31, 2019 Using:
   Level 1    Level 2    Level 3    Total
Assets:

Cash equivalents:

Money market funds
   $ 14,951    $ —    $ —    $ 14,951








Liabilities:

Preferred stock warrant liability
   $ —    $ —    $ 45    $ 45


	Fair Value Measurements at June 30, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	120,167	$	0	$	0	$	120,167

Commercial paper	0		4,999		0		4,999
Marketable securities:

Commercial paper	0		8,992		0		8,992
Corporate notes and bonds	0		7,115		0		7,115
Total	$	120,167	$	21,106	$	0	$	141,273
	Fair Value Measurements at December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	48,770	$	0	$	0	$	48,770
U.S. treasury notes	0		42,997		0		42,997
Marketable securities:
U.S. treasury notes	0		92,975		0		92,975
Total	$	48,770	$	135,972	$	0	$	184,742

During the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

~~The preferred stock warrant liability in the tables above~~

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4.Property and Equipment, Net

Property and equipment, net consisted of the ~~fair value~~following (in thousands):


	June 30, 2021		December 31, 2020
Laboratory equipment	$	4,333	$	3,740
Furniture and fixtures	815		815
Computer equipment and software	100		100
Leasehold improvements	17,062		16,961
Financing lease right-of-use asset	384		0
Assets not yet placed in service	0		15
	22,694		21,631
Less: Accumulated depreciation and amortization	(3,692)		(2,103)
	19,002		19,528

Depreciation and amortization expense, including amortization of ~~warrants to purchase 14,076 shares of~~ ~~Series A-1~~ ~~convertible preferred stock at $1.00 per share~~financing lease right-of-use assets, was $0.8 and was based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants. The Company assesses these assumptions and estimates at the end of each reporting period. Changes in the fair value of the preferred stock warrants are recognized within other income (expense) in the condensed consolidated statements of operations and comprehensive loss.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability include the fair value per share of the underlying ~~Series A-1~~ convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The most significant assumption in the Black-Scholes option-pricing model impacting the fair value of the preferred stock warrants is the fair value of the Company’s Series ~~A-1~~ ~~convertible preferred stock as of each remeasurement date. The Company determines the fair value per share of the underlying Series~~ ~~A-1~~ convertible preferred stock by taking into consideration its most recent sales of its convertible preferred stock as well as additional factors that the Company deems relevant. The change in the fair value of the preferred stock warrant liability was not material during$0.2 million for the three ~~or nine~~ months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~2019.~~

4.	~~Accrued Expenses~~

$1.6 and $0.5 million for the six months ended June 30, 2021 and 2020, respectively.

5.Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Accrued construction in progress	$	6,208	$	119
Accrued external research and development expenses					Accrued external research and development expenses	$	2,455	$	2,146
Accrued employee compensation and benefits		2,086		1,867	Accrued employee compensation and benefits	1,974		3,513
Accrued external research and development expenses		1,089		1,384
Accrued professional fees					Accrued professional fees	693		979
Accrued tenant improvements					Accrued tenant improvements	29		2,385
Other		587		331	Other	1		138
						$	5,152	$	9,161
	$	9,970	$	3,701

5.	~~Notes Payable~~

6.Notes Payable

Long-term debt consisted of the following (in thousands):

         September 30, 2020             December 31, 2019
Principal amount of long-term debt
   $ 14,500 $ 15,000
Less: Current portion of long-term debt
   (5,990 ) (4,152 )


Long-term debt, net of current portion
   8,510 10,848
Final payment fee
   530 530
Debt discount, net of accretion
   (239 ) (418 )


Long-term debt, net of discount and current portion
   $ 8,801 $ 10,960

~~The~~


	June 30, 2021		December 31, 2020
Principal amount of long-term debt	$	20,000	$	20,000
Less: Current portion of long-term debt	0		0
Long-term debt, net of current portion	20,000		20,000
Final payment fee	1,000		1,000
Debt discount, net of accretion	(1,174)		(1,346)
Long-term debt, net of discount and current portion	$	19,826	$	19,654

As of June 30, 2021, the Company ~~has~~had outstanding loans under its ~~amended~~loan and security agreement of $20.0 million.

On November 19, 2020, the Company entered into a loan and security agreement (the ~~“Loan”~~"Oxford Loan Agreement"), with Oxford Finance LLC, or Oxford, for an aggregate principal amount of ~~$6.8~~$20.0 million (“(the "Oxford Term Loan A”A") and ~~$7.7~~up to an additional $5.0 million (“(the "Oxford Term Loan B”B") ~~so that~~. On November 19, 2020, the ~~total amount outstanding~~Company borrowed $20.0 million under the Oxford Term Loan ~~was $14.5 million as of September 30, 2020.~~

~~Borrowings under both~~A. Oxford Term Loan A and Oxford Term Loan B ~~were repayable in monthly payments of interest-only through February 2020,~~(the "Term Loans") bear interest at a floating per annum rate equal to be followed by monthly payments of equal principal plus interest until the loan maturity date of February 1, 2023. In April 2020, the Company amended the Loan to extend the interest only period through May 31, 2020 and in June 2020 the Loan was further amended to extend the interest-only period through August 31, 2020. Interest for Term Loan A is the greater of ~~1) Comerica’s Prime Rate~~(i) 8.0% and (ii) the sum of (a) thirty-day LIBOR rate plus (b) 7.84%. In addition, upon loan maturity or ~~2) LIBOR plus 2.5%, and for Term Loan B, 1.0% plus~~prepayment, the ~~greater of 1) Comerica’s Prime Rate or 2) LIBOR plus 2.5%.~~

ACompany is required to make a final payment fee ~~of 3.0%~~equal to 5.0% of the aggregate amounts drawn under Term Loan A and 4.0% under Term Loan B is due upon the earlier of the maturity date, the repayment date if paid early, whether voluntary or upon acceleration due to default, the sale of substantially all of the Company’s assets, or the Company’s IPO. The Company may repay the Loan at any time by paying the outstanding principal ~~balance in full, along with any unpaid accrued interest and the final payment fee. The final payment fee of $0.5 million~~amount borrowed which is being amortized to interest expense over the term of the debt using the effective interest method. ~~Upon closing~~

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The Company is required to make monthly interest only payments under the Oxford Loan each month beginning on January 1, 2021. Beginning on December 1, 2023, the Company is required to make consecutive equal monthly payments of principal, together with applicable interest, in arrears, based upon a repayment schedule equal to 24 months, with a final maturity date of November 1, 2025 (the “Maturity Date”). At the Company’s option, the Company may elect to prepay the loans subject to a prepayment fee equal to the following percentage of the ~~Company’s IPO in October 2020,~~principal amount being prepaid: 2% if an advance is prepaid during the ~~final payment fee became due.~~

~~Borrowings~~first 12 months following the applicable advance date, 1% if an advance is prepaid after 12 months but prior to 24 months following the applicable advance date, and 0.5% if an advance is prepaid any time after 24 months following the applicable advance date but prior to the Maturity Date.

The Company's obligations under the Oxford Loan Agreement are ~~collateralized~~secured by ~~substantially~~a security interest in all of ~~the Company’s~~its assets, other than its intellectual property. ~~There are no financial covenants associated with the Loan; however, the~~The Company is also subject to certain affirmative and negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and engaging in certain other business transactions. The obligations under the Loan are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition. Upon the occurrence of an event of default and until such event of default is no longer continuing, the annual interest rate will be 5.0% above the otherwise applicable rate. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company believes an event of default would be remote.

In connection with the Oxford Loan Agreement, the Company granted warrants to purchase 18,445 shares of the Company’s common stock at $16.26 per share. The issued warrants are exercisable for 10 years. The Company valued the warrants using the Black-Scholes option pricing model and determined the fair value of the warrants to be $0.2 million. The Company determined the warrants met the criteria for equity classification, and, as such, the fair value of the warrants were recorded as additional paid-in capital and as a discount to the debt which is being amortized to interest expense over the term of the Oxford Loan of five years. In addition, the Company incurred debt issuance costs of $0.2 million.

As of ~~September~~June 30, ~~2020,~~2021, the interest rate applicable to outstanding borrowings under the Oxford Loan Agreement was ~~3.8%~~8.1%. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the weighted average effective interest rate on outstanding borrowings ~~under the Loan~~ was approximately ~~5.5% and 5.9%, respectively.~~

9.8%.

As of ~~September~~June 30, ~~2020,~~2021, future principal payments due are as follows (in thousands):

Remainder of 2020 (three months)
   $                 1,500
2021
   6,000
2022
   6,000
2023
   1,000


   $ 14,500

Remainder of 2021 (six months) $ 0
2022 0
2023 833
2024 10,000
2025 $ 9,167
$ 20,000

As of June 30, 2020, the Company had outstanding loans under its amended loan and security agreement with Comerica Bank. In November 2020, the Company ~~entered into~~used a ~~term loan agreement for $20.0 million with a new lender and used~~portion of the proceeds from the ~~new term loan~~Oxford Loan Agreement described above to ~~fully~~ repay ~~Term Loan A and Term Loan B (see Note 13).~~

6.	~~Convertible Preferred Stock~~

~~The Company has~~ ~~issued Series A-1 convertible~~ ~~preferred stock~~ (the ~~“Series A-1”), Series A-2 convertible~~ ~~preferred stock (the~~ ~~“Series A-2”) and~~ ~~Series B convertible preferred stock (the “Series B”).~~ ~~The Series A-1 and Series A-2 are~~ ~~collectively referred to as the “Series A”~~outstanding principal balances in full plus unpaid accrued interest and the ~~Series A~~final payment fee.

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7.Common Stock and ~~Series B~~Net Loss Per Share

Common Stock

Each share of common stock entitles the holder to 1 vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are ~~collectively referred~~not entitled to asreceive dividends, unless declared by the ~~“Preferred Stock.”~~

~~In April 2020, in two separate closings,~~board of directors.

Net Loss Per Share

The following common stock equivalents presented based on amounts outstanding at each period end, have been excluded from the ~~Company sold 6,407,867 shares~~calculation of ~~Series B preferred stock at a purchase price of $7.50~~diluted net loss per share ~~resulting in gross proceeds to the Company of $48.1 million.~~

In July and August 2020, in two separate closings, the Company sold 5,600,000 shares of Series B preferred stock at a purchase price of $7.50 per share resulting in gross proceeds to the Company of $42.0 million.

~~Upon the closing of the IPO in October 2020 (see Note 13), the Company’s Preferred Stock automatically converted into 21,958,588 shares of common stock.~~

7.	~~Stock-Based Compensation~~

because including them would have had an anti-dilutive impact:

June 30,
2021 2020
Stock options to purchase common stock 6,378,714 3,990,475
Warrants to purchase common stock 18,445 0
Convertible preferred stock (as converted to common stock) 0 18,931,575
Warrants to purchase convertible preferred stock
(as converted to common stock) 0 7,608
Unvested restricted common stock 0 445,949
6,397,159 23,375,607

8.Stock-Based Compensation

2016 Stock ~~incentive plan~~

Incentive Plan

The ~~Company grants stock-based awards under its~~Company’s 2016 Stock Incentive Plan (the “2016 Plan”)~~. The total number~~ provided for the Company to grant incentive stock options or nonqualified stock options and other equity awards to employees, directors and consultants of ~~shares of common stock that may be issued under~~ the ~~2016 Plan was 6,513,512 shares as of September 30, 2020, of which 227,354 shares remained available for future grant as of September 30, 2020.~~Company. Upon the effectiveness of the 2020 Equity Incentive Plan (the “2020 Plan”) in October 2020, ~~(see Note 13),~~ the Company ceased granting additional awards under the 2016 Plan.

2020 Equity Incentive Plan

On October 21, 2020, the Company’s board of directors adopted and its stockholders approved the 2020 Plan, which became effective on October 21, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares initially reserved for issuance under the 2020 Plan was (i) 2,200,000 shares (the “share pool”), plus (ii) the number of shares of common stock available for issuance under the 2016 Plan as of the effective date of the 2020 Plan, plus the number of shares of common stock underlying awards under the 2016 Plan that on or after the date of adoption expire or become unexercisable without delivery of shares, are forfeited to, or repurchased for cash, are settled in cash, or otherwise become available again for grant under the 2016 Plan, in each case, in accordance with its terms (up to an aggregate of 5,078,295 shares). As of June 30, 2021, 2,270,457 shares remained available for future grant under the 2020 Plan.

The share pool will automatically increase on January 1 of each year from 2021 to 2030 by the lesser of (i) 4 percent of the number of shares of our common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the board of directors on or prior to such date for such year. The number of shares reserved for issuance under the 2020 Plan was increased by 1,471,576 shares effective January 1, 2021.

The 2020 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated. Stock options granted with service-based vesting conditions generally vest over four years and expire after ten years. The exercise price for stock options granted is not less than the fair value of common stock on the date of grant. The Company bases fair value of common stock on the quoted market price. Prior to the IPO, the board of directors determined the value the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional relevant factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant.

2020 Employee Stock Purchase Plan

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outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the board of directors on or prior to such date for such year (up to a maximum of 3,220,520 shares). The number of shares reserved for issuance under the ESPP was increased by 367,894 shares effective January 1, 2021.
As of June 30, 2021, no offering periods have commenced under the ESPP.

Stock-based compensation

Stock-based compensation expense was classified in the statements of operations and comprehensive loss as follows (in thousands):

     Three Months Ended September 30,        Nine Months Ended September 30,
   2020    2019    2020    2019
Research and development expenses
   $ 500    $ 292    $ 1,125    $ 747
General and administrative expenses
   377    151    758    377








   $ 877    $ 443    $ 1,883    $ 1,124


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Research and development expenses	$	1,109	$	298	$	2,123	$	625
General and administrative expenses	933		191		1,807		381
	$	2,042	$	489	$	3,930	$	1,006

As of ~~September~~June 30, ~~2020,~~2021, total unrecognized compensation cost related to unvested options ~~and unvested restricted stock~~ was ~~$12.1~~$25.2 million, which is expected to be recognized over a weighted average period of ~~3.3~~3.1 years.

8.	~~Collaboration Agreement~~

9.Collaboration Agreement

In July 2020, the Company entered into a research collaboration and license agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”). The Company and Merck will apply Foghorn’s proprietary Gene Traffic Control platform to discover and develop novel therapeutics. Under the Collaboration Agreement, the Company granted Merck exclusive global rights to develop, manufacture and commercialize drugs that target dysregulation of a single transcription factor. Under the terms of the Collaboration Agreement, the Company and Merck are each responsible to perform certain research activities in accordance with a ~~mutually agreed~~mutually-agreed upon research plan. Merck may substitute the selected transcription factor during certain stages of the research program, subject to certain limitations. Following completion of the research program, Merck is responsible for the development and commercialization of the compounds developed pursuant to the research program and any product containing such compounds. Pursuant to the Collaboration Agreement, the Company will also participate on a joint steering committee.

Under the terms of the agreement, Foghorn received a nonrefundable upfront payment of $15.0 million from Merck and is eligible to receive up to $245.0 million upon ~~first~~ achievement of specified research, development and regulatory milestones by any product candidate generated by the collaboration, and up to $165.0 million upon achievement of specified sales-based milestones per approved product from the collaboration, if any. The Company will be eligible to receive tiered royalties, calculated on a product-by-product and country-by-country basis, on net sales of approved products from the collaboration, if any, at royalty rates ranging from the mid single digits to low tens, depending on whether the products are covered by patent rights it licenses to Merck.

Unless terminated earlier, the Collaboration Agreement will continue in full force and effect until one or more products has received marketing authorization and, thereafter, until expiration of all royalty obligations under the Collaboration Agreement. The Company or Merck may terminate the Collaboration Agreement upon an uncured material breach by the other party or insolvency of the other party. Merck may also terminate the Merck Collaboration Agreement for any reason upon certain notice to the Company.

The Company determined that the (1) research, development, manufacture and commercialization licenses, (2) the research activities performed by the Company and (3) service on the joint committees represent a single performance obligation under the Collaboration Agreement. The Company determined that Merck cannot benefit from the licenses separately from the research activities and participation on the joint steering committee asbecause these services are specialized and rely on the Company’s expertise such that these activities are highly interrelated and therefore not distinct. Accordingly, the promised goods and services represent one combined performance obligation, and the entire transaction price ~~will be~~was allocated to that single combined performance obligation. The performance obligation will be satisfied over the research term as the Company performs the research activities and participates in a joint steering committee to oversee research activities.

~~Accordingly, the~~

The upfront payment of $15.0 million was initially recorded as deferred revenue and is being recognized as revenue as the performance obligation is satisfied. The Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer over time. Under the cost-to-cost method, the extent of progress towards

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completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. As of ~~September~~June 30, ~~2020,~~2021, the potential research, development and regulatory milestone payments that the Company is eligible to receive were excluded from the transaction price as they were fully constrained by uncertain events. The Company will reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and if necessary, the Company will adjust its estimate of the transaction price. Any additions to the transaction price would be reflected in the period as a cumulative revenue catch-up based on the ratio of costs incurred to the total estimated costs expected applied to the revised transaction price. Sales-based royalties and milestone payments, which predominantly relate to the license, will be recognized if and when the related sales occur.

As of ~~September~~June 30, ~~2020,~~2021, the aggregate amount of the transaction price related to the unsatisfied portion of the performance obligation is ~~$14.8~~$14.0 million, which is expected to be recognized as revenue through 2028. The Company does not expect collaboration revenue to be recognized evenly over this period as it will be recognized on a percentage of completion basis (using cost-to-cost method) as the Company performs the research activities and participates on the joint steering committee, which will likely vary from period to period. In estimating the total costs to satisfy its single performance obligation pursuant to the Collaboration Agreement, the Company is required to make significant estimates including an estimate of the number of transcription factor substitutions and the expected time and expected costs to fulfill the performance ~~obligation. The~~obligation.The cumulative effect of revisions to the total estimated costs to complete the Company’s single performance obligation will be recorded in the period in which the changes are identified, and amounts can be reasonably estimated. While such revisions will have no impact on the Company’s cash flows, a significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

~~The~~ In the three months ended June 30, 2021, the Company re-evaluated its estimates related to the collaboration agreement resulting in a reclass of $1.9 million from short-term deferred revenue to long-term deferred revenue, net of current portion on the Company's condensed consolidated balance sheets.

At inception, the Company assessed the Collaboration Agreement to determine whether a significant financing component exists and concluded that a significant financing component does not exist. ~~Through September~~For the three months ended June 30, ~~2020,~~2021, the Company had recorded ~~$0.2~~$0.3 million of revenue under the Collaboration ~~Agreement.~~

9.	~~Leases~~

~~The~~Agreement, which was included in deferred revenue at the beginning of the period. For the six months ended June 30, 2021, the Company ~~has a lease for office and laboratory facilities~~had recorded $0.6 million of revenue under the Collaboration Agreement, which was included in ~~Cambridge, Massachusetts (the “Existing Lease”) under a noncancelable operating lease that began in August 2017 and expires in March 2025. In April 2020,~~deferred revenue at the ~~Existing Lease was assigned and assumed by a related party which became effective in October 2020.~~

beginning of the period.

10.Leases

In October 2019, the Company entered into a lease for 81,441 square feet of office and laboratory space in Cambridge, Massachusetts, commencing in January 2020 (the “New Lease”). The initial term of the New Lease was eight years with a five-year option to extend at fair-market rent at the time of the extension. The base rent payments escalate annually over the eight-year lease term and totaled approximately $60.3 million. In connection with the New Lease, the landlord agreed to fund up to $3.0 million in tenant improvements to the leased facility as well as up to an additional $16.3 million, which ~~will result~~resulted in additional rent payments to the ~~landlord.~~ landlord over the lease term. During the three ~~and nine~~ months ended ~~September~~June 30, 2021 and 2020, ~~$5.4~~$1.0 million, and ~~$8.4~~$2.3 million respectively, of leasehold improvements were reimbursed by the landlord, which resulted in an increase to operating lease liabilities. During the six months ended June 30, 2021 and 2020, $2.5 million and $3.0 million, respectively, of leasehold improvements were reimbursed by the landlord, which resulted in an increase to operating lease liabilities. The Company will be obligated to pay its portion ofof real estate taxes and costs related to the premises, including costs of operations and management of the leased premises. On January 1, 2020, the lease commencement date, the Company recorded an operating lease asset of $38.6 million and corresponding lease liability of $38.3 million.

In June 2020, the Company amended the New Lease to defer payment of a portion of the base rent and operating expenses and to extend the lease term by nine months to September 2028. The amendment was accounted for as a lease modification and the ~~right-of-~~

~~use~~right-of-use asset and lease liability were remeasured at the modification date of June 29, 2020 resulting in an increase of $7.4 million to both the right-of-use asset and lease liabilities.

The Company had a lease for office and laboratory facilities in Cambridge, Massachusetts under a noncancellable operating lease that began in August 2017 and expired in March 2025. In April 2020, this lease was assigned and assumed by a related party which became effective in October 2020.

The components of lease expense were as follows (in thousands):

   Three Months Ended September 30,    Nine Months Ended September 30,
   2020    2019    2020    2019
Operating lease cost
   $ 2,162    $ 445    $ 5,145    $ 1,318
Short-term lease cost
   —    23    46    38
Variable lease cost
   225    110    617    348








   $ 2,387    $     578 �� $ 5,808    $ 1,704

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	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost	$	1,886	$	1,725	$	3,773	$	2,983
Short-term lease cost	0		19		0		46
Variable lease cost	727		156		1,491		392
	$	2,613	$	1,900	$	5,264	$	3,421

Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

         Nine Months Ended September 30,
   2020    2019
Cash paid for amounts included in the measurement of operating lease liabilities
   $ 1,571    $ 1,280
Operating lease liabilities arising from obtaining right-of-use assets
   $ 38,306    $ 271
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement
   $ 7,384    $ —


	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,799	$	1,064
Operating lease liabilities arising from obtaining right-of-use assets	$	0	$	38,306
Financing lease liabilities arising from obtaining right-of-use assets	$	330	$	0
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement	$	0	$	7,384

The weighted-average remaining lease term and discount rate as of period ends were as follows:


	September 30, 2020			December 31, 2019				June 30, 2021		December 31, 2020
Weighted-average remaining lease term - operating leases (in years)		7.91			1.06		Weighted-average remaining lease term - operating leases (in years)	7.2		7.7
Weighted-average discount rate - operating leases		5.35	%		7.53	%	Weighted-average discount rate - operating leases	5.35	%	5.35	%

Future annual minimum lease payments under ~~the Company’s~~ operating leases as of ~~September~~June 30, ~~2020~~2021 were as follows (in thousands):

Remainder of 2020 (three months)
   $ 1,517
2021
   9,804
2022
   10,015
2023
   10,108
2024
   10,349
Thereafter
   41,100


Total future minimum lease payments
   82,893
Less: imputed interest
   (15,891 )
Less: estimated lease incentives
   (10,906 )


Total operating lease liabilities
   $                 56,096



Included in the consolidated balance sheet (in thousands):    September 30, 2020
Current operating lease liabilities
   $ 91
Operating lease liabilities, net of current portion
   56,005


Total operating lease liabilities
   $ 56,096

Remainder of 2021 (six months) $ 4,941
2022 9,967
2023 10,051
2024 10,375
2025 10,623
Thereafter 30,576
Total future minimum lease payments 76,533
Less: imputed interest (13,413)
Less: estimated lease incentives (1,477)
Total operating lease liabilities $ 61,643
Included in the condensed consolidated balance sheet (in thousands): June 30, 2021
Current operating lease liabilities $ 6,840
Operating lease liabilities, net of current portion 54,803
Total operating lease liabilities $ 61,643

Sublease agreement

In April 2020, the Company entered into a two-year sublease ofagreement to sublet approximately 16,843 square feet of office space under the New Lease, as amended, which began in July 2020. In February 2021, the Company entered into an amendment to the sublease to sublet approximately 2,980 square feet of additional office space to the sublessee for the remaining lease term. In August 2021, the Company entered into an amendment to, among other things, extend the sublease through November 31, 2022. As of ~~September~~June 30, ~~2020,~~2021, the remaining rent payments due to the Company under the ~~subleases was $3.0~~amended sublease were $2.9 million. ~~The~~During the three and six months ended June 30, 2021, the Company recorded other income of ~~$0.4~~$0.6 million ~~during the three~~ and ~~nine months ended September 30, 2020~~$1.2 million, respectively, related to this sublease.

~~10.~~

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Financing lease

In October 2020, the Company entered into an equipment lease with a three-year term and an optional purchase option. The Company analyzed the terms of the lease and, due to the likelihood of the Company exercising a purchase option at the end of the three-year lease term, classified this lease as a financing lease. On March 31, 2021, the lease commencement date, the Company recorded a financing lease right-of-use asset of $0.4 million, included in property and equipment, net, and a corresponding financing lease liability of $0.3 million on the condensed consolidated balance sheets. See Notes 2 and 4 for additional information. As of June 30, 2021, a financing lease right-of-use asset of $0.4 million, included in property and equipment, net, and a corresponding financing lease liability of $0.3 million remained on the condensed consolidated balance sheets.

11.Commitments and Contingencies

Leases

The Company’s commitments under its leases are described in Note 9.

10.

License agreements

~~Dana-Farber Cancer Institute~~

~~In 2016,~~

The Company has entered into various exclusive and non-exclusive license agreements for certain technologies. Under the terms of these license agreements, the Company entered into a license agreement with the Dana-Farber Cancer Institute, Inc. (“Dana Farber”) for an exclusive license for certain biological materials as well as patent rights to methods of identifying compounds to treat prostate cancer. In consideration for the right to develop, manufacture, and commercialize products based on certain of Dana Farber’s intellectual property, the Company is obligatedcould be required to reimburse ~~Dana Farber~~the licensors for patent expenses and ~~pay~~remit amounts in the low single-digit as sales-based royalties upon the occurrence of specific events as outlined in the corresponding license agreement. Unless terminated earlier, in accordance with the provisions of the agreement, the agreement will terminate on the expiration date of the last to expire of the applicable Dana Farber patents. None of the Company’s product candidates utilize technology covered by this license.

~~Stanford~~

~~In July 2017, the Company entered into a license agreement with the Board of Trustees of the Leland Stanford Junior University (“Stanford”) for a~~ ~~non-exclusive~~ license for patent rights to certain diseases associated with chromatin remodeling. In consideration for the right to develop, manufacture, and commercialize products based on certain of Stanford’s intellectual property, the Company paid a ~~one-time, non-refundable~~ ~~license fee of less than $0.1 million and reimbursed Stanford for $0.1 million of costs incurred related to the patented technology.~~agreements. The Company is also ~~issued 42,781 shares of the Company’s common stock upon execution of a share purchase agreement. In addition~~required to make annual license maintenance fees of less than $0.1 million ~~the Company will reimburse Stanford for patent expenses, pay low single-digit sales-based royalties,~~ and pay up to $1.1 million in regulatory milestones on each licensed product upon the occurrence of specific events as outlined in one of the license ~~agreement.~~agreements. None of ~~the Company’s~~our product candidates utilize ~~technology~~technologies covered by ~~this license.~~

these licenses.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Legal Proceedings

From time to time, the Company may become involved in litigation or other legal proceedings. The Company is not currently a party to any material litigation or legal proceedings.

~~11.~~

~~Defined Contribution Plan~~

12.Defined Contribution Plan

The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for its employees. Eligible employees may make pretax contributions to the 401(k) Plan up to statutory limits. There ~~has been~~was no discretionary match made under the 401(k) Plan as of ~~September~~June 30, ~~2020.~~

~~12.~~

~~Related Parties~~

2021.

13.Related Parties

In October 2015, the Company entered into a five-year service agreement with Flagship Pioneering (“Flagship”), an affiliate of one of its stockholders, Flagship Venture Funds, to provide general and administrative services to the Company, including certain consulting services and the provision of employee health and dental benefit plans for the Company’s employees. The Company made 0 cash payments to Flagship for services received under this during the three and six months ended June 30, 2021. The Company made cash payments to Flagship for services received under this agreement of ~~$0.3 million and $0.9 million during the three and nine months ended September 30, 2020, respectively. The Company made cash payments for services received under this agreement of $0.2~~$0.4 million and $0.6 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. As of both June 30, 2021 and December 31, ~~2019, the Company had no accounts payable to Flagship related to this service agreement. As of September 30,~~ 2020, the Company had ~~less than $0.1 million in~~0 accounts payable to ~~Flagship for costs related to the service agreement.~~

Flagship. This agreement expired in 2020.

In October 2015, the Company entered into a five-year consulting agreement with a scientific founder of the Company who is also a board member and a shareholder. In October 2020, this agreement was extended to January 1, 2022, with an option to

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renew. During the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, the Company paid the scientific founder $0.1 ~~million and $0.2 million, respectively. During the three and nine months ended September 30, 2019, the Company paid the scientific founder $0.1 million and $0.2 million, respectively.~~million. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had node minimis and 0 accounts payable, respectively, to this scientific founder.

~~13.~~

~~Subsequent Events~~

~~On October 18, 2020, the board~~

Table of ~~directors of the Company approved a~~ ~~1-for-1.85~~ reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the conversion ratios for each series of the Company’s outstanding Preferred Stock. The reverse stock split legally occurred upon the filing of the certificate of amendment to the Company’s amended and restated certification of incorporation, which was filed with the State of Delaware on October 21, 2020. All share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the Preferred Stock conversion ratios.

~~2020 Equity Incentive Plan~~

On October 21, 2020, the Company’s board of directors adopted and its stockholders approved the 2020 Plan, which became effective on October 21, 2020. The 2020 Plan provides for the grant of incentive stock ~~options, non-qualified options,~~ stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares initially reserved for issuance under the 2020 Plan is (i) 2,200,000 shares (the “share pool”), plus (ii) the number of shares of common stock available for issuance under the 2016 Plan as of the effective date of the 2020 Plan, plus the number of shares of common stock underlying awards under the 2016 Plan that on or after the date of adoption expire or become unexercisable without delivery of shares, are forfeited to, or repurchased for cash, are settled in cash, or otherwise become available again for grant under the 2016 Plan, in each case, in accordance with its terms (up to an aggregate of 5,078,295 shares) . The share pool will automatically increase on January 1 of each year from 2021 to 2030 by the lesser of (i) four percent of the number of shares of our common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the board of directors on or prior to such date for such year.

~~2020 Employee Stock Purchase Plan~~

On October 21, 2020, the Company’s board of directors adopted and its stockholders approved the 2020 Employee Stock Purchase Plan (the “ESPP”), which became effective on October 21, 2020. The aggregate number of shares of common stock available for purchase pursuant to the exercise of options under the ESPP is 360,000 shares, plus an automatic annual increase, as of January 1 of each year from 2021 to 2030, equal to the lesser of (i) one percent of the number of shares of common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the board of directors on or prior to such date for such year (up to a maximum of 3,220,520 shares).

~~Changes to Authorized Common and Preferred Shares~~

On October 27, 2020, the Company filed a restated certificate of incorporation in the State of Delaware, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 200,000,000 shares, consisting of (i) 175,000,000 shares of common stock, $0.0001 par value per share, and (ii) 25,000,000 shares of preferred stock, $0.0001 par value per share. The shares of preferred stock are currently undesignated.

~~Initial Public Offering~~

On October 27, 2020, the Company completed its IPO pursuant to which it issued and sold 7,500,000 shares of its common stock at a public offering price of $16.00 per share, resulting in net proceeds of $108.0 million, after deducting underwriting discounts and commissions and other offering expenses. On November 19, 2020, the Company issued and sold an additional 951,837 shares of common stock at the IPO price of $16.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $14.2 million after deducting underwriting discounts and commissions. Upon the closing of the IPO, all of the Company’s outstanding convertible preferred stock automatically converted into shares of common stock (see Note 6). Upon the closing of the IPO, the Company’s outstanding warrants to purchase Series A Preferred Stock automatically became warrants to purchase an aggregate of 7,608 shares of common stock.

~~Loan and Security Agreements~~

On November 19, 2020, the Company entered into a new loan and security agreement, or the Oxford Loan, with Oxford Finance LLC, or Oxford, for an aggregate principal amount of $20.0 million (Oxford Term Loan A) and up to an additional $5.0 million (Oxford

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~~Term Loan B). The Term Loan bears interest at a floating per annum rate equal to the greater of (i) 8.0% and (ii) the sum of~~ ~~(a) thirty-day~~ U.S. DOLLAR LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.84%. In addition, upon loan maturity or prepayment, the Company is reqired to make a final payment fee equal to 5.0% of the aggregate principal amount borrowed.

The Company is required to make monthly interest only payments under the Oxford Loan on the first calendar day of each month beginning on January 1, 2021. Beginning on December 1, 2023, the Company is required to make consecutive equal monthly payments of principal, together with applicable interest, in arrears, based upon a repayment schedule equal to 24 months, with a final maturity date of November 1, 2025.

The Company’s obligations under the Oxford Loan Agreement will be secured by a security interest in all of its assets, other than its intellectual property. The Company is also subject to certain affirmative and negative covenants.

In connection with the Oxford Loan Agreement, the Company granted Oxford warrants to purchase 18,445 shares of the Company’s common stock at $16.26 per share. The issued warrants are exerciseable for 10 years.

On November 19, 2020, the Company borrowed $20.0 million under the Oxford Term Loan A and used a portion of the proceeds to repay the outstanding principal balance plus unpaid accrued interest and the final payment fee related to the loan and security agreement with Comerica.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in our ~~Registration Statement~~Annual Report on Form ~~S-1~~ ~~(File~~ ~~No. 333-249264),~~ ~~as amended, or~~10-K for the ~~Registration Statement.~~

fiscal year ended December 31, 2020.

Overview

We are pioneering the discovery and development of a new class of medicines targeting genetically determined dependencies within the chromatin regulatory system, an untapped opportunity for therapeutic intervention. Our proprietary Gene Traffic Control platform gives us an integrated, mechanistic understanding of how the various components of the chromatin regulatory system interact, allowing us to identify, validate and potentially drug targets within the system. Breakdowns in the chromatin regulatory system are associated with over 50 percent of all cancers. Addressing these breakdowns could potentially provide therapies for over 2.5 million patients. Consequently, we are initially focused in oncology. We are developing FHD-286, a selective, allosteric ATPase inhibitor that is currently being evaluated in separate Phase 1 studies in (i) metastatic uveal melanoma and (ii) relapsed or refractory acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). We are developing FHD-609, a targeted protein degrader ~~to treat hematologic cancers and solid tumors, for which we plan to file investigational new drug applications, or INDs,~~that is currently being evaluated in ~~the fourth quarter of 2020 and~~a Phase 1 study in ~~the first half of 2021, respectively. Our product candidates are in preclinical development, and so we currently do not have any products approved for commercial sale.~~synovial sarcoma. Our vision is to use our Gene Traffic Control platform to discover and develop drugs in oncology and other therapeutic areas, including virology, autoimmune disease and neurology.

Since our inception in October 2015, we have focused substantially all of our resources on building our Gene Traffic Control platform, organizing and staffing our company, business planning, raising capital, conducting discovery and research activities, protecting our trade secrets, filing patent applications, identifying potential product candidates, undertaking preclinical studies and clinical trial activities, establishing arrangements with third parties for the manufacture of initial quantities of our product candidates and component materials. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations with proceeds from sales of preferred stock, term loans and an upfront payment of $15.0 million we received in July 2020 under our collaboration agreement with Merck Sharp & Dohme Corp., or Merck, and, most recently, with proceeds from the sale of common stock in our initial public offering, or IPO.

On October 27, 2020, we completed our initial public offering, or IPO, pursuant to which we issued and sold 7,500,000 shares of our common stock at a public offering price of $16.00 per share, resulting in net proceeds of $108.0 million, after deducting underwriting discounts and commissions and other offering expenses. On November 19, 2020, we issued and sold an additional 951,837 shares of common stock at the IPO price of $16.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $14.2 million after deducting underwriting discounts and commissions.

Prior to our IPO, we have funded our operations with proceeds from sales of preferred stock, term loans and an upfront payment of $15.0 million we received in July 2020 under our collaboration agreement with Merck Sharp & Dohme Corp., or Merck.

We have incurred significant operating losses since our inception. For the six months ended June 30, 2021 and the year ended December 31, ~~2019, we reported net losses of $51.1 million, and for the nine months ended September 30,~~ 2020, we reported net losses of ~~$48.0 million.~~$46.1 million and $68.8 million, respectively. As of ~~September~~June 30, ~~2020,~~2021, we had an accumulated deficit of ~~$142.2~~$209.0 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more product candidates we may develop.

We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

• advance our FHD-286 and FHD-609 product candidates ~~into Phase 1 clinical development~~ and continue our preclinical development of product candidates from our current research programs;

• identify additional research programs and additional product candidates;

• initiate preclinical testing for any new product candidates we identify and develop;

• obtain, maintain, expand, enforce, defend and protect our trade secrets and intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio;

• hire additional ~~clinical, regulatory~~research and ~~scientific~~development personnel;

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• add operational, legal, compliance, financial and management information systems and personnel to support our research, product development and operations as a public company;

• expand the capabilities of our platform;

• acquire or in-license product candidates, intellectual property and technologies;

• operate as a public company;

• seek marketing approvals for any product candidates that successfully complete clinical trials; and

• ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval.

We will not generate revenue from product sales unless and until we successfully commercialize one of our product candidates, after completing clinical development and obtaining regulatory approval. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, and distribution. Further, ~~following the completion of this offering,~~ we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through our collaboration agreement with Merck and a combination of equity offerings, debt financings and collaborations or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back our development or commercialization plans for one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

COVID-19

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and are difficult to predict. While we continue to conduct our research and development activities, the COVID-19 pandemic may cause disruptions that affect our ability to initiate and complete preclinical studies, ongoing and future clinical trials or to procure items that are essential for our research and development activities.

We plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our business operations. In an effort to provide a safe work environment for our employees, we have, among other things, increased the cadence of sanitization of our office and lab facilities, implemented various social distancing measures in our office and labs including replacing in-person meetings with virtual interactions, and are providing personal protective equipment for our employees present in our office and lab facilities. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.

Components of Our Results of Operations

Collaboration Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or licenses with third parties, we may generate revenue in the future from product sales, milestone payments under our existing collaboration agreement or payments from other license agreements that we may enter into with third parties.

In July 2020, we entered into a strategic research collaboration and license agreement, or the Collaboration Agreement, with Merck, pursuant to which we will apply our proprietary Gene Traffic Control platform to discover and develop novel

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therapeutics. Under the Collaboration Agreement, we granted Merck exclusive global rights to develop, manufacture, and commercialize drugs that target dysregulation of a single transcription factor. Under the terms of the Collaboration Agreement, we received a nonrefundable upfront payment of $15.0 million from Merck and are eligible to receive up to $245.0 million upon ~~first~~ achievement of specified research, development and regulatory milestones by any product candidate generated by the collaboration, and up to $165.0 million upon achievement of specified sales-based milestones per approved product from the collaboration, if any, as well as royalties on sales of any approved product from the collaboration. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.

We record revenue over the research term as we satisfy our performance obligation under the Collaboration Agreement. Accordingly, the upfront payment of $15.0 million is being recognized as revenue using the cost-to-cost method, which we believe best depicts the transfer of control to the customer over time. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified single performance obligation. We expect revenue to fluctuate as the achievement of milestones becomes probable and as our efforts to satisfy our performance obligation ~~will likely~~ vary from period to period. In estimating the total costs to satisfy our performance obligation pursuant to the Collaboration Agreement, we are required to make significant estimates including an estimate of the number of transcription factor substitutions and the expected time and expected costs to fulfill the performance obligation. The cumulative effect of revisions to the total estimated costs to complete our performance obligation will be recorded in the period in which the changes are identified, and amounts can be reasonably estimated. While such revisions will have no impact on our cash flows, a significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. AsIn the three months ended June 30, 2021, the Company re-evaluated its estimates related to the collaboration agreement resulting in a reclass of ~~September 30, 2020, we recorded $14.8~~$1.9 million ~~of the upfront payment as~~from short-term deferred revenue to long-term deferred revenue, net of current portion on the Company's condensed consolidated balance sheets. During the three and six months ended June 30, 2021, we recognized ~~$0.2~~$0.3 million and $0.6 million, respectively, of revenue under the Collaboration ~~Agreement.~~

Agreement and, as of June 30, 2021, we had $14.0 million of deferred revenue related to the upfront payment remaining on our condensed consolidated balance sheets.

Operating Expenses

Our operating expenses are comprised of research and development expenses and general and administrative expenses.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and progressing our programs, which include:

•personnel-related costs, including salaries, benefits and stock-based compensation expense, for employees engaged in research and development functions;

•expenses incurred in connection with our research programs and preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants and contractors and contract research organizations, or CROs;

•the cost of manufacturing drug substance and drug product for use in our research and preclinical studies and ~~future~~ clinical trials under agreements with third parties, such as consultants and contractors and contract development and manufacturing organizations, or CDMOs;

•laboratory supplies and research materials;

•facilities, depreciation and amortization and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and

•payments made under third-party licensing agreements.

We track our direct external research and development expenses on a program-by-program basis. These consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, CDMOs, and CROs in connection with our preclinical, clinical and manufacturing activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform and, as such, are not separately classified.

We expect that our research and development expenses will increase substantially as we advance our programs into clinical development and expand our discovery, research and preclinical activities in the near term and in the future. At this time, we

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cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any product candidates we may develop. A change in the outcome of any number of variables with respect to product candidates we may develop could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidates we may develop.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for employees engaged in executive, legal, finance and accounting and other administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, investor and public relations and accounting and audit services as well as direct and allocated facility-related costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our programs and platform. We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs and investor and public relations expenses associated with operating as a public company.

Other Income (Expense)

Interest Expense

Interest expense consists of interest expense associated with outstanding borrowings under our ~~existing~~ loan ~~agreement with Comerica Bank, or Comerica,~~agreements as well as the amortization of debt discount associated with such ~~agreement.~~

agreements.

Interest Income and Other Income (Expense), Net

Interest income consists of interest earned on our invested cash balances. Other income (expense) consists of sublease income and miscellaneous expense unrelated to our core operations.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

As of December 31, ~~2019,~~2020, we had federal and state net operating loss carryforwards of ~~$87.6~~$147.3 million and ~~$84.9~~$132.3 million, respectively, which may be available to offset future taxable income. The federal net operating loss carryforwards include $12.5 million which expire at various dates beginning in 2035 and ~~$75.1~~$134.8 million which carryforward indefinitely but in some circumstances may be limited to offset 80% of annual taxable income. The state net operating loss carryforwards expire at various dates beginning in 2036. As of December 31, ~~2019,~~2020, we also had federal and state research and development tax credit carryforwards of ~~$1.5~~$3.4 million and ~~$1.2~~$2.0 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2036 and 2031, respectively. Due to our history of cumulative net losses since inception and uncertainties surrounding our ability to generate future taxable income, we have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as well as elsewhere in this Quarterly Report on Form 10-Q, we believe that revenue recognition, accrued research and development expenses and stock-based compensation are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. There have

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been no material changes to our critical accounting policies and estimates detailed in the Critical Accounting Policies and Significant Judgements section of Item 7. Managements Discussion and Analysis of financial Condition and Results of Operations

in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Results of Operations

Comparison of the Three and Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~

2020

The following table summarizes our results of operations for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~

2020:


	Three Months Ended September 30,										Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			Change				2021		2020		Change		2021		2020		Change
	(in thousands)										(in thousands)						(in thousands)
Collaboration revenue	$	179		$	—		$	179		Collaboration revenue	$	279	$	—	$	279	$	565	$	—	$	565

Operating expenses:										Operating expenses:
Research and development		16,113			11,292			4,821		Research and development	18,642		13,628		5,014		37,368		25,131		12,237
General and administrative		2,555			1,808			747		General and administrative	4,898		1,911		2,987		9,588		4,132		5,456

Total operating expenses		18,668			13,100			5,568		Total operating expenses	23,540		15,539		8,001		46,956		29,263		17,693

Loss from operations		(18,489	)		(13,100	)		(5,389	)	Loss from operations	(23,261)		(15,539)		(7,722)		(46,391)		(29,263)		(17,128)

Other income (expense):										Other income (expense):
Interest expense		(202	)		(113	)		(89	)	Interest expense	(495)		(198)		(297)		(981)		(456)		(525)
Interest income and other income (expense), net		394			121			273		Interest income and other income (expense), net	645		14		631		1,275		43		1,232
Change in fair value of preferred stock warrant liability		(70	)		—			(70	)	Change in fair value of preferred stock warrant liability	—		—		—		—		1		(1)

Total other income (expense), net		122			8			114		Total other income (expense), net	150		(184)		334		294		(412)		706

Net loss	$	(18,367	)	$	(13,092	)	$	(5,275	)	Net loss	$	(23,111)	$	(15,723)	$	(7,388)	$	(46,097)	$	(29,675)	$	(16,422)

Collaboration Revenue

Collaboration revenue recognized during the three months ended ~~September~~June 30, ~~2020~~2021 of ~~$0.2~~$0.3 million was related to our Collaboration Agreement. The upfront payment of $15.0 million was initially recorded as deferred revenue and is being recognized as revenue under the cost-to-cost method.

~~Research and Development Expenses~~

~~The following table summarizes our research and development expenses for the three months ended September 30, 2020 and 2019:~~

   Three Months Ended September 30,
               2020                            2019                            Change
   (in thousands)
Direct research and development expenses by program:

FHD-286
   $ 1,220    $ 1,092    $ 128
FHD-609
   3,300    1,334    1,966
Platform, research and discovery, and unallocated expenses:

Platform and other early stage research external costs
   3,349    3,489    (140 )
Personnel related (including stock-based compensation)
   4,568    3,609    959
Facility related and other
   3,676    1,768    1,908






Total research and development expenses
   $ 16,113    $ 11,292    $ 4,821

~~Research and development expenses were $16.1 million for the three months ended September 30, 2020, compared to $11.3 million for the three months ended September 30, 2019.~~ ~~FHD-609~~ ~~program costs increased by $2.0 million as a result of an increase in preclinical and manufacturing costs, partially offset by a decrease in research costs as we progressed our candidate into~~ ~~IND-enabling~~ studies. Personnel-related costs increased by $1.0 million due primarily to increased headcount in our research and development function. The increase in facility-related expenses and other of $1.9 million There was due to the increased costs of supporting a larger group of research and development personnel and their research efforts, including increased rent expense related to our new facility lease, which commenced in January 2020.

~~General and Administrative Expenses~~

~~The following table summarizes our general and administrative expenses for the three months ended September 30, 2020 and 2019:~~

   Three Months Ended September 30,
               2020                            2019                            Change
   (in thousands)
Personnel related (including stock-based compensation)
   $ 1,474    $ 1,031    $ 443
Professional and consultant
   741    590    151
Facility related and other
   340    187    153






Total general and administrative expenses
   $ 2,555    $ 1,808    $ 747

General and administrative expenses were $2.6 million for the three months ended September 30, 2020, compared to $1.8 million for the three months ended September 30, 2019. The increase in personnel-related costs of $0.4 million was primarily a result of an increase in headcount in our general and administrative function to support our business.

~~Other Income (Expense)~~

Interest expense was $0.2 million for the three months ended September 30, 2020, compared to $0.1 million for the three months ended September 30, 2019. The increase was due to increased borrowings under our loan facility.

Interest income and other income (expense), net was $0.4 million for the three months ended September 30, 2020 and consisted primarily of sublease income of $0.4 million related to the sublease that began in July 2020. Interest income and other income (expense), net of $0.1 million for the three months ended September 30, 2019 consisted primarily of $0.1 million of interest income.

~~Comparison of the Nine Months Ended September 30, 2020 and 2019~~

~~The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019:~~

   Nine Months Ended September 30,
               2020                         2019                         Change
   (in thousands)
Collaboration revenue
   $ 179 $ — $ 179


Operating expenses:

Research and development
   41,244 30,842 10,402
General and administrative
   6,687 5,056 1,631


Total operating expenses
   47,931 35,898 12,033


Loss from operations
   (47,752 ) (35,898 ) (11,854 )


Other income (expense):

Interest expense
   (658 ) (362 ) (296 )
Interest income and other income (expense), net
   437 424 13
Change in fair value of preferred stock warrant liability
   (69 ) — (69 )


Total other income (expense), net
   (290 ) 62 (352 )


Net loss
   $ (48,042 ) $ (35,836 ) $ (12,206 )

~~Collaboration Revenue~~

~~Collaboration~~no collaboration revenue recognized during the three months ended ~~September~~June 30, 2020 as the Collaboration Agreement was not entered into until July 2020.

Collaboration revenue recognized during the six months ended June 30, 2021 of ~~$0.2~~$0.6 million was related to our Collaboration Agreement. The upfront payment of $15.0 million was initially recorded as deferred revenue and is being recognized as revenue under the cost-to-cost method.

There was no collaboration revenue recognized during the six months ended June 30, 2020 as the Collaboration Agreement was not entered into until July 2020.

Research and Development Expenses

The following table summarizes our research and development expenses for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~

   Nine Months Ended September 30,
               2020                            2019                            Change
   (in thousands)
Research and development program expenses:

FHD-286
   $ 4,289    $ 3,935    $ 354
FHD-609
   5,269    3,671    1,598
Platform, research and discovery, and unallocated expenses:

Platform and other early stage research external costs
   9,735    8,996    739
Personnel related (including stock-based compensation)
   12,846    9,251    3,595
Facility related and other
   9,105    4,989    4,116






Total research and development expenses
   $ 41,244    $ 30,842    $ 10,402

2020:

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	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
	(in thousands)						(in thousands)
Direct research and development expenses by program:
FHD-286	$	2,110	$	2,081	$	29	$	4,048	$	3,069	$	979
FHD-609	1,314		1,128		186		2,712		1,969		743
Platform, research and discovery, and unallocated expenses:
Platform and other early stage research external costs	4,599		3,589		1,010		9,057		6,386		2,671
Personnel related (including stock-based compensation)	6,082		4,028		2,054		12,306		8,278		4,028
Facility related and other	4,537		2,802		1,735		9,245		5,429		3,816
Total research and development expenses	$	18,642	$	13,628	$	5,014	$	37,368	$	25,131	$	12,237

Research and development expenses were ~~$41.2~~$18.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$30.8~~$13.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The ~~increases in our~~ ~~FHD-286~~ ~~and~~ ~~FHD-609~~ ~~program costs of $0.4 million and $1.6 million, respectively, were due~~increase is attributed to the following:

•an increase in ~~preclinical and manufacturing~~personnel-related costs ~~partially offset by~~of $2.1 million, including a ~~decrease in research costs as we progressed our program candidates into~~ ~~IND-enabling~~ ~~studies. Platform and other early stage research external costs, which include our selective BRM and selective ARID 1B early-stage programs, increased by $0.7~~$0.8 million ~~primarily as a result of an~~ increase in ~~selective BRM costs as a result of our ongoing~~ ~~hit-to-lead~~ ~~efforts. Personnel-related costs increased by $3.6 million~~stock-based compensation expense, which due primarily to increased headcount in our research and development ~~function. The~~function; and

•an increase in facility-related expenses and other of ~~$4.1~~$1.7 million, which was due to the increased costs of supporting a larger research and development organization and their research efforts, including increased rent and maintenance expense related to our new facility lease, and purchases lab supplies, consumables, and equipment.

Research and development expenses were $37.4 million for the six months ended June 30, 2021, compared to $25.1 million for the three months ended June 30, 2020. The increase is attributed to the following:

•an increase in personnel-related costs of $4.0 million, including a $1.5 million increase in stock-based compensation expense due primarily to increased headcount in our research and development function;

•an increase in facility-related expenses and other of $3.8 million was due to the increased costs of supporting a larger ~~group of~~ research and development ~~personnel~~organization and their research efforts, including increased rent and maintenance expense related to our new facility lease, ~~which commenced~~and purchases lab supplies, consumables, and equipment;

•an increase in ~~January 2020.~~

FHD-286 program costs of $1.0 million as the Company initiated two Phase 1 clinical trials in uveal melanoma and AML; and

•an increase in our FHD-609 program costs of $0.7 million as the Company initiated a Phase 1 clinical trial in synovial sarcoma.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~

2020:


	Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		Change			2021		2020		Change		2021		2020		Change
	(in thousands)							(in thousands)						(in thousands)
Personnel related (including stock-based compensation)	$	3,946	$	2,744	$	1,202	Personnel related (including stock-based compensation)	$	2,678	$	1,149	$	1,529	$	5,161	$	2,472	$	2,689
Professional and consultant		1,958		1,760		198	Professional and consultant	972		571		401		2,071		1,217		854
Facility related and other		783		552		231	Facility related and other	1,248		191		1,057		2,356		443		1,913

Total general and administrative expenses	$	6,687	$	5,056	$	1,631	Total general and administrative expenses	$	4,898	$	1,911	$	2,987	$	9,588	$	4,132	$	5,456

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General and administrative expenses were ~~$6.7~~$4.9 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$5.1~~$1.9 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase is attributed to the following:

•an increase in personnel-related costs of ~~$1.2~~$1.5, including a $0.7 million increase in stock-based compensation expense, was primarily a result of an increase in headcount in our general and administrative function to support our ~~business.~~

business;

•an increase in facility related and other expense of $1.1 which was primarily due to increased rent, maintenance, and non-capital equipment expense related to our new facility lease; and

•an increase in professional and consulting costs of $0.4, which was due to increased audit, tax, and consulting services associated with being a publicly traded company.

General and administrative expenses were $9.6 million for the six months ended June 30, 2021, compared to $4.1 million for the six months ended June 30, 2020. The increase was primarily a result of the following:

•an increase in personnel-related costs of $2.7 million, including a $1.4 million increase in stock-based compensation expense, was primarily a result of an increase in headcount in our general and administrative function to support our business;

•an increase in facility related and other expense of $1.9 million was primarily due to including increased rent, maintenance, and non-capital equipment expense related to our new facility lease; and

•an increase in professional and consulting costs of $0.9 million, which was due to increased audit, tax, and consulting services associated with being a publicly traded company.

Other Income (Expense)

Interest expense was ~~$0.7~~$0.5 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$0.4~~$0.2 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase was due to the increased ~~borrowings under our loan facility.~~

outstanding debt balance as of June 30, 2021 compared to June 30, 2020, resulting from the Oxford Loan.

Interest expense was $1.0 million for the six months ended June 30, 2021, compared to $0.5 million for the three months ended June 30, 2020. The increase was due to the increased outstanding debt balance as of June 30, 2021 compared to June 30, 2020, resulting from the Oxford Loan.

Interest income and other income (expense), net was ~~$0.4~~$0.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and consisted primarily of sublease income of ~~$0.4~~$0.6 million related to the sublease that began in July ~~2020.Interest~~2020. Interest income and other income (expense), net of ~~$0.4~~a de minimis amount for the three months ended June 30, 2020 consisted primarily of interest income.

Interest income and other income (expense), net was $1.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2021 and consisted primarily of ~~$0.4~~sublease income of $1.2 million related to the sublease that began in July 2020. Interest income and other income (expense), net of a de minimis amount for the three months ended June 30, 2020 consisted primarily of interest income. ~~Interest income decreased from the nine months ended September 30, 2019 to the same period in 2020 as a result of lower invested balances and lower interest rates on invested balances.~~

Liquidity and Capital Resources

Since our inception in October 2015, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we support our continued research activities and development of our programs and platform. Through ~~September~~June 30, ~~2020,~~2021, we have funded our operations with proceeds from our IPO in October 2020, sales of preferred stock, term loans and an upfront payment of $15.0 million we received in July 2020 under our Collaboration Agreement. As of ~~September~~June 30, ~~2020,~~2021, we had unrestricted cash, ~~and~~ cash equivalents and marketable securities of ~~$74.6~~$141.3 million.

On October 27, 2020, we completed our IPO pursuant to which we issued and sold 7,500,000 shares of our common stock at a public offering price of $16.00 per share, resulting in net proceeds of $108.0 million, after deducting underwriting discounts and commissions and other offering expenses.

On November 19, 2020, we issued and sold an additional 951,837 shares of common stock at the IPO price of $16.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $14.2 million after deducting underwriting discounts and commissions.

Cash Flows

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The following table summarizes our sources and uses of cash for each of the periods presented:


	Nine Months Ended September 30,							Six Months Ended June 30,
	2020			2019				2021		2020
	(in thousands)							(in thousands)
Cash used in operating activities	$	(20,631	)	$	(33,151	)	Cash used in operating activities	$	(41,630)	$	(23,357)
Cash used in investing activities		(8,694	)		(836	)
Cash provided by (used in) investing activities							Cash provided by (used in) investing activities	73,828		(3,269)
Cash provided by financing activities		88,964			15,469		Cash provided by financing activities	173		48,210

Net increase (decrease) in cash, cash equivalents and restricted cash	$	59,639		$	(18,518	)	Net increase (decrease) in cash, cash equivalents and restricted cash	$	32,371	$	21,584

Operating Activities

During the ~~nine~~six months ended ~~September~~June 30, 2021, operating activities used $41.6 million of cash, resulting from our net loss of $46.1 million and by changes in our operating assets and liabilities of $3.2 million, partially offset by net non-cash charges of $7.8 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2021 consisted primarily of a $2.0 million decrease in accounts payable and accrued expenses, a decrease of $0.7 million in lease liabilities and a decrease of $0.6 million in deferred revenue resulting from the recognition of revenue on the upfront payment received in connection with our Collaboration Agreement partially offset by a decrease of $0.1 million in prepaid expenses and other current assets.

During the six months ended June 30, 2020, operating activities used ~~$20.6~~$23.4 million of cash, resulting from our net loss of ~~$48.0~~$29.7 million, partially offset by net non-cash charges of ~~$6.0~~$3.3 million and net cash provided by changes in our operating assets and liabilities of ~~$21.4~~$3.0 million. Net cash provided by changes in our operating assets and liabilities for the ~~nine~~six months ended ~~September~~June 30, 2020 consisted primarily of a ~~$14.8 million increase in deferred revenue resulting from the upfront payment received in connection with our Collaboration Agreement and an $8.9~~$3.3 million increase in operating lease liabilities resulting from our landlord

incentives ~~partially offset by a decrease~~and an increase of ~~$0.6~~$0.5 million in accounts payable and accrued expenses and other current liabilities, ~~and~~both partially offset by an increase of ~~$1.7~~$0.8 million in prepaid expenses and other current assets.

~~During the nine months ended September 30, 2019, operating activities used $33.2 million of cash, resulting from our net loss of $35.8 million, partially offset by net~~ ~~non-cash charges~~ of $2.5 million and net cash provided by changes in our operating assets and liabilities of $0.2 million. Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2019 consisted primarily of a $1.5 million increase in accounts payable and accrued expenses and other current liabilities, partially offset by a $0.8 million decrease in operating lease liabilities and an increase of $0.5 million in prepaid expenses and other current assets.

Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to growth in our business, the advancement of our research programs and the timing of vendor invoicing and payments.

Investing Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019,~~2021 net cash ~~used in~~provided by investing activities was ~~$8.7~~$73.8 million due to$119.4 million of sales of marketable securities partially offset by $42.6 million of purchases of marketable securities and ~~$0.8~~$3.0 million ~~respectively, due to the acquisition~~in purchases of property and ~~equipment during these periods.~~equipment. Property and equipment purchases for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were primarily related to leasehold improvements for our new facility in Cambridge, Massachusetts.

~~Financing Activities~~

During the ~~nine~~six months ended ~~September~~June 30, 2020, net cash used in investing activities was $3.3 million due to the acquisition of property and equipment during the period. Property and equipment purchases for the six months ended June 30, 2020 were primarily related to leasehold improvements for our new facility in Cambridge, Massachusetts.

Financing Activities

During the six months ended June 30, 2021, net cash provided by financing activities was $0.2 million consisting of net proceeds from the exercise of common stock options.

During the six months ended June 30, 2020, net cash provided by financing activities was ~~$89.0~~$48.2 million consisting of ~~net~~ proceeds from the sale of our Series B preferred stock of ~~$89.9~~$47.9 million and net proceeds from the exercise of common stock options of ~~$0.9~~$0.3 million. ~~These amounts were partially offset by the payment of offering costs of $1.2 million and the repayment of notes payable of $0.5 million.~~

During the nine months ended September 30, 2019, net cash provided by financing activities was $15.5 million, consisting of net proceeds from the sale of our Series B preferred stock of $15.3 million and proceeds from the exercise of common stock options of $0.2 million.

~~Loan and Security Agreement with Comerica~~

As of September 30, 2020, we have outstanding loans under our amended loan and security agreement, or the Loan, with Comerica Bank, or Comerica, of $6.8 million (Term Loan A) and $7.7 million (Term Loan B). Borrowings under both Term Loan A and Term Loan B are being repaid in monthly payments of equal principal plus interest until the loan maturity date of February 1, 2023. Interest for Term Loan A is the greater of (a) Comerica’s Prime Rate or (b) LIBOR plus 2.5%, and for Term Loan B, 1.0% plus the greater of (a) Comerica’s Prime Rate or (b) LIBOR plus 2.5%. A final payment fee of 3.0% of the aggregate amounts drawn under Term Loan A and 4.0% of the aggregate amounts drawn under Term Loan B, which amounts to $0.5 million, is due upon the earlier of the maturity date, the repayment date if paid early, whether voluntary or upon acceleration due to default, the sale of substantially all of our assets, or our IPO. On November 19, 2020, the amounts outstanding under this Loan were paid in full with proceeds from a new debt agreement.

Borrowings under the Loan, as amended, are collateralized by substantially all of our assets, other than our intellectual property. There are no financial covenants associated with the Loan, as amended; however, we are subject to certain affirmative and negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions; encumbering our intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and engaging in certain other business transactions. The obligations under the Loan, as amended, are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition. Upon the occurrence of an event of default and until such event of default is no longer continuing, the annual interest rate will be 5.0% above the otherwise applicable rate. We believe an event of default would be remote.

Loan and Security Agreement with Oxford

On November 19, 2020, we entered into a new loan and security agreement, or the Oxford Loan, with Oxford Finance LLC, or Oxford, for an aggregate principal amount of $20.0 million (Oxford Term Loan A) and up to an additional $5.0 million (Oxford Term Loan B). ~~The~~Oxford Term Loan ~~bears~~A and Oxford Term Loan B (the "Term Loans" bear interest at a floating per annum rate equal to the greater of (i) 8.0% and (ii) the sum of (a) thirty-day

U.S. DOLLAR LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.84%. In

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addition, upon loan maturity or prepayment, we are ~~reqired~~required to make a final payment fee equal to 5.0% of the aggregate principal amount borrowed. We are required to make monthly interest only payments under the Oxford Loan on the first calendar day of each month beginning on January 1, 2021. Beginning on December 1, 2023, we are required to make consecutive equal monthly payments of principal, together with applicable interest, in arrears, based upon a repayment schedule equal to 24 months, with a final maturity date of November 1, 2025.

Our obligations under the Oxford Loan Agreement will be secured by a security interest in all of our assets, other than our intellectual property. We are also subject to certain affirmative and negative covenants.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and initiate clinical trials for our product candidates in development. We believe that the net proceeds from our IPO in October 2020, together with our existing cash, ~~and~~ cash equivalents and marketable securities, will enable us to fund our operating expenses, capital expenditure requirements and debt service payments into at least the ~~third~~fourth quarter of 2022. We have based these estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be ~~wrong.~~inaccurate. We could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing sooner than planned, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

If we are unable to raise sufficient capital as and when needed, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate we may develop, or be unable to expand our operations or otherwise capitalize on our business opportunities. If we raise additional funds through collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

See “Risk Factors” in our ~~Registration Statement~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for additional risks associated with our substantial capital requirements.

~~Contractual Obligations and Commitments~~

During the three months ended September 30, 2020, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Registration Statement.

~~Critical Accounting Policies and Significant Judgments and Estimates~~

We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management.

Other than our revenue policy disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report, there have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Registration Statement.

Off-balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the ~~SEC.~~

Securities and Exchange Commission.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~As September 30, 2020, we had cash and cash equivalents of $74.6 million, which consisted of cash and money market funds. Interest income is sensitive to changes~~

We are a smaller reporting company, as defined in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in market interest rates would not have a material effect on the fair market value of our investment portfolio.

~~As of September 30, 2020, we had $14.5 million of borrowings outstanding~~Rule 12b-2 under the ~~Loan with Comerica. Outstanding borrowings bear interest at a variable rate based on the bank’s prime rate~~Securities Exchange Act of 1934, as amended, for this reporting period and ~~LIBOR. An immediate 10% change in the prime rate or LIBOR would not have had a material impact on our debt-related obligations, financial position or results of operations.~~

We are not ~~currently exposed~~required to ~~significant market risk related to changes in foreign currency exchange rates. Our operations may be subject to fluctuations in foreign currency exchange rates in~~provide the ~~future.~~

information required under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal Accounting and Financial Officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures as of period end. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal

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financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~September~~June 30, ~~2020,~~2021, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended ~~September~~June 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

For a discussion of potential risks or uncertainties, please see “Risk Factors” in our ~~Registration Statement.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020. There have been no material changes to the risk factors disclosed in our ~~Registration Statement.~~

Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Use of Proceeds from Initial Public Offering

On October 27, 2020, we closed our initial public offering, or IPO, of our common stock pursuant to which we issued and sold 7,500,000 shares of our common stock at a price to the public of $16.00 per share for aggregate gross proceeds of $120.0 million, before deducting underwriting discounts and commissions and offering expenses payable by us. On November 19, 2020, we sold an additional 951,837 shares of our common stock pursuant to the underwriters’ option to purchase additional shares in the IPO at the public offering price for an additional $15.2 million in gross proceeds.

All of the shares issued and sold in the IPO were registered under the Securities Act pursuant to the Registration Statement, which was declared effective by the SEC on October 22, 2020. Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and Cowen and Company, LLC acted as joint book-running managers and Wedbush Securities Inc. acted as lead manager of our IPO.

We received aggregate net proceeds of approximately $122.2 million after deducting underwriting discounts and commissions and other offering expenses payable by us. None of the underwriting discounts and commissions or offering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10 percent or more of our common stock or to any of our affiliates.

We have used approximately $56.7 million of the net proceeds from the IPO as of June 30, 2021 to advance FHD-286 and FHD-609 into the clinic, to further invest in our pipeline and platform targeting the chromatin regulatory system and for working capital and other general corporate purposes. There has been no material change in our planned use of the net proceeds from the offering as described in our Registration Statement.

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Item 6. Exhibits.


Exhibit Number						Description
31.1* 10.1*						Consulting Agreement by and Between Ian F. Smith and Foghorn Therapeutics Inc., dated as of June 23, 2021.
10.2						First Amendment to Loan and Security Agreement dated as of June 14, 2021, among Oxford Finance LLC and Foghorn Therapeutics Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 15, 2021) (File No. 001-39634).
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* 31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* 32.1**						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* 32.2**						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document

*	~~Filed herewith.~~

**	~~Furnished herewith.~~

______________

*Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on

its behalf by the undersigned thereunto duly authorized.

FOGHORN THERAPEUTICS, INC.

Date: ~~December 4, 2020~~August 10, 2021

By:

~~By:~~

/s/ Allan Reine

Allan Reine, M.D.

Chief Financial Officer

(Principal Accounting and Financial Officer)


			Page
PART I.	FINANCIAL INFORMATION			2
Item 1.	Financial Statements (Unaudited)			2
	Condensed Consolidated Balance Sheets			2
	Condensed Consolidated Statements of Operations and Comprehensive Loss			3
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ ~~Deficit~~Equity			4
	Condensed Consolidated Statements of Cash Flows			6	5
	Notes to Unaudited Condensed Consolidated Financial Statements			7	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			29	25
Item 4.	Controls and Procedures			29	25
PART II.	OTHER INFORMATION			30	27
Item 1.	Legal Proceedings			30	27
Item 1A.	Risk Factors			30	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			30	27
Item 6.	Exhibits			31	28
Signatures		32	29


	September 30,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	74,620		$	14,981
Restricted cash		541			541
Prepaid expenses and other current assets		2,603			1,363

Total current assets		77,764			16,885
Property and equipment, net		16,848			2,683
Restricted cash		1,733			1,733
Deferred offering costs		1,970			—
Other assets		211			11
Operating lease right-of-use assets		43,902			1,030

Total assets	$	142,428		$	22,342

Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	3,554		$	3,439
Accrued expenses		9,970			3,701
Operating lease liabilities		91			1,360
Notes payable, net of discount		5,990			4,152
Deferred revenue		1,696			—

Total current liabilities		21,301			12,652
Notes payable, net of discount and current portion		8,801			10,960
Operating lease liabilities, net of current portion		56,005			157
Deferred revenue, net of current portion		13,125			—
Preferred stock warrant liability		114			45

Total liabilities		99,346			23,814

Commitments and contingencies (Note 10)
Convertible preferred stock (Series A-1, A-2 and B), $0.0001 par value; 43,296,288 and 28,629,622 shares authorized at September 30, 2020 and December 31, 2019, respectively; 40,623,413 and 28,615,546 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; liquidation preference of $176,841 at September 30, 2020		176,405			86,544

Stockholders’ deficit:
Common stock, $0.0001 par value; 62,000,000 and 46,600,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 6,244,154 and 5,762,745 shares issued and 6,021,177 and 4,870,851 shares outstanding at September 30, 2020 and December 31, 2019, respectively		1			—
Additional paid-in capital		8,854			6,120
Accumulated deficit		(142,178	)		(94,136	)

Total stockholders’ deficit		(133,323	)		(88,016	)

Total liabilities, convertible preferred stock and stockholders’ deficit	$	142,428		$	22,342


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	125,166	$	92,795
Marketable securities	16,107		92,975
Prepaid expenses and other current assets	3,399		4,917
Total current assets	144,672		190,687
Property and equipment, net	19,002		19,528
Restricted cash	1,733		1,733
Other assets	2,445		842
Operating lease right-of-use assets	40,674		42,804
Total assets	$	208,526	$	255,594
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,406	$	3,680
Accrued expenses	5,152		9,161
Operating lease liabilities	6,840		$	3,981
Financing lease liability	106		0
Deferred revenue	910		2,024
Total current liabilities	16,414		18,846
Notes payable, net of discount and current portion	19,826		19,654
Operating lease liabilities, net of current portion	54,803		58,361
Financing lease liability, net of current portion	198		0
Deferred revenue, net of current portion	13,095		12,546
Total liabilities	104,336		109,407
Commitments and contingencies (Note 11)	0		0
Stockholders’ equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued or outstanding	0		0
Common stock, $0.0001 par value; 175,000,000 shares authorized at June 30, 2021 and December 31, 2020; 36,861,350 shares issued and outstanding at June 30, 2021; 36,790,946 shares issued and outstanding at December 31, 2020	4		4
Additional paid-in capital	313,229		309,126
Accumulated other comprehensive loss	(10)		(7)
Accumulated deficit	(209,033)		(162,936)
Total stockholders’ equity	$	104,190	$	146,187
Total liabilities and stockholders’ equity	$	208,526	$	255,594


	Series A-1, A-2 and B
	Convertible								Additional					Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
	Three Months Ended September 30, 2020
Balances at June 30, 2020		35,023,413	$	134,480		5,434,649	$	1	$	7,399	$	(123,811	)	$	(116,411	)
Issuance of Series B convertible preferred stock, net of issuance costs of $75		5,600,000		41,925		—		—		—		—			—
Issuance of common stock upon exercise of stock options		—		—		363,556		—		578		—			578
Vesting of restricted stock		—		—		222,972		—		—		—			—
Stock-based compensation expense		—		—		—		—		877		—			877
Net loss		—		—		—		—		—		(18,367	)		(18,367	)

Balances at September 30, 2020		40,623,413	$	176,405		6,021,177	$	1	$	8,854	$	(142,178	)	$	(133,323	)


	Three Months Ended September 30, 2019
Balances at June 30, 2019		28,615,546	$	86,544		4,014,627	$	—	$	4,469	$	(65,752	)	$	(61,283	)
Issuance of common stock upon exercise of stock options		—		—		212,322		—		138		—			138
Vesting of restricted stock		—		—		222,973		—		—		—			—
Stock-based compensation expense		—		—		—		—		443		—			443
Net loss		—		—		—		—		—		(13,092	)		(13,092	)

Balances at September 30, 2019		28,615,546	$	86,544		4,449,922	$	—	$	5,050	$	(78,844	)	$	(73,794	)


Remainder of 2020 (three months)	$	1,500
2021		6,000
2022		6,000
2023		1,000

	$	14,500


Remainder of 2021 (six months)	$	0
2022	0
2023	833
2024	10,000
2025	$	9,167
	$	20,000


	June 30,
	2021	2020
Stock options to purchase common stock	6,378,714	3,990,475
Warrants to purchase common stock	18,445	0
Convertible preferred stock (as converted to common stock)	0	18,931,575
Warrants to purchase convertible preferred stock (as converted to common stock)	0	7,608
Unvested restricted common stock	0	445,949
	6,397,159	23,375,607


Remainder of 2020 (three months)	$	1,517
2021		9,804
2022		10,015
2023		10,108
2024		10,349
Thereafter		41,100

Total future minimum lease payments		82,893
Less: imputed interest		(15,891	)
Less: estimated lease incentives		(10,906	)

Total operating lease liabilities	$	56,096


Included in the consolidated balance sheet (in thousands):	September 30, 2020
Current operating lease liabilities	$	91
Operating lease liabilities, net of current portion		56,005

Total operating lease liabilities	$	56,096


Remainder of 2021 (six months)	$	4,941
2022	9,967
2023	10,051
2024	10,375
2025	10,623
Thereafter	30,576
Total future minimum lease payments	76,533
Less: imputed interest	(13,413)
Less: estimated lease incentives	(1,477)
Total operating lease liabilities	$	61,643

Included in the condensed consolidated balance sheet (in thousands):	June 30, 2021
Current operating lease liabilities	$	6,840
Operating lease liabilities, net of current portion	54,803
Total operating lease liabilities	$	61,643