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, 2021

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 3, 2021, there were 47,478,726 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, 2021

Table of Contents

		Page
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	ii
	SPECIAL NOTE REGARDING COMPANY REFERENCES	iii
	SPECIAL NOTE REGARDING TRADEMARKS	iii
	RISK FACTOR SUMMARY	iv
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	2
	Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		88

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. 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;

▪our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

▪our ability to obtain regulatory approval of CP101, FIN-211 and any other current and 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;

▪business disruptions affecting the initiation, patient enrollment, development and operation of our clinical trials, including a public health emergency, such as the ongoing COVID-19 pandemic;

▪our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;

▪the effects of competition with respect to CP101, FIN-211 or any of our other current or future product candidates, as well as innovations by current and future competitors in our industry;

▪our ability to fund our working capital requirements;

▪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;

▪our ability to obtain additional funding for our operations; and

▪other risks and uncertainties, including those listed under the section titled “Risk Factors.”

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 those described under “Risk Factors” and elsewhere in this 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 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 while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our 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.

ii

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

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

RISK FACTORS SUMMARY

The following is a summary of the principal risks that could adversely affect our business, financial condition, operating results, cash flows or stock price. Discussion of the risks listed below, and other risks that we face, are discussed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

We face substantial competition which may result in others developing or commercializing drugs before or more successfully than us, particularly since we are aware of a number of companies focused on developing microbiome therapeutics in various indications, including three competitors that have a product candidate being evaluated in clinical trials for recurrent CDI.

Our business and operations may be adversely affected by the evolving and ongoing COVID-19 global pandemic.

We have a limited operating history, have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.

We will require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our product development programs or other operations.

We believe our current cash and cash equivalents will be sufficient to fund our business only for a limited amount of time, and if we are not able to raise additional funds, we may be unable to continue as a going concern.

We are heavily dependent on the success of our product candidates, which are in clinical and preclinical development. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval and ultimately commercialize any product candidates we develop, or experience significant delays in doing so, our business will be materially harmed.

Our product candidates are based on microbiome therapeutics, which is an unproven approach to therapeutic intervention.

Our product candidates may be associated with serious adverse, undesirable or unacceptable side effects or other properties or safety risks, which may delay or halt their clinical development, or prevent marketing approval.

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The manufacture of our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-up of our manufacturing capabilities.

We rely on third-party donors of biological material to manufacture certain product candidates such as CP101 and FIN 211, and if we do not obtain an adequate supply of acceptable material from those qualified donors, the clinical and commercial supply of these product candidates may be adversely impacted.

We operate our own manufacturing facility for certain product candidates, which requires significant resources and we may fail to successfully operate our facility, which could adversely affect our clinical trials and the commercial viability of our product candidates.

We have never commercialized a product candidate and may experience delays or unexpected difficulties in obtaining regulatory approval for our current or future product candidates for our initial or potential additional indications.

We rely on third parties to supply and manufacture our product candidates, and we expect to continue to rely on third parties to manufacture our products, if approved.

If we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to compete effectively in our market.

We identified a material weakness in our internal control over financial reporting. If we are not able to remediate the material weakness or if we otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial statements in a timely manner, which may adversely affect our business, investor confidence in our company and the market value of our common stock.

iv

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, 2021			DECEMBER 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	149,200		$	99,710
Accounts receivable		2,399			1,034
Due from related party		—			61
Prepaid expenses and other current assets		4,568			5,359
Total current assets		156,167			106,164
Property and equipment, net		19,546			7,004
In-process research and development		32,900			32,900
Goodwill		18,057			18,057
Deferred initial public offering costs		—			1,013
Restricted cash, non-current		2,268			—
Other assets		4,041			200
TOTAL ASSETS	$	232,979		$	165,338
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND    STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	1,382		$	2,621
Accrued expenses and other current liabilities		7,469			5,228
Due to related party		—			266
Deferred revenue, current portion		—			3,371
Total current liabilities		8,851			11,486
Deferred tax liability		3,461			3,461
Deferred revenue, net of current portion		—			10,260
Loan payable		—			1,808
Deferred rent		692			766
Other liabilities		174			221
Total liabilities		13,178			28,002
COMMITMENTS AND CONTINGENCIES (Note 8)
Series A redeemable convertible preferred stock, $0.001 par value; no shares authorized,    issued or outstanding as of September 30, 2021; 167,496,750 shares authorized and    11,596,280 shares issued and outstanding as of December 31, 2020;		—			53,593
Series B redeemable convertible preferred stock, $0.001 par value; no shares authorized,    issued or outstanding as of September 30, 2021; 74,620,739 shares authorized and    5,166,203 shares issued and outstanding as of December 31, 2020		—			36,336
Series C redeemable convertible preferred stock, $0.001 par value; no shares authorized,    issued or outstanding as of September 30, 2021; 109,604,994 shares authorized    and 7,588,254 shares issued and outstanding as of December 31, 2020		—			53,221
Series D redeemable convertible preferred stock, $0.001 par value; no shares authorized,    issued or outstanding as of September 30, 2021; 99,705,359 shares authorized and 6,902,872    shares issued and outstanding as of December 31, 2020		—			89,904
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.001 par value; 200,000,000 and 598,232,153 shares authorized as    of September 30, 2021 and December 31, 2020, respectively; 47,454,962 and 8,391,793 shares    issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		47			8
Additional paid-in capital		361,694			7,109
Accumulated deficit		(141,940	)		(102,835	)
Total stockholders’ equity (deficit)		219,801			(95,718	)
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED    STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	232,979		$	165,338

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,
	2021			2020			2021			2020
REVENUE:
Collaboration revenue	$	11,343		$	1,733		$	17,726		$	5,582
Royalty revenue from related party		—			38			—			330
Total revenue		11,343			1,771			17,726			5,912
OPERATING EXPENSES:
Research and development		(15,537	)		(9,045	)		(42,476	)		(24,577	)
General and administrative		(5,739	)		(2,807	)		(16,173	)		(7,639	)
Total operating expenses		(21,276	)		(11,852	)		(58,649	)		(32,216	)
Net loss from operations		(9,933	)		(10,081	)		(40,923	)		(26,304	)
OTHER INCOME (EXPENSE), NET:
Gain on extinguishment of PPP Loan		—			—			1,827			—
Interest income (expense)		8			(7	)		14			105
Other expense, net		(30	)		(2	)		(23	)		(51	)
Total other income (expense), net		(22	)		(9	)		1,818			54
Loss before income taxes		(9,955	)		(10,090	)		(39,105	)		(26,250	)
Income tax provision		—			—			—			—
Net loss	$	(9,955	)	$	(10,090	)	$	(39,105	)	$	(26,250	)
Net loss attributable to common stockholders—basic and diluted (Note 14)	$	(9,955	)	$	(10,090	)	$	(39,105	)	$	(26,250	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.21	)	$	(1.22	)	$	(1.07	)	$	(3.25	)
Weighted-average common stock outstanding—basic and diluted		47,445,195			8,258,537			36,408,506			8,065,730

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			DEFICIT
BALANCE, January 1, 2020		11,596,280	$	53,593		5,166,203	$	36,336		7,588,254	$	53,221		—	$	—		7,778,552		8	$	3,951	$	(63,494	)	$	(59,535	)
Exercise of common stock options		—		—		—		—		—		—		—		—		14,826		—		15		—			15
Vesting of restricted stock		—		—		—		—		—		—		—		—		183,744		—		3		—			3
Stock-based compensation		—		—		—		—		—		—		—		—		—		—		75		—			75
Net loss		—		—		—		—		—		—		—		—		—		—		—		(7,901	)		(7,901	)
BALANCE, March 31, 2020		11,596,280	$	53,593		5,166,203	$	36,336		7,588,254	$	53,221		—	$	—		7,977,122	$	8	$	4,044	$	(71,395	)	$	(67,343	)
Exercise of common stock options		—		—		—		—		—		—		—		—		15,447		—		4		—			4
Vesting of restricted stock		—		—		—		—		—		—		—		—		181,810		—		3		—			3
Stock-based compensation		—		—		—		—		—		—		—		—		—		—		85		—			85
Net loss		—		—		—		—		—		—		—		—		—		—		—		(8,259	)		(8,259	)
BALANCE, June 30, 2020		11,596,280	$	53,593		5,166,203	$	36,336		7,588,254	$	53,221		—	$	—		8,174,379	$	8	$	4,136	$	(79,654	)	$	(75,510	)
Exercise of common stock options		—		—		—		—		—		—		6,902,872		89,904		8,440		-		10		-			10
Vesting of restricted stock		—		—		—		—		—		—		—		—		181,806		-		2		-			2
Stock-based compensation		—		—		—		—		—		—		—		—		—		-		56		-			56
Net loss		—		—		—		—		—		—		—		—		—		-		-		(10,090	)		(10,090	)
BALANCE, September 30, 2020		11,596,280	$	53,593		5,166,203	$	36,336		7,588,254	$	53,221		6,902,872	$	89,904		8,364,625	$	8	$	4,204	$	(89,744	)	$	(85,532	)

See notes to unaudited condensed consolidated financial statements.

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)

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