Foghorn Therapeutics Stock (FHTX): Why The Price Surged Today

By Amit Chowdhry ● Dec 13, 2021
  • The stock price of Foghorn Therapeutics Inc. (NASDAQ: FHTX) increased by over 30% pre-market today. This is why it happened.

The stock price of Foghorn Therapeutics Inc. (NASDAQ: FHTX) increased by over 30% pre-market today. Investors are responding positively to Loxo Oncology at Lilly (a research and development group of Eli Lilly and Company) and Foghorn Therapeutics announcing a strategic collaboration to create novel oncology medicines by applying Foghorn’s proprietary Gene Traffic Control platform. This collaboration includes a co-development and co-commercialization agreement for Foghorn’s selective BRM oncology program and an additional undisclosed oncology target. And the collaboration includes three additional discovery programs using Foghorn’s proprietary Gene Traffic Control platform.

Under the terms of the agreement, Foghorn will receive upfront consideration of $300 million in cash for the collaboration agreement and an equity investment by Lilly of $80 million in Foghorn common shares at a price of $20 per share.

Terms of the Collaboration

For the BRM-selective program and the additional undisclosed target program, Foghorn is going to lead discovery and early research activities while Lilly will lead development and commercialization activities with participation from Foghorn in operational activities and cost-sharing. And Foghorn and Lilly will share 50/50 in the U.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 is going to lead discovery and early research activities. And Foghorn may receive up to a total of $1.3 billion in potential development and commercialization milestones. Plus Foghorn will have an option to participate in a percentage of the U.S. economics and is eligible to receive tiered royalties from the mid-single-digit to low-double-digit range on sales outside the U.S. that may be exercised after the successful completion of the dose-finding toxicity studies.

This deal will be reflected in Lilly’s reported results and financial guidance according to Generally Accepted Accounting Principles (GAAP). And there will be no change to Lilly’s 2021 non-GAAP earnings per share guidance as a result of this transaction.

KEY QUOTE:

“Oncogenic mutations in BRG1 impact a large population of cancer patients and we believe are best addressed therapeutically with a highly selective BRM inhibitor, though designing such a drug is a difficult chemistry challenge. We’ve been very impressed by the progress the Foghorn team has made against this product profile and are excited to work with this highly talented team. Foghorn has a differentiated platform and we look forward to the prospect of leveraging it to discover multiple new drugs against similarly challenging targets with strong biologic rationale.”

— Jacob Van Naarden, CEO of Loxo Oncology at Lilly and president, Lilly Oncology

“We are excited to be collaborating with the Loxo Oncology at Lilly team to use our platform and utilize Foghorn’s powerful precision biology-first approach to create medicines targeting genetic dependencies within the chromatin regulatory system. This collaboration enables an acceleration and expansion of our pipeline and significantly strengthens our balance sheet as we strive to bring new medicines to patients and their families.”

— Foghorn CEO Adrian Gottschalk

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.