UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
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(I.R.S. Employer |
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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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
As of November 7, 2022 there were
FINCH THERAPEUTICS, INC.
FORM 10-Q
For the quarterly period ended September 30, 2022
Table of Contents
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ii |
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iii |
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iii |
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PART I. |
1 |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 |
1 |
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Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 |
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Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2022 and 2021 |
3 |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 |
5 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
36 |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 5. |
42 |
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Item 6. |
42 |
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43 |
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. 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 words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including: uncertainties relating to regulatory applications and related filing and approval timelines; our limited operating history and historical losses; our ability to raise additional funding to complete the development and any commercialization of our product candidates and the potential impact of termination of our collaboration with Takeda on such funding requirements and our ability to obtain funding; the possibility that we may be delayed in initiating, enrolling or completing any clinical trials; results of clinical trials may not be sufficient to satisfy regulatory authorities to approve our product candidates in their targeted or other indications (or such authorities may request additional trials or additional information); results of clinical trials may not be indicative of final or future results from later stage or larger clinical trials (or in broader patient populations once the product is approved for use by regulatory agencies) or may not be favorable or may not support further development; unexpected regulatory actions or delays, such as requests for additional safety and/or efficacy data or analysis of data, and including with respect to the FDA's planned review of the validation package for one of our release tests, which is utilized for CP101, or government regulation generally; the possibility that we may experience unanticipated regulatory or other development problems with any of our product candidates; our ability to comply with regulatory requirements and continued regulatory review, which may result in significant additional expense and with respect to which we may be subject to penalties for failure to comply; our ability to maintain patent and other intellectual property protection and the possibility that our intellectual property rights may be infringed, invalid or unenforceable or will be threatened by third parties; the possibility that third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights; our ability to qualify and scale our manufacturing capabilities to support multiple global clinical trials; our dependence on third parties in connection with manufacturing, clinical trials and preclinical studies; the impact and duration of the COVID-19 pandemic on our business, as well as those described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022, and in any other reports we file with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks,
ii
uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and such information may be limited or incomplete. These statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in our forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by law. We qualify all of our forward-looking statements by these cautionary statements.
SPECIAL NOTE REGARDING COMPANY REFERENCES
Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “FTG,” the “Company,” “we,” “us” and “our” refer to Finch Therapeutics Group, Inc., and its subsidiaries.
SPECIAL NOTE REGARDING TRADEMARKS
All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
iii
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share data)
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SEPTEMBER 30, |
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DECEMBER 31, |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating right-of-use assets |
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In-process research and development |
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Goodwill |
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Restricted cash, non-current |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities, current |
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Total current liabilities |
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Deferred tax liability |
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Loan payable, non-current |
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Operating lease liabilities, non-current |
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Other liabilities |
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Total liabilities |
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STOCKHOLDERS’ EQUITY: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
1
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
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THREE MONTHS ENDED |
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NINE MONTHS ENDED |
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2022 |
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2021 |
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2022 |
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2021 |
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REVENUE: |
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Collaboration revenue |
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$ |
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$ |
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$ |
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$ |
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Total revenue |
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OPERATING EXPENSES: |
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Research and development |
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( |
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( |
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( |
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( |
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General and administrative |
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( |
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( |
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( |
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( |
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Impairment of goodwill |
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( |
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( |
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Restructuring expense |
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( |
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( |
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Total operating expenses |
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( |
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( |
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( |
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( |
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Net loss from operations |
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( |
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( |
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( |
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( |
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OTHER INCOME (EXPENSE), NET: |
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Gain on extinguishment of PPP Loan |
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Interest income (expense), net |
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(Loss) gain on disposal of fixed assets, net |
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( |
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Other income (expense), net |
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( |
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Total other income (expense), net |
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( |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax provision |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss attributable to common stockholders—basic and diluted (Note 17) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders—basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average common stock outstanding—basic and diluted |
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See notes to unaudited condensed consolidated financial statements.
2
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited, in thousands, except share and per share data)
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REDEEMABLE CONVERTIBLE PREFERRED STOCK |
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$ |
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$ |
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$ |
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$ |
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COMMON STOCK |
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ADDITIONAL |
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ACCUMULATED |
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TOTAL |
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SHARES |
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AMOUNT |
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SHARES |
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AMOUNT |
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SHARES |
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AMOUNT |
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SHARES |
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AMOUNT |
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SHARES |
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AMOUNT |
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CAPITAL |
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DEFICIT |
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EQUITY (DEFICIT) |
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BALANCE, January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Conversion of redeemable convertible preferred stock into common stock upon initial public offering |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
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( |
) |
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— |
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Initial public offering, net of underwriting discounts, commissions and net of offering costs of $ |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
BALANCE, March 31, 2021 |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Underwriters' exercise of overallotment option, net of underwriting discounts, commissions and initial public offering costs of $ |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares repurchased for |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
BALANCE, June 30, 2021 |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
$ |
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||||
Exercise of common stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
— |
|
|
( |
) |
|
( |
) |
BALANCE, September 30, 2021 |
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|
— |
|
$ |
— |
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|
— |
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$ |
— |
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|
— |
|
$ |
— |
|
|
— |
|
$ |
— |
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|
|
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|
$ |
|
$ |
|
$ |
( |
) |
$ |
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||||
3
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholders’ Equity (Deficit) (Continued)
(Unaudited, in thousands, except share and per share data)
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COMMON STOCK |
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ADDITIONAL |
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ACCUMULATED |
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TOTAL |
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SHARES |
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AMOUNT |
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CAPITAL |
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DEFICIT |
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EQUITY |
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|||||
BALANCE, January 1, 2022 |
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$ |
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$ |
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