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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

For the quarterly period ended September 30, 2022

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: 001-40227

 

FINCH THERAPEUTICS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-3433558

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

200 Inner Belt Road, Suite 400

Somerville, Massachusetts

02143

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 229-6499

 

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, $0.001 par value per share

 

FNCH

 

The Nasdaq Stock Market LLC

 

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 ☒ 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 ☒ 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

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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 November 7, 2022 there were 47,897,675 outstanding shares of the registrant’s common stock, par value $0.001 per share.

 

 

 


 

 

 

FINCH THERAPEUTICS, INC.

FORM 10-Q

For the quarterly period ended September 30, 2022

 

Table of Contents

 

 

 

Page

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

ii

 

SPECIAL NOTE REGARDING COMPANY REFERENCES

iii

 

SPECIAL NOTE REGARDING TRADEMARKS

iii

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

2

 

Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2022 and 2021

3

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

5

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 5.

Other Information

42

Item 6.

Exhibits

42

 

Signatures

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:

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and related preparatory work and the period during which the results of the trials will become available, as well as our research and development programs, including our ability to satisfactorily address FDA correspondence;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to obtain regulatory approval of CP101, and any other current or future product candidates that we develop;
our ability to identify and develop additional product candidates;
our ability to advance product candidates into, and successfully complete, preclinical studies and clinical trials;
our ability to contract with contract research organizations, contract manufacturing organizations, third-party suppliers and manufacturers and other third parties with which we do business and their ability to perform adequately;
our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;
our ability to fund our working capital requirements and to service any debt obligations we may incur;
our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates;
our financial performance and our ability to effectively manage our anticipated growth; and
our ability to obtain additional funding for our operations;

 

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)

 

 

 

SEPTEMBER 30,
2022

 

 

DECEMBER 31,
2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

85,292

 

 

$

133,481

 

Accounts receivable

 

 

 

 

 

494

 

Prepaid expenses and other current assets

 

 

5,324

 

 

 

8,576

 

Total current assets

 

 

90,616

 

 

 

142,551

 

Property and equipment, net

 

 

17,280

 

 

 

19,635

 

Operating right-of-use assets

 

 

40,355

 

 

 

5,053

 

In-process research and development

 

 

32,900

 

 

 

32,900

 

Goodwill

 

 

 

 

 

18,057

 

Restricted cash, non-current

 

 

2,568

 

 

 

2,268

 

Other assets

 

 

4,249

 

 

 

4,905

 

TOTAL ASSETS

 

$

187,968

 

 

$

225,369

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

1,060

 

 

$

3,737

 

Accrued expenses and other current liabilities

 

 

10,107

 

 

 

9,925

 

Operating lease liabilities, current

 

 

2,641

 

 

 

1,128

 

Total current liabilities

 

 

13,808

 

 

 

14,790

 

Deferred tax liability

 

 

3,461

 

 

 

3,461

 

Loan payable, non-current

 

 

14,636

 

 

 

 

Operating lease liabilities, non-current

 

 

35,072

 

 

 

4,887

 

Other liabilities

 

 

125

 

 

 

7

 

Total liabilities

 

 

67,102

 

 

 

23,145

 

COMMITMENTS AND CONTINGENCIES (Note 11)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized as of September 30, 2022 and
    December 31, 2021;
47,826,506 and 47,512,182 shares issued and outstanding as of
    September 30, 2022 and December 31, 2021, respectively

 

 

48

 

 

 

47

 

Additional paid-in capital

 

 

369,451

 

 

 

363,172

 

Accumulated deficit

 

 

(248,633

)

 

 

(160,995

)

Total stockholders’ equity

 

 

120,866

 

 

 

202,224

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

187,968

 

 

$

225,369

 

 

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)

 

 

 

THREE MONTHS ENDED
SEPTEMBER 30,

 

 

NINE MONTHS ENDED
SEPTEMBER 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

138

 

 

$

11,343

 

 

$

853

 

 

$

17,726

 

Total revenue

 

 

138

 

 

 

11,343

 

 

 

853

 

 

 

17,726

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

(11,859

)

 

 

(15,537

)

 

 

(41,312

)

 

 

(42,476

)

General and administrative

 

 

(9,584

)

 

 

(5,739

)

 

 

(27,152

)

 

 

(16,173

)

Impairment of goodwill

 

 

(18,057

)

 

 

 

 

 

(18,057

)

 

 

 

Restructuring expense

 

 

(1,270

)

 

 

 

 

 

(2,173

)

 

 

 

Total operating expenses

 

 

(40,770

)

 

 

(21,276

)

 

 

(88,694

)

 

 

(58,649

)

Net loss from operations

 

 

(40,632

)

 

 

(9,933

)

 

 

(87,841

)

 

 

(40,923

)

OTHER INCOME (EXPENSE), NET:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of PPP Loan

 

 

 

 

 

 

 

 

 

 

 

1,827

 

Interest income (expense), net

 

 

45

 

 

 

8

 

 

 

(7

)

 

 

14

 

(Loss) gain on disposal of fixed assets, net

 

 

 

 

 

 

 

 

(6

)

 

 

28

 

Other income (expense), net

 

 

216

 

 

 

(30

)

 

 

216

 

 

 

(51

)

Total other income (expense), net

 

 

261

 

 

 

(22

)

 

 

203

 

 

 

1,818

 

Loss before income taxes

 

 

(40,371

)

 

 

(9,955

)

 

 

(87,638

)

 

 

(39,105

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(40,371

)

 

$

(9,955

)

 

$

(87,638

)

 

$

(39,105

)

Net loss attributable to common stockholders—basic and diluted (Note 17)

 

$

(40,371

)

 

$

(9,955

)

 

$

(87,638

)

 

$

(39,105

)

Net loss per share attributable to common stockholders—basic and diluted

 

$

(0.85

)

 

$

(0.21

)

 

$

(1.84

)

 

$

(1.07

)

Weighted-average common stock outstanding—basic and diluted

 

 

47,728,130

 

 

 

47,445,195

 

 

 

47,611,872

 

 

 

36,408,506

 

 

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)

 

 

 

REDEEMABLE CONVERTIBLE PREFERRED STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.001 PAR VALUE
SERIES A

 

$0.001 PAR VALUE
SERIES B

 

$0.001 PAR VALUE
SERIES C

 

$0.001 PAR VALUE
SERIES D

 

 

 

COMMON STOCK
$0.001 PAR VALUE

 

ADDITIONAL
PAID-IN

 

ACCUMULATED

 

TOTAL
STOCKHOLDERS’

 

 

 

SHARES

 

AMOUNT

 

SHARES

 

AMOUNT

 

SHARES

 

AMOUNT

 

SHARES

 

AMOUNT

 

 

 

SHARES

 

AMOUNT

 

CAPITAL

 

DEFICIT

 

EQUITY (DEFICIT)

 

BALANCE, January 1, 2021

 

 

11,596,280

 

$

53,593

 

 

5,166,203

 

$

36,336

 

 

7,588,254

 

$

53,221

 

 

6,902,872

 

$

89,904

 

 

 

 

8,391,793

 

$

8

 

$

7,109

 

$

(102,835

)

$

(95,718

)

Conversion of redeemable convertible preferred stock into common stock upon initial public offering

 

 

(11,596,280

)

 

(53,593

)

 

(5,166,203

)

 

(36,336

)

 

(7,588,254

)

 

(53,221

)

 

(6,902,872

)

 

(89,904

)

 

 

 

31,253,609

 

 

31

 

 

233,022

 

 

 

 

233,053

 

Initial public offering, net of underwriting discounts, commissions and net of offering costs of $11,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,500,000

 

 

8

 

 

115,706

 

 

 

 

115,714

 

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,901

 

 

 

 

54

 

 

 

 

54

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

335

 

 

 

 

335

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,981

)

 

(13,981

)

BALANCE, March 31, 2021

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

47,227,303

 

$

47

 

$

356,226

 

$

(116,816

)

$

239,457

 

Underwriters' exercise of overallotment option, net of underwriting discounts, commissions and initial public offering costs of $276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

192,877

 

 

 

 

3,003

 

 

 

 

3,003

 

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,793

 

 

 

 

7

 

 

 

 

7

 

Shares repurchased for
   cashless exercise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,221

)

 

 

 

(10

)

 

 

 

(10

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

905

 

 

 

 

905

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,169

)

 

(15,169

)

BALANCE, June 30, 2021

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

47,425,752

 

$

47

 

$

360,131

 

$

(131,985

)

$

228,193

 

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,210

 

 

 

 

48

 

 

 

 

48

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,515

 

 

 

 

1,515

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,955

)

 

(9,955

)

BALANCE, September 30, 2021

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

47,454,962

 

$

47

 

$

361,694

 

$

(141,940

)

$

219,801

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK
$0.001 PAR VALUE

 

ADDITIONAL
PAID-IN

 

ACCUMULATED

 

TOTAL
STOCKHOLDERS’

 

 

 

SHARES

 

AMOUNT

 

CAPITAL

 

DEFICIT

 

EQUITY

 

BALANCE, January 1, 2022

 

 

47,512,182

 

$

47

 

$

363,172

 

$

(160,995

)

$

202,224

 

Exercise of common stock options

 

 

20,406

 

 

1

 

 

13

 

 

 

 

14

 

Stock-based compensation

 

 

 

 

 

 

2,120