Foghorn Therapeutics (FHTX) Q3 2026 earnings review
Foghorn extends its cash runway, but drops its lead drug
Foghorn Therapeutics posted a large accounting profit only because it stopped developing its sole clinical-stage cancer drug. The biotechnology group recorded $84 million in collaboration revenue and $58 million in net income after writing off $74 million in upfront payments from partner Eli Lilly following the decision to drop FHD-909. Chief executive Adrian Gottschalk shifted focus to wholly owned laboratory programs and extended the cash outlook into the second half of 2029.
| Collaboration revenue, excluding catch-up | $9.4M +16% from a year ago by our math (reported: $83.5M) |
|---|---|
| Net income (reported) | $58.2M lifted by a $74.1M non-cash accounting adjustment |
| Cash and marketable securities | $156.2M -$11.4M from last quarter by our math |
| Cash runway outlook | Raised into second half of 2029 (was first half of 2028) |
⚖️ Verdict: 🔴 Bearish
The story got worse because terminating FHD-909 leaves the drug developer without a single medicine in human trials until 2027 and guts the Eli Lilly partnership. The good news: dropping the shared clinical trial costs and trimming staff spending cut quarterly cash burn to about $11 million by our math, giving the company an extra 18 months of cash to bring its blood cancer and bowel disease drugs into the clinic.
The question now is whether Eli Lilly will keep any of the remaining undisclosed discovery targets when the research agreement expires in December 2026, or walk away from the partnership entirely. If Lilly keeps a target, Foghorn retains a partner and milestone upside; if Lilly leaves, the company must rely solely on its early wholly owned programs. The full-year filing in early 2027 will show what happened upon the December expiration.
🐂 Bull Case
Cash Now Lasts Into Late 2029
Foghorn Therapeutics develops small-molecule drugs for cancer and inflammatory diseases. The company ended September with $156.2 million in cash and securities, down $11.4 million from June by our math. Even with less cash on hand, management extended its funding outlook "into the second half of 2029" from the first half of 2028.
- Cash and marketable securities: $156.2 million, down 6.8% from last quarter by our math
- Research and development spending: $18.8 million, down 5.8% from a year ago
- General and administrative spending: $5.8 million, down 12.9% from a year ago
That extra 18 months of breathing room matters because the biotech group no longer has to fund its half of the expensive FHD-909 lung cancer clinical trial with Eli Lilly. Lower spending on staff, office space and technology also slowed the quarterly cash drain from $16.0 million in the second quarter to $11.4 million in the third by our math.
What to watch: quarterly cash burn in the fourth-quarter report early next year. If quarterly spending stays near $11 million after one-off restructuring payouts end, the drug developer can fund both of its 2027 human trial starts without selling more stock.
Blood Cancer Drug Beats Rival in Mice
With its lung cancer drug gone, the Massachusetts company needs its wholly owned laboratory programs to step up. Its lead oncology candidate is a selective EP300 degrader, a drug designed to destroy the EP300 protein that drives blood cancers like multiple myeloma and diffuse large B-cell lymphoma (DLBCL) while leaving a twin protein called CBP alone.
In animal studies presented this quarter, the drug showed "superior anti-tumor activity with complete responses, compared to clinical benchmark dual CBP/EP300 inhibitor inobrodib". Inobrodib blocks both proteins and causes dangerous drops in blood platelets that force patients to pause treatment, whereas Foghorn's selective drug wiped out tumors in mice without lowering platelet counts.
What to watch: the regulatory application to begin human testing, called an Investigational New Drug (IND) filing, which management plans for 2027. Submitting that application on time will show whether the long-acting injectable version of the drug is safe enough for patients.
Bowel Disease Pill Matches Antibody in Animals
Foghorn is also expanding outside cancer into immunology and inflammation (I&I) with an oral pill for inflammatory bowel disease (IBD) against an undisclosed biological target. In two mouse models of colon inflammation, the pill reduced disease activity with "efficacy comparable to an anti-IL-12/23p40 antibody positive control", a mouse stand-in for the injected drug ustekinumab.
Matching an injected antibody with a daily pill in animal tests gives the biotech group a second independent shot on goal alongside its cancer pipeline. The company plans to start dose-range finding safety studies in the fourth quarter of 2026 and aims to enter first-in-human trials by the end of 2027.
What to watch: the disclosure of the biological target and the results of fourth-quarter toxicology studies in early 2027. Clean safety numbers in those dose-range studies are required before the company can prepare its human trial application later in the year.
🐻 Bear Case
Dropping FHD-909 Empties the Clinical Pipeline
"Our focus is on advancing our wholly owned portfolio, including our novel, oral I&I program in IBD, with potential for first-in-human trials by the end of 2027, and our Selective EP300 degrader which has an IND targeted for next year," chief executive Adrian Gottschalk said. Yet that shift to wholly owned drugs happened because the company and partner Eli Lilly dropped their lead clinical program.
Buried in the revenue lines, Foghorn revealed "the decision to not advance FHD-909 and the SMARCA2 selective degrader". FHD-909 was the company's only drug in human clinical trials, tested in Phase 1 for lung cancer, and was the centerpiece of its 2021 Lilly partnership that carried up to $1.3 billion in potential milestone payments.
Canceling the program triggered a $74.1 million non-cash accounting boost to third-quarter collaboration revenue and produced $58.2 million in net income, because Foghorn wrote off upfront cash Lilly paid years ago. Without that accounting catch-up, third-quarter revenue was $9.4 million and the business lost $16.0 million by our math.
What to watch: whether Eli Lilly selects any remaining discovery targets from the collaboration now that the research term expires in December 2026. If Lilly walks away from the remaining unnamed targets, the $146.3 million still sitting in deferred revenue will turn into accounting profit with no future cash attached.
Human Trials Will Not Start Until 2027
Terminating FHD-909 returns Foghorn to a pure preclinical developer with no drugs in human testing for at least the next year. Meanwhile, the company's selective CBP degrader for breast cancer, FHT-171, suffered an operational delay at an outside contract laboratory last quarter and still has no target date for a human trial filing.
- Selective CBP degrader (FHT-171): originally planned for 2026 IND-ready status, now lists no clinical milestone date
- Selective EP300 degrader: human trial application (IND) targeted in 2027
- Oral IBD small molecule: first-in-human studies targeted by the end of 2027
- Selective ARID1B degrader: previously slated for 2026 animal proof-of-concept, absent from this quarter's update
This gap matters because preclinical animal results often fail to translate into human patients, and investors will see no human safety or tumor-shrinkage data across 2027 while the new studies get underway.
What to watch: a new timeline for the FHT-171 breast cancer program in the full-year report early next year. Continued silence on a filing date would signal that the weekly injectable formulation needs more laboratory work before entering the clinic.
👓 Other Themes
Restructuring Charge Marks Pipeline Shift
Foghorn booked $2.3 million in restructuring costs during the third quarter as it wound down work on its partnered SMARCA2 programs and trimmed staff and facility expenses. Total operating expenses rose 0.9% from a year ago to $26.9 million, but excluding the restructuring charge, ongoing operating costs fell 7.6% to $24.6 million by our math.
💲 Other KPIs
Deferred revenue — upfront cash from Eli Lilly not yet recorded as sales — dropped 36.4% from last quarter and 43.4% from a year ago by our math. The balance fell by $83.5 million in the quarter because dropping the SMARCA2 programs accelerated revenue recognition without bringing in any new cash.
Weighted average diluted shares increased 15.2% from 63.0 million a year ago by our math. The drug developer issued common stock and pre-funded warrants in a $50 million January 2026 financing, and the third-quarter accounting profit also pulled 1.1 million dilutive options and warrants into the count.
Net other income, which mostly reflects interest earned on the biotech group's cash pile, fell 43.0% from $2.7 million a year ago by our math. The decline tracks the company's lower cash balance compared with the $180.3 million it held in September 2025.
🔮 Guidance
Raised. Foghorn now expects its $156.2 million in cash and securities to fund operations into the second half of 2029, six quarters longer than the first-half 2028 plan it held for the prior three quarters by our math. Dropping the 50% cost-sharing burden on FHD-909 and cutting staff and facility costs drove the extension.
Unchanged. Management still targets a 2027 regulatory filing to begin human trials in multiple myeloma and diffuse large B-cell lymphoma. With FHD-909 discontinued and the CBP breast cancer drug still lacking a date after last quarter's contract lab issue, EP300 is now the company's lead clinical candidate.
Unchanged. The company plans to start dose-range finding studies in the fourth quarter of 2026 and begin first-in-human trials in inflammatory bowel disease by the end of 2027. That schedule keeps the oral pill on the same 2027 timeline management first outlined last quarter.
❓ Key Questions
Why did Foghorn and Eli Lilly stop advancing FHD-909?
The release notes the decision to drop FHD-909 and the SMARCA2 degrader inside the revenue line without giving a scientific or clinical reason. Investors need to know whether Phase 1 lung cancer patients saw poor tumor responses or safety problems.
What remains active in the Eli Lilly partnership?
The 2021 Lilly deal covered SMARCA2 plus two undisclosed discovery targets, and the research term expires in December 2026. Management did not say whether Lilly is keeping any of the remaining targets or ending the collaboration completely.
When will the FHT-171 breast cancer drug enter human trials?
Last quarter, an operational issue at a third-party laboratory delayed the selective CBP degrader FHT-171. The November presentation shows new animal data for a weekly injectable version, but the pipeline chart still leaves the next clinical milestone blank.
What happened to the ARID1B degrader program?
Through the first quarter of 2026, Foghorn guided for animal proof-of-concept data on its selective ARID1B degrader in 2026. The program disappeared from both the third-quarter press release and the investor presentation without explanation.