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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: 001-39344

 

Fusion Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Canada

Not Applicable

(State or other jurisdiction of

incorporation or organization)

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

270 Longwood Rd., S.

Hamilton, ON, Canada

L8P 0A6

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (289) 799-0891

 

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 shares, no par value per share

 

FUSN

 

The Nasdaq Global Select Market

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 October 28, 2022, the registrant had 44,762,514 common shares, with no par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements

1

 

Condensed Consolidated Balance Sheets (Unaudited)

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

2

 

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

3

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

5

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

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

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

48

PART II.

OTHER INFORMATION

49

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

Signatures

51

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

106,052

 

 

$

52,898

 

Accounts receivable

 

 

215

 

 

 

357

 

Short-term investments

 

 

99,429

 

 

 

147,897

 

Prepaid expenses and other current assets

 

 

9,721

 

 

 

9,941

 

Restricted cash

 

 

429

 

 

 

669

 

Total current assets

 

 

215,846

 

 

 

211,762

 

Property and equipment, net

 

 

3,851

 

 

 

2,967

 

Deferred tax assets

 

 

4,155

 

 

 

1,645

 

Restricted cash

 

 

1,018

 

 

 

1,222

 

Long-term investments

 

 

 

 

 

19,987

 

Operating lease right-of-use assets

 

 

5,972

 

 

 

6,486

 

Other non-current assets

 

 

7,651

 

 

 

8,202

 

Total assets

 

$

238,493

 

 

$

252,271

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,311

 

 

$

2,195

 

Accrued expenses

 

 

10,258

 

 

 

7,563

 

Deferred revenue

 

 

412

 

 

 

1,538

 

Operating lease liabilities

 

 

1,431

 

 

 

1,215

 

Total current liabilities

 

 

13,412

 

 

 

12,511

 

Long-term debt, net of discount

 

 

34,106

 

 

 

 

Income taxes payable, net of current portion

 

 

297

 

 

 

297

 

Deferred revenue, net of current portion

 

 

2,667

 

 

 

2,500

 

Operating lease liabilities, net of current portion

 

 

4,869

 

 

 

5,507

 

Total liabilities

 

 

55,351

 

 

 

20,815

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Common shares, no par value, unlimited shares authorized as of September 30, 2022
   and December 31, 2021;
44,761,814 and 43,073,727 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

441,643

 

 

 

425,821

 

Accumulated other comprehensive (loss) income

 

 

(1,256

)

 

 

(115

)

Accumulated deficit

 

 

(257,245

)

 

 

(194,250

)

Total shareholders’ equity

 

 

183,142

 

 

 

231,456

 

Total liabilities and shareholders’ equity

 

$

238,493

 

 

$

252,271

 

 

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

 

1


 

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

166

 

 

$

325

 

 

$

1,321

 

 

$

846

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

16,551

 

 

 

12,684

 

 

 

41,288

 

 

 

44,546

 

General and administrative

 

 

7,420

 

 

 

7,156

 

 

 

23,650

 

 

 

20,762

 

Total operating expenses

 

 

23,971

 

 

 

19,840

 

 

 

64,938

 

 

 

65,308

 

Loss from operations

 

 

(23,805

)

 

 

(19,515

)

 

 

(63,617

)

 

 

(64,462

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

190

 

 

 

107

 

 

 

220

 

 

 

300

 

Other (expense) income, net

 

 

(1,159

)

 

 

27

 

 

 

(1,095

)

 

 

406

 

Total other (expense) income, net

 

 

(969

)

 

 

134

 

 

 

(875

)

 

 

706

 

Loss before benefit (provision) for income taxes

 

 

(24,774

)

 

 

(19,381

)

 

 

(64,492

)

 

 

(63,756

)

Income tax benefit (provision)

 

 

761

 

 

 

(48

)

 

 

1,497

 

 

 

(55

)

Net loss

 

$

(24,013

)

 

$

(19,429

)

 

$

(62,995

)

 

$

(63,811

)

Unrealized (loss) gain on investments

 

 

(196

)

 

 

(274

)

 

 

(1,141

)

 

 

19

 

Comprehensive loss

 

$

(24,209

)

 

$

(19,703

)

 

$

(64,136

)

 

$

(63,792

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share—basic and diluted

 

$

(0.55

)

 

$

(0.45

)

 

$

(1.45

)

 

$

(1.50

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding—basic and diluted

 

 

43,683,738

 

 

 

43,022,762

 

 

 

43,405,566

 

 

 

42,441,091

 

 

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

 

2


 

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Shares

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

Balances at December 31, 2021

 

 

43,073,727

 

 

$

 

 

$

425,821

 

 

$

(194,250

)

 

$

(115

)

 

$

231,456

 

Issuance of common shares from at-the-market offering, net of issuance costs

 

 

222,726

 

 

 

 

 

 

1,627

 

 

 

 

 

 

 

 

 

1,627

 

Issuance of common shares upon exercise of stock options

 

 

34,685

 

 

 

 

 

 

82

 

 

 

 

 

 

 

 

 

82

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,633

 

 

 

 

 

 

 

 

 

2,633

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(463

)

 

 

(463

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19,909

)

 

 

 

 

 

(19,909

)

Balances at March 31, 2022

 

 

43,331,138

 

 

$

 

 

$

430,163

 

 

$

(214,159

)

 

$

(578

)

 

$

215,426

 

Issuance of common share warrants

 

 

 

 

 

 

 

 

147

 

 

 

 

 

 

 

 

 

147

 

Issuance of common shares from at-the-market offering, net of issuance costs

 

 

10,000

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

74

 

Issuance of common shares upon exercise of stock options

 

 

43,372

 

 

 

 

 

 

79

 

 

 

 

 

 

 

 

 

79

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,736

 

 

 

 

 

 

 

 

 

2,736

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(482

)

 

 

(482

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19,073

)

 

 

 

 

 

(19,073

)

Balances at June 30, 2022

 

 

43,384,510

 

 

$

 

 

$

433,199

 

 

$

(233,232

)

 

$

(1,060

)

 

$

198,907

 

Issuance of common shares pursuant to asset purchase agreements

 

 

156,679

 

 

 

 

 

 

1,285

 

 

 

 

 

 

 

 

 

1,285

 

Issuance of common share warrants

 

 

 

 

 

 

 

 

415

 

 

 

 

 

 

 

 

 

415

 

Issuance of common shares from at-the-market offering, net of issuance costs

 

 

1,186,342

 

 

 

 

 

 

3,981

 

 

 

 

 

 

 

 

 

3,981

 

Issuance of common shares under ESPP

 

 

28,261

 

 

 

 

 

 

53

 

 

 

 

 

 

 

 

 

53

 

Issuance of common shares upon exercise of stock options

 

 

6,022

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,697

 

 

 

 

 

 

 

 

 

2,697

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

(196

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(24,013

)

 

 

 

 

 

(24,013

)

Balances at September 30, 2022

 

 

44,761,814

 

 

$

 

 

$

441,643

 

 

$

(257,245

)

 

$

(1,256

)

 

$

183,142

 

 

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

 

3


 

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – CONTINUED

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Shares

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

Balances at December 31, 2020

 

 

41,725,797

 

 

$

 

 

$

407,672

 

 

$

(113,203

)

 

$

44

 

 

$

294,513

 

Issuance of common shares upon exercise of stock options

 

 

119,384

 

 

 

 

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,718

 

 

 

 

 

 

 

 

 

1,718

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

239

 

 

 

239

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,529

)

 

 

 

 

 

(17,529

)

Balances at March 31, 2021

 

 

41,845,181

 

 

$

 

 

$

409,520

 

 

$

(130,732

)

 

$

283

 

 

$

279,071

 

Issuance of common shares pursuant to asset purchase agreements

 

 

600,000

 

 

 

 

 

 

8,924

 

 

 

 

 

 

 

 

 

8,924

 

Issuance of common shares upon exercise of stock options

 

 

175,918

 

 

 

 

 

 

210

 

 

 

 

 

 

 

 

 

210

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,145

 

 

 

 

 

 

 

 

 

2,145

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

54

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(26,853

)

 

 

 

 

 

(26,853

)

Balances at June 30, 2021

 

 

42,621,099

 

 

$