PR Newswire | Aug 11, 2020 07:25AM EDT

Business Update

08/11 06:25 CDT

Fusion Pharmaceuticals Announces Second Quarter 2020 Financial Results and Business Update HAMILTON, ON and BOSTON, Aug. 11, 2020

- Following Fusion's June 2020 initial public offering, cash runway extended into 2024

HAMILTON, ON and BOSTON, Aug. 11, 2020 /PRNewswire/ -- Fusion Pharmaceuticals Inc. (Nasdaq: FUSN), a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines, today announced financial results for the second quarter ended June 30, 2020 and provided an update on clinical and corporate developments.

"By developing targeted alpha therapies (TATs), Fusion is taking a precision medicine approach to radiation therapy," said Chief Executive Officer John Valliant, Ph.D. "In addition to our lead program, FPI-1434, which is currently in a Phase 1 clinical trial, Fusion's research and development capabilities, manufacturing and supply chain expertise, and our Fast-Clear(tm) linker technology provide a platform for creating new TATs and growing our pipeline."

Dr. Valliant continued, "Following a successful initial public offering in June, and achieving a regulatory milestone that triggered the second tranche of our Series B financing in May, we are well-positioned to reach significant inflection points in our clinical programs, expand our pipeline, and invest in our platform to create potent TATs."

"Our near-term priority is to initiate the multi-dosing portion of our Phase 1 trial of FPI-1434, and we are pleased to have received notice from both Health Canada and the U.S. Food and Drug Administration (FDA) that we are able to move forward with these plans," Dr. Valliant concluded.

Recent Highlights and Future Milestones

FPI-1434 Monotherapy

* Fusion has completed enrollment, dosing and the dose-limiting toxicity (DLT) evaluation period for the third patient cohort in the ongoing Phase 1 clinical trial of FPI-1434. Fusion plans to convene a Safety Review Committee (SRC) meeting in the third quarter of 2020 to evaluate the safety of the third patient single-dose cohort of 40kBq/kg (cohort three). Fusion anticipates Phase 1 single-dose safety and imaging data to be available in the fourth quarter of 2020. * Fusion received notice from the FDA in May 2020 and a "No Objection Letter" from Health Canada in July 2020 indicating that investigation of the multiple-dose administration in the Phase 1 clinical trial of FPI-1434 may begin. * Fusion anticipates reporting Phase 1 multiple-dose safety and imaging data, and the recommended Phase 2 dose/schedule, approximately nine to eighteen months after the commencement of this portion of the study.

FPI-1434 Combination Therapy

* Fusion is currently evaluating FPI-1434 in preclinical studies in combination with approved checkpoint and DNA damage response inhibitors, including PARP inhibitors, and believes the synergies observed could expand the addressable patient populations for FPI-1434 and allow for potential use in earlier lines of treatment. * Fusion anticipates initiating Phase 1 combination studies six to nine months following determination of the recommended Phase 2 dose of FPI-1434 monotherapy.

FPI-1966

* FPI-1966 is designed to target and deliver Actinium to tumor sites expressing FGFR3, a protein that is overexpressed in head and neck and bladder cancers. Following the completion of pre-clinical studies, the Company expects to submit an IND for FPI-1966 approximately six to twelve months after the Company fully resumes preclinical activities following interruptions caused by COVID-19.

Corporate Updates

* In June 2020, Fusion completed an initial public offering of 12,500,000 common shares at a public offering price of $17.00 per share. Gross proceeds of the offering, before deducting underwriting discounts and commissions and other offering expenses payable by Fusion, were $212.5 million. * In May 2020, upon acceptance of the clinical trial protocol amendment to move from the single- to multiple-dose regimen of FPI-1434, the Company achieved a regulatory milestone associated with the Class B financing which triggered the closing of the second tranche of $62.5 million in gross proceeds.

Impact of COVID-19

Fusion is closely monitoring how the spread of COVID-19 is affecting the Company's employees, business, preclinical studies and clinical trials. In response to the COVID-19 pandemic, most employees have transitioned to working remotely and travel has been restricted.

While Fusion has completed enrollment, dosing and the DLT evaluation period for the third patient cohort in the ongoing Phase 1 clinical trial of FPI-1434, the Company may not be able to enroll additional patient cohorts on the planned timeline due to disruptions at clinical trial sites. Additionally, while certain preclinical activities have restarted, Fusion is currently unable to predict when the Company will fully resume all preclinical activities.

Although the single dose Phase 1 clinical trial has not been materially affected by the COVID-19 pandemic as of June 30, 2020, at this time, there is significant uncertainty relating to the trajectory of the pandemic. The impact of related responses and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing the planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays. The impact of COVID-19 on future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence.

Second Quarter 2020 Financial Results

* Cash Position: As of June 30, 2020, Fusion held cash of $318.9 million, compared to cash of $65.3 million as of December 31, 2019. Fusion expects its cash as of June 30, 2020 will enable the Company to fund its operations into 2024. * R&D Expenses: Research and development expenses for the second quarter of 2020 were $3.3 million, compared to $2.1 million for the same period in 2019. The increase was primarily due to costs related to our Phase 1 clinical trial of FPI-1434, as well as other development and personnel-related costs. * G&A Expenses: General and administrative expenses for the second quarter of 2020 were $4.0 million, compared to $1.8 million for the same period in 2019. The increase was primarily due to an increase in professional fees, personnel-related costs and other costs including general corporate, insurance and facilities costs. * Net Loss: For the second quarter of 2020, Fusion reported a net loss of $44.7 million, or $18.91 per share, compared with a net loss of $3.5 million, or $1.79 per share, for the same period in 2019. During the second quarter of 2020, Fusion recorded a non-cash charge of $31.6 million for the final fair value measurement of the Company's Class B preferred share tranche right liability. The fair value increased in the quarter due primarily to an increase in the fair value of the Class B preferred shares as a result of achieving specified milestones underlying the preferred share tranche rights. Fusion also recorded a non-cash charge of $6.1 million during the second quarter of 2020 for the final fair value measurement of the Company's Class B preferred share warrant liability. The fair value increased in the quarter due primarily to an increase in the fair value of the underlying Class B preferred shares resulting from the IPO. The tranche right liability and the warrant liability were reclassified to shareholders' equity during the second quarter of 2020. Excluding these non-cash charges, for the second quarter of 2020 net loss on a non-GAAP adjusted basis was $7.1 million.

Upcoming Events

* Fusion will present at the 2020 Wedbush PacGrow Healthcare Virtual Conference on Wednesday, August 12 at 9:10am EDT. * Fusion will participate in a virtual "fireside chat" presentation at Morgan Stanley's 18th Annual Global Healthcare Conference on Thursday, September 17 at 11:00am EDT.

About FusionFusion Pharmaceuticals is a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines. Employing a proprietary Fast-Clear linker technology, Fusion connects alpha particle emitting isotopes to antibodies and other targeting molecules in order to selectively deliver the alpha emitting payloads to tumors. Fusion's lead program, FPI-1434, is currently in a Phase 1 clinical trial.

Forward-Looking Statements

Certain statements set forth in this press release constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements can be identified by terms such as "believes," "expects," "plans," "potential," "would" or similar expressions and the negative of those terms. Such forward-looking statements involve substantial risks and uncertainties that could cause Fusion's research and clinical development programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the uncertainties inherent in the drug development process, including Fusions' programs' early stage of development, the process of designing and conducting preclinical and clinical trials, the regulatory approval processes, the timing of regulatory filings, the challenges associated with manufacturing drug products, Fusion's ability to successfully establish, protect and defend its intellectual property, risks relating to business interruptions resulting from the coronavirus (COVID-19) disease outbreak or similar public health crises and other matters that could affect the sufficiency of existing cash to fund operations. Fusion undertakes no obligation to update or revise any forward-looking statements. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of the company in general, see Fusion's quarterly report on Form 10-Q for the quarter ended June 30, 2020 which will be available on the Security and Exchange Commission's website at www.sec.gov and Fusions website at www.fusionpharma.com.

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

June 30, December 31,

2020 2019

Assets

Current assets:

Cash $ 318,892 $ 65,344

Restricted cash 280 280

Prepaid expenses and other current assets 960 929

Total current assets 320,132 66,553

Property and equipment, net 1,403 1,272

Deferred tax assets 78 78

Restricted cash 1,497 1,497

Total assets $ 323,110 $ 69,400

Liabilities, Non-Controlling Interest, ConvertiblePreferred Shares and Shareholders' Equity (Deficit)

Current liabilities:

Accounts payable $ 703 $ 830

Income taxes payable 278 117

Accrued expenses 6,629 3,326

Total current liabilities 7,610 4,273

Deferred rent, net of current portion - 28

Preferred share tranche right liability - 5,741

Income taxes payable, net of current portion 293 293

Special voting shares redemption right liability - -(Notes 2 and 6)

Total liabilities 7,903 10,335

Commitments and contingencies (Note 11)

Non-controlling interest in Fusion Pharmaceuticals - 20,961(Ireland) Limited (Notes 2 and 6)

Convertible preferred shares, no par value; 0 sharesand 132,207,290 shares authorized as of June 30,2020 and December 31, 2019, respectively; 0shares and 73,125,790 shares issued and outstanding - 71,592as of June 30, 2020 and December 31, 2019,respectively; aggregate liquidation preference of $0and $77,965 as of June 30, 2020 and December 31,2019, respectively

Shareholders' equity (deficit):

Common shares, no par value, unlimited sharesauthorized as of June 30, 2020 and December 31,2019; 41,664,044 and 1,929,555 shares issued - -and outstanding as of June 30, 2020 and December 31,2019, respectively

Additional paid-in capital 405,032 1,286

Accumulated deficit (89,825) (34,774)

Total shareholders' equity (deficit) 315,207 (33,488)

Total liabilities, non-controlling interest,convertible preferred shares and shareholders' $ 323,110 $ 69,400equity (deficit)

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Operating expenses:

Research and $ 3,325 $ 2,137 $ 7,702 $ 4,978development

General and 3,988 1,771 8,315 2,942administrative

Total operating 7,313 3,908 16,017 7,920expenses

Loss from operations (7,313) (3,908) (16,017) (7,920)

Other income (expense):

Change in fair value ofpreferred share tranche (31,604) 222 (32,722) 222right liability

Change in fair value ofpreferred share warrant (6,065) - (6,399) -liability

Interest income 22 148 169 148

Refundable investment 52 44 98 88tax credits

Other income (expense), 325 56 128 105net

Total other income (37,270) 470 (38,726) 563(expense), net

Loss before provision (44,583) (3,438) (54,743) (7,357)for income taxes

Provision for income (150) (18) (212) (32)taxes

Net loss and (44,733) (3,456) (54,955) (7,389)comprehensive loss

Dividends paid topreferred shareholders - - (1,382) -in the form of warrantsissued

Net loss attributable $ (44,733) $ (3,456) $ (56,337) $ (7,389)to common shareholders

Net loss per shareattributable to common $ (18.91) $ (1.79) $ (26.23) $ (3.89)shareholders-basic anddiluted

Weighted-average commonshares 2,366,198 1,928,933 2,147,876 1,901,109outstanding-basic anddiluted

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2020 2019

Cash flows from operating activities:

Net loss $ (54,955) $ (7,389)

Adjustments to reconcile net loss to net cash usedin operating activities:

Share-based compensation expense 784 190

Depreciation and amortization expense 270 134

Non-cash rent expense 14 -

Change in fair value of preferred share tranche 32,722 (222)right liability

Change in fair value of preferred share warrant 6,399 -liability

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (103) (46)

Accounts payable (319) (12)

Accrued expenses 1,209 525

Income taxes payable 162 (9)

Net cash used in operating activities (13,817) (6,829)

Cash flows from investing activities:

Purchases of property and equipment (382) (151)

Net cash used in investing activities (382) (151)

Cash flows from financing activities:

Proceeds from issuance of Class B convertiblepreferred shares and Class B preferred share 65,676 45,476tranche right, net of issuance costs

Proceeds from issuance of Class B preferredexchangeable shares of Fusion Pharmaceuticals 6,722 6,711(Ireland) Limited and Class B preferred sharetranche right, net of issuance costs

Proceeds from the issuance of common shares uponclosing of initial public offering, net of 197,625 -underwriter fees

Payment of offering costs (2,276) -

Net cash provided by financing activities 267,747 52,187

Net increase in cash and restricted cash 253,548 45,207

Cash and restricted cash at beginning of period 67,121 29,080

Cash and restricted cash at end of period $ 320,669 $ 74,287

Supplemental disclosure of cash flow information:

Cash paid for income taxes $ 50 $ 40

Supplemental disclosure of non-cash investing andfinancing activities:

Purchases of property and equipment included in $ - $ 11accounts payable and accrued expenses

Issuance of common shares upon net settlement of $ - $ 57stock option exercise

Issuance of warrants to purchase Class B preferredshares and Class B preferred exchangeable shares as $ 1,382 $ -a non-cash dividend to preferred shareholders

Offering costs included in accounts payable and $ 2,296 $ -accrued expenses

FUSION PHARMACEUTICALS INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

GAAP Net lossand $ (44,733) $ (3,456) $ (54,955) $ (7,389)comprehensiveloss

Adjustments

Change infair value ofpreferred (31,604) 222 (32,722) 222share trancherightliability

Change infair value ofpreferred (6,065) - (6,399) -share warrantliability

Non-GAAP Netloss and $ (7,064) $ (3,678) $ (15,834) $ (7,611)comprehensiveloss

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SOURCE Fusion Pharmaceuticals Inc.