FOGHORN THERAPEUTICS INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. 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" and elsewhere in this Annual Report on Form 10-K.
Overview
Foghorn is a clinical stage, precision therapeutics biotechnology company
pioneering a new class of medicines that treat serious diseases by correcting
abnormal gene expression through selectively targeting the chromatin regulatory
system, an untapped opportunity for therapeutic intervention in oncology and in
a wide spectrum of other diseases including virology, autoimmune diseases and
neurology.
The chromatin regulatory system orchestrates gene expression-the turning on and
off of genes-which is fundamental to how all our cells function. The chromatin
regulatory system is implicated in approximately 50% of all cancers, and
understanding how this system works could lead to an entirely new class of
precision medicines. To our knowledge, we are the only company with the ability
to study and target the chromatin regulatory system at scale, in context, and in
an integrated way.
Our proprietary Gene Traffic Control® platform provides an integrated and
mechanistic understanding of how the various components of the chromatin
regulatory system interact, allowing us to identify, validate and potentially
drug targets within this system. We have developed unique capabilities that have
yielded new insights and scalability in drugging this new, previously untapped
and promising area.
Since our inception in 2015, our platform has generated a broad pipeline of more
than 15 programs with two clinical-stage drug candidates currently in phase 1
development across multiple indications. We have discovered highly selective
chemical matter for some of the most challenging targets in oncology including
BRM, CBP, EP300 and ARID1B as well as other undisclosed targets. We believe our
current pipeline has the potential to help more than 500,000 cancer patients. We
take a small molecule
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modality agnostic approach to drugging targets which includes protein degraders,
allosteric enzymatic inhibitors, and transcription factor disruptors. We are a
biology first company which means we focus first on the underlying genetics and
biology of a disease relevant target and then leverage the most appropriate
drugging approach to impact the disease biology.
Our two clinical-stage candidates are being studied across multiple indications
and are supported by compelling science and preclinical data. We are developing
FHD-286, a selective, allosteric ATPase inhibitor with two separate Phase 1
studies in (i) metastatic uveal melanoma and (ii) relapsed and/or refractory
acute myeloid leukemia ("AML"), and myelodysplastic syndrome ("MDS"). We expect
initial clinical data for metastatic uveal melanoma in the first half of 2023.
The relapsed and/or refractory AML and MDS study has been placed on full
clinical hold by the FDA due to potential differentiation syndrome and potential
linkages to grade 5 safety events. We are developing FHD-609, a targeted protein
degrader, and are currently enrolling a Phase 1 study in synovial sarcoma and
SMARCB1-loss tumors. We anticipate initial clinical data in mid-2023.
We believe Foghorn has the potential to be a major biopharmaceutical company
with our current pipeline addressing more than 20 tumor types impacting more
than 500,000 new patients annually. We believe we have the potential to file at
least six new INDs over the next four years.
Since our inception, 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 and initiating two strategic collaborations. We do not have any
products approved for sale and have not generated any revenue from product
sales.
On December 10, 2021 , we entered into a collaboration agreement (the "Lilly
Collaboration Agreement") with Eli Lilly and Company ("Lilly"), for which we
received an upfront payment of $300.0 million in January 2022 (see Note 8 to our
notes to consolidated financial statements included elsewhere in this Annual
Report on Form 10-K). Concurrent with the Lilly Collaboration Agreement, we also
entered into a stock purchase agreement (the "Lilly SPA") and issued and sold
Lilly 4,000,000 shares of our common stock at a price of $20.00 per share,
resulting in net proceeds of $80.0 million , of which $42.2 million was allocated
to equity upon the issuance of the Company's common stock.
In the third quarter of 2022, the Company achieved a research milestone related
to a Research Collaboration and Exclusive License Agreement (the "Merck
Collaboration Agreement") with Merck Sharp & Dohme Corp. ("Merck") and received
a $5.0 million milestone payment from Merck.
We have incurred significant operating losses since our inception. For the years
ended December 31, 2022 and 2021, we reported net losses of $108.9 million and
$101.3 million , respectively. As of December 31, 2022 , we had an accumulated
deficit of $373.1 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 are developing and 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 and continue our preclinical development of product candidates from our current research programs;
•identify and advance 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 research and development personnel;
•add operational, legal, compliance, financial and management information systems and personnel to support our research, product development and operations;
•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
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•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, manufacturing and distribution. Further, 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 we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and collaborations or licensing arrangements and our collaboration agreements with Merck and Lilly. 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.
Components of Our Results of Operations
Collaboration Revenue
To date, we have not generated any revenue from product sales and do not expect to do so 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 agreements or payments from other license agreements that we may enter into with third parties. In December of 2021, we entered into a strategic collaboration with Lilly to create novel oncology medicines by applying Foghorn's proprietary Gene Traffic Control platform. The collaboration includes a co-development and co-commercialization agreement for the aforementioned selective BRM oncology program and an additional undisclosed oncology target. In addition, the collaboration includes three additional discovery programs using Foghorn's proprietary Gene Traffic Control platform. Under the terms of the collaboration, Foghorn received upfront consideration of$300.0 million in cash pursuant to the Lilly Collaboration Agreement, together with an equity investment by Lilly of$80.0 million in shares of Foghorn common stock pursuant to the Lilly SPA. For the BRM-selective program and the additional undisclosed target program, Foghorn will lead discovery and early research activities, while Lilly will lead development and commercialization activities with participation from Foghorn in operational activities and cost sharing. Foghorn and Lilly will share 50/50 in theU.S. economics, and Foghorn is eligible to receive royalties on ex-U.S. sales starting in the low double-digit range and escalating into the twenties based on revenue levels. For the additional discovery programs, Foghorn will lead discovery and early research activities. Foghorn may receive up to a total of$1.3 billion in potential development and commercialization milestones. Additionally, Foghorn will have an option to participate in a percentage of theU.S. economics and is eligible to receive tiered royalties from the mid-single digit to low-double digit range on sales outside theU.S. that may be exercised after the successful completion of the dose-finding toxicity studies.
We cannot provide assurances as to the timing of future milestones, royalty payments and economics associated with the strategic collaboration with Loxo Oncology at Lilly.
We recognized total deferred revenue of$337.8 million related to the Lilly Collaboration Agreement and the Lilly SPA, which included the$300.0 million upfront payment under the Lilly Collaboration Agreement as well as$37.8 million allocated to deferred revenue from the gross proceeds of the Lilly SPA to be recognized over the performance period. For the year endedDecember 31, 2022 and 2021, we recognized$17.4 million and$0.6 million , respectively, of revenue under the Lilly Collaboration Agreement and, as ofDecember 31, 2022 , we had$319.8 million of deferred revenue related to the above mentioned upfront payment and revenue allocation remaining on our consolidated balance sheets. InJuly 2020 , we entered into the Merck Collaboration Agreement, pursuant to which we will apply our proprietary Gene Traffic Control platform to discover and develop novel therapeutics. Under the Merck Collaboration Agreement, we granted Merck exclusive global rights to develop and commercialize drugs that target dysregulation of a single transcription factor. Under the terms of the Merck Collaboration Agreement, we received a nonrefundable upfront payment of$15.0 million from 72
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Merck, and are eligible to receive up to$245.0 million upon 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. For the years endedDecember 31, 2022 and 2021, we recognized$1.8 million and$0.7 million , respectively, of revenue under the Merck Collaboration Agreement. In the third quarter of 2022, the Company achieved a research milestone related to the Merck Collaboration Agreement and received a$5.0 million milestone payment from Merck. As ofDecember 31, 2022 , we had$17.0 million of deferred revenue related to the upfront payment and milestone achievement remaining on our 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 ("CROs");
•the cost of manufacturing drug substance and drug product for use in our research and preclinical studies and clinical trials under agreements with third parties, such as consultants and contractors and contract development and manufacturing organizations ("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 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, human resources,
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.
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Table of Contents Other Income (Expense) Interest Income
Interest income consists of interest earned on our invested cash balances.
Other Income (Expense), Net
Other income (expense) ,net consists of sublease income and miscellaneous expense unrelated to our core operations.
Interest Expense
Interest expense consists of interest expense associated with previously outstanding borrowings under our prior loan agreements as well as the amortization of debt discount associated with such agreements.
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 ofDecember 31, 2022 , we had federal and state net operating loss carryforwards of$221.7 million and$203.3 million , respectively, which may be available to offset future taxable income. The federal net operating loss carryforwards include$5.3 million which expire in 2037 and$216.4 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 ofDecember 31, 2022 , we also had federal and state research and development tax credit carryforwards of$9.6 million and$5.7 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 Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe 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 appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We received significant non-refundable upfront payments under our collaboration
agreements with Merck and Lilly, from which we recognize revenue over time using
the cost-to-cost method. 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. In estimating the total costs to satisfy our performance
obligation, we are required to make significant estimates including an estimate
of the expected time and expected internal and external costs to fulfill the
performance obligation. In developing these estimates we consider historical
experience, relevant entity-specific factors, known market trends and
conditions, and a variety of other factors we believe are relevant to estimating
the total cost to fulfill the performance obligation. We periodically evaluate
estimates against the actual time and costs incurred as well as any anticipated
changes to the timing or estimated costs. Any 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
and the classification of deferred revenue between short-term and long-term.
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As part of the process of preparing our consolidated financial statements, we are required to estimate certain accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:
•vendors in connection with discovery, preclinical and clinical development activities;
•CROs in connection with preclinical studies and testing and clinical trials; and
•CDMOs in connection with the process development and scale up activities and the production and manufacturing of materials.
We base the expense recorded related to contract research and manufacturing on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and CDMOs that conduct services and produce and supply materials. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. While the majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met, some require advance payments. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. We record these as prepaid expenses on our consolidated balance sheets.
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, 2022 2021 Change (in thousands) Collaboration revenue$ 19,228 $ 1,319 $ 17,909 Operating expenses: Research and development 105,618 80,325 25,293 General and administrative 30,747 21,728 9,019 Total operating expenses 136,365 102,053 34,312 Loss from operations (117,137) (100,734) (16,403) Other income (expense): Interest income 5,675 59 5,616 Other income (expense), net 2,580 2,494 86 Interest expense - (1,906) 1,906 Loss on debt extinguishment - (1,233) 1,233 Total other expense, net 8,255 (586) 8,841 Net loss$ (108,882) $ (101,320) $ (7,562) Collaboration Revenue Collaboration revenue was$19.2 million for the year endedDecember 31, 2022 , compared to$1.3 million for the year endedDecember 31, 2021 . The increase in collaboration revenue is attributed to the following: •an increase in Lilly collaboration revenue recognition of$16.8 million due to work performed pursuant to the Lilly Collaboration Agreement entered into inDecember 2021 ; and 75
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•an increase in Merck collaboration revenue recognition of$1.1 million was primarily driven by the$0.7 million revenue catch-up adjustment related to the$5.0 million research milestone achievement in 2022, which is no longer considered constrained (see Note 8), and increased work completed under the Merck agreement in the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 .
Research and Development Expenses
The following table summarizes our research and development expenses for the
years ended
Year Ended December 31,
2022 2021 Change
(in thousands)
Research and development program expenses:
FHD-286 $ 18,906 $ 10,289 $ 8,617
FHD-609 10,674 7,604 3,070
Platform, research and discovery, and unallocated expenses: Platform and other early stage research external costs
22,214 18,865 3,349
Personnel related (including stock-based compensation) 32,612 25,405 7,207
Facility related and other 21,212 18,162 3,050
Total research and development expenses $ 105,618 $ 80,325 $ 25,293 Research and development expenses were
•an increase in our FHD-286 program costs of
•an increase in personnel-related costs of
•an increase in platform and other early stage research costs of$3.3 million , which was due to continued investment and development of our platform and early research pipeline;
•an increase in facility-related and other expenses of
•an increase in our FHD-609 program cost of
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the
years ended
Year Ended December 31,
2022 2021 Change
(in thousands)
Personnel related (including stock-based compensation) $ 18,243 $ 12,062 $ 6,181
Professional and consultant 6,921 4,852 2,069
Facility related and other 5,583 4,814 769
Total general and administrative expenses $ 30,747 $ 21,728 $ 9,019 General and administrative expenses were
•an increase in personnel-related costs of$6.2 million , including a$3.8 million increase in stock-based compensation expense, which was a result of an increase in headcount in our general and administrative function to support our business;
•an increase in professional and consulting costs of
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•an increase in facility related and other expense of
Other Income (Expense)
Interest income was$5.7 million for the year endedDecember 31, 2022 , compared to$0.1 million for the year endedDecember 31, 2021 . The increase in interest income was primarily due to larger average cash balances and an increase in the average interest rate throughout the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 . Other income (expense), net was$2.6 million for the year endedDecember 31, 2022 compared to$2.5 million for the year endedDecember 31, 2021 . The increase in interest and other income (expense), net for the year endedDecember 31, 2022 was primarily due to an increase of$0.1 million sublease income compared to the year endedDecember 31, 2021 . The Company did not record any interest expense for the year endedDecember 31, 2022 , compared to$1.9 million for the year endedDecember 31, 2021 . The decrease in interest expense for the year endedDecember 31, 2022 was due to the payoff of the Company's debt withOxford Finance LLC inDecember 2021 , resulting in no interest expense compared to the year endedDecember 31, 2021 . We recorded a loss on debt extinguishment of$1.2 million for the year endedDecember 31, 2021 . We used cash on hand to repay early the balance of our loan outstanding at the time, including a final payment fee and a prepayment fee.
Liquidity and Capital Resources
Since our inception inOctober 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. ThroughDecember 31, 2022 , we have funded our operations with proceeds from our initial public offering ("IPO") inOctober 2020 , sales of preferred stock, term loans, an upfront payment of$15.0 million we received inJuly 2020 under the Merck Collaboration Agreement and proceeds we received inDecember 2021 under the Lilly SPA of$80.0 million , an upfront payment of$300.0 million received inJanuary 2022 under the Lilly Collaboration Agreement and a payment of$5.0 million received from Merck under the Merck Collaboration Agreement for the achievement of a research milestone. As ofDecember 31, 2022 , we had cash, cash equivalents and marketable securities of$345.8 million . Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by (used in) operating activities$ 193,612 $ (50,250) Net cash provided by (used in) investing activities (244,322) 36,173 Net cash provided by financing activities 1,763 22,418 Net increase in cash, cash equivalents and restricted cash$ (48,947) $ 8,341 Operating Activities For the year endedDecember 31, 2022 , operating activities provided$193.6 million of cash, resulting from net cash provided by changes in our operating assets and liabilities of$281.5 million and by net non-cash charges of$20.9 million partially offset by our net loss of$108.9 million . Net cash provided by changes in our operating assets and liabilities for the year endedDecember 31, 2022 consisted primarily of a$302.7 million net increase in working capital. This was primarily driven by to the$300.0 million of cash received related to our collaboration receivable from Lilly and an increase of$4.3 million in deferred revenue related to the$5.0 million milestone payment from Merck, partially offset by a$18.5 million decrease in deferred revenue primarily associated with the recognition of revenue on the upfront and milestone payments received in connection with our collaboration agreements and a$7.0 million decrease in operating lease liabilities. For the year endedDecember 31, 2021 , operating activities used$50.3 million of cash, resulting from our net loss of$101.3 million partially offset by net cash provided by changes in our operating assets and liabilities of$33.4 million and by net non-cash charges of$17.6 million . Net cash provided by changes in our operating assets and liabilities for the year endedDecember 31, 2021 consisted primarily of$37.8 million of proceeds from the Lilly SPA partially offset by a$4.0 million decrease in operating lease liabilities and a$0.3 million net increase in working capital. 77
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Investing Activities
For the year endedDecember 31, 2022 , net cash used in investing activities was$244.3 million primarily due to$409.3 million of purchases of marketable securities and$1.2 million in purchases of property and equipment partially offset by$166.2 million of maturities of marketable securities. For the year endedDecember 31, 2021 , net cash provided by investing activities was$36.2 million primarily due to the maturity of marketable securities of$139.5 million partially offset by the purchases of marketable securities of$100.0 million and the acquisition of property and equipment of$3.3 million . Property and equipment purchases for the year endedDecember 31, 2021 were primarily related to leasehold improvements for our facility inCambridge, Massachusetts .
Financing Activities
For the year endedDecember 31, 2022 , net cash provided by financing activities was$1.8 million , consisting of net proceeds from the exercise of common stock options and the employee stock purchase plan. For the year endedDecember 31, 2021 , net cash provided by financing activities was$22.4 million , consisting primarily of proceeds from the Lilly SPA of$42.2 million and proceeds from the exercise of common stock options of$1.4 million partially offset by the repayment of notes payable of$21.2 million .
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities, initiate clinical trials for our product candidates in development and continue to fund on-going clinical trials. As of the issuance date of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we expect that our cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements for at least twelve months. 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 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.
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
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 consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
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