SEC Filing - Third Harmonic Bio

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10-Q

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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 June 30, 2023


☐	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: 001-41498

THIRD HARMONIC BIO, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		83-4553503
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1700 Montgomery Street, Suite 210
San Francisco, California		94111
(Address, including zip code of registrant’s principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (209) 727-2457

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, par value $0.0001 per share

THRD

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 August 4, 2023, the registrant had 40,379,483 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page

	Special Note Regarding Forward-Looking Statements	1
	Risk Factor Summary	2

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
	Signatures	73

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and section 27A of the Securities Act of 1933, as amended, or the Securities Act. All statements contained in this Quarterly Report other than statements of historical fact, including but not limited to statements regarding our future results of operations and financial position, business strategy, market size, potential growth opportunities, nonclinical and clinical development activities, efficacy and safety profile of any future product candidates, potential therapeutic benefits and economic value of our product candidates, use of net proceeds from our initial public offering, our ability to maintain and recognize the benefits of certain designations received by product candidates, the timing and results of nonclinical studies and clinical trials, commercial collaboration with third parties, the potential impact of global business or macroeconomic conditions, including as a result of inflation, rising interest rates, instability in the global banking system, and geopolitical conflicts, including the war in Ukraine, on our operations, and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “predict,” “target,” “intend,” “could,” “would,” “should,” “project,” “plan,” “expect,” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report. 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, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the 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 actual results or to changes in our expectations, except as required by law. You should read this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Unless the context indicates otherwise, as used in this Quarterly Report, the terms “the Company,” “we,” “us,” and “our” refer to Third Harmonic Bio, Inc., a Delaware corporation, and its consolidated subsidiaries taken as a whole, unless otherwise noted. The mark “Third Harmonic Bio” is our registered common law trademark. This Quarterly Report contains additional trade names, trademarks and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

RISK FACTOR SUMMARY

Our business is subject to a number of risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report. The principal risks and uncertainties affecting our business include, among others, the following:

•

We have a limited operating history, have not completed any clinical trials beyond Phase 1, and neither THB335 nor any of our other product candidates have been approved for commercial sale. We have a history of significant net losses since our inception and expect to continue to incur significant losses for the foreseeable future.

•

In December 2022, we announced the discontinuation of our Phase 1b clinical trial of our first-generation product candidate THB001 in chronic inducible urticaria following observation of asymptomatic liver transaminitis in two patients enrolled in the first dose cohort.

•

We will need substantial additional funds to pursue our business objectives, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development programs, commercialization efforts or other operations.

•

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or nonperformance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations, financial condition and results of operations.

•

We have identified a material weakness in our internal control over financial reporting. If we do not remediate the material weakness in our internal control over financial reporting, or if we fail to establish and maintain effective internal control, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our common stock.

•

Our future performance is substantially dependent on the success of THB335 as well as our ability to identify and develop future product candidates.

•

Drug development is a lengthy and expensive process, and the outcome of clinical testing is inherently uncertain, and results of earlier studies and trials may not be predictive of future trial results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of THB335 or any future product candidates.

•

Our future clinical trials may reveal significant adverse events not seen in our nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of THB335 or any future product candidates.

•

We face competition from entities that have made substantial investments into the rapid development of novel treatments for allergic and inflammatory diseases, including large and specialty pharmaceutical and biotechnology companies developing novel treatments and technology platforms. If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize, if approved, product candidates may be adversely affected.

•

We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform all of our research and nonclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.

•

If we are not able to obtain, maintain and enforce patent protection for our technologies or product candidates, development and commercialization, if approved, of THB335 or any future KIT inhibitor product candidates may be adversely affected.

•

The regulatory approval process is highly uncertain, and we may be unable to obtain, or may be delayed in obtaining, U.S. or foreign regulatory approval and, as a result, unable to commercialize THB335 or any future KIT inhibitor product candidates. Even if we believe our development plans are successful, regulatory authorities may not agree that they provide adequate data on safety or efficacy.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

THIRD HARMONIC BIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	December 31, 2022			June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	288,877		$	278,132
Prepaid expenses and other current assets		3,958			2,233
Total current assets		292,835			280,365
Restricted cash		441			441
Property and equipment, net		35			193
Right of use asset		4,327			4,097
Other assets, noncurrent		1,037			726
Total assets	$	298,675		$	285,822
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	2,087		$	1,343
Accrued expenses and other current liabilities		3,181			2,187
Operating lease liability, current		385			693
Total current liabilities		5,653			4,223
Operating lease liability, noncurrent		3,954			3,591
Total liabilities		9,607			7,814
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.0001 par value, 500,000,000 shares authorized at December 31, 2022 and June 30, 2023; 39,377,222 and 39,628,764 shares issued and outstanding at December 31, 2022 and June 30, 2023, respectively		4			4
Additional paid-in capital		372,460			378,045
Accumulated deficit		(83,396	)		(100,041	)
Total stockholders’ equity		289,068			278,008
Total liabilities and stockholders’ equity	$	298,675		$	285,822

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

THIRD HARMONIC BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2023			2022			2023
Operating expenses:
Research and development	$	4,181		$	5,340		$	10,393		$	12,077
General and administrative		3,602			5,374			5,177			10,625
Total operating expenses		7,783			10,714			15,570			22,702
Loss from operations		7,783			10,714			15,570			22,702
Other income, net:
Interest income		(107	)		(3,158	)		(110	)		(6,063	)
Other (income) expense		—			4			—			6
Total other (income) expense, net		(107	)		(3,154	)		(110	)		(6,057	)
Net loss	$	7,676		$	7,560		$	15,460		$	16,645
Net loss per share of common stock, basic and diluted	$	1.76		$	0.19		$	3.58		$	0.42
Weighted-average common stock outstanding, basic and diluted		4,361,735			39,570,464			4,321,267			39,504,882

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

THIRD HARMONIC BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands, except share amounts)

(Unaudited)


	Redeemable Convertible Preferred Stock
	Series A-1				Series A-2				Series A-3				Series B				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit) and Equity
Balance at December 31, 2021		13,970,000	$	12,574		13,750,000	$	19,476		7,812,501	$	33,288		14,091,686	$	104,846		4,237,290	$	1	$	1,534	$	(48,241	)	$	(46,706	)
Vesting of restricted stock		—		—		—		—		—		—		—		—		84,024		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		—		—		450		—			450
Net loss		—		—		—		—		—		—		—		—		—		—		—		(7,784	)		(7,784	)
Balance at March 31, 2022		13,970,000	$	12,574		13,750,000	$	19,476		7,812,501	$	33,288		14,091,686	$	104,846		4,321,314	$	1	$	1,984	$	(56,025	)	$	(54,040	)
Vesting of restricted stock		—		—		—		—		—		—		—		—		94,740		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		—		—		1,159		—			1,159
Net loss		—		—		—		—		—		—		—		—		—		—		—		(7,676	)		(7,676	)
Balance at June 30, 2022		13,970,000	$	12,574		13,750,000	$	19,476		7,812,501	$	33,288		14,091,686	$	104,846		4,416,054	$	1	$	3,143	$	(63,701	)	$	(60,557	)


	Redeemable Convertible Preferred Stock
	Series A-1				Series A-2				Series A-3				Series B				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2022		—	$	—		—	$	—		—	$	—		—	$	—		39,377,222	$	4	$	372,460	$	(83,396	)	$	289,068
Vesting of restricted stock		—		—		—		—		—		—		—		—		107,181		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		—		—		2,682		—			2,682
Net loss		—		—		—		—		—		—		—		—		—		—		—		(9,085	)		(9,085	)
Balance at March 31, 2023		—	$	—		—	$	—		—	$	—		—	$	—		39,484,403	$	4	$	375,142	$	(92,481	)	$	282,665
Vesting of restricted stock		—		—		—		—		—		—		—		—		107,093		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		—		—		2,845		—			2,845
Exercise of stock options		—		—		—		—		—		—		—		—		37,268		—		58		—			58
Net loss		—		—		—		—		—		—		—		—		—		—		—		(7,560	)		(7,560	)
Balance at June 30, 2023		—	$	—		—	$	—		—	$	—		—	$	—		39,628,764	$	4	$	378,045	$	(100,041