recently announced that Eli Lilly has terminated its collaboration with the company . The core SMARCA2 selective inhibitor FHD-909 failed to demonstrate the efficacy required to advance to the expansion phase in Phase I dose escalation, and the related SMARCA2 degrader project has also been discontinued.
Following the announcement, Foghorn's stock price plummeted, falling by more than 40% at one point during the day , leaving its market capitalization at only about $130 million.
As a result, Foghorn’s board of directors approved a restructuring plan that would reduce its workforce by about 40% , bringing the total number of employees down to about 65, in order to extend its cash runway to the second half of 2029.
Why did a four-year collaboration end so suddenly?
Why was the cooperation terminated?
The key to understanding Eli Lilly's "return" lies in understanding the decision-making logic of MNCs in the early stages of clinical practice.
FHD-909 is an orally administered, first-in-class allosteric small molecule that selectively inhibits the ATPase activity of SMARCA2 (BRM) and targets SMARCA4-mutant non-small cell lung cancer (NSCLC). SMARCA4-mutant NSCLC is a gene mutation present in approximately 10% of NSCLC and 5% of pan-cancer types. The drug's design logic is based on a sophisticated "synthetic lethality" hypothesis: SMARCA4-mutant cancer cells are highly dependent on SMARCA2 for survival; therefore, selectively inhibiting SMARCA2 can precisely kill tumor cells while having a controllable impact on normal cells.
According to Foghorn CEO Adrian Gottschalk, the Phase I dose escalation results showed that the drug "selectively hit the SMARCA2 target with exposure exceeding preclinical targets and maintained a good safety profile."
"Exposure exceeding preclinical targets" and "good safety" mean that pharmacokinetics are fine, the drug is indeed reaching its intended destination, and safety is fine, with no dose-limiting toxicities. But the only thing missing is precisely the most crucial element of oncology drugs: insufficient efficacy.
For MNCs, while a safety failure is unsightly, it at least demonstrates that the drug has biological activity, albeit too strong and lacking selectivity. However, insufficient efficacy points to a more disturbing possibility: whether the biological assumptions about the target are flawed.
Eli Lilly chose to cut the tumor in Phase I rather than give FHD-909 a chance to "expand the sample size and see" because the logic behind it is that if the synthetic lethal mechanism cannot be converted into measurable tumor shrinkage in the human body, every day of continued investment is just burning money.
If it were just the termination of the FHD-909 project, it would simply be a routine clinical failure. But Eli Lilly and Foghorn's actions went far beyond that.
According to the announcements released by both parties, not only was FHD-909 halted under the cooperation framework, but the selective SMARCA2 degrader project was also terminated, and an undisclosed tumor target was also abandoned. More importantly, "neither party expects further collaborative activities."
This is not a project-level suspension, but a complete wipeout of the partnership.
The $300 million initial payment Eli Lilly made wasn't for the FHD-909 molecule alone, but rather for priority collaboration rights to Foghorn's entire BRM selective project platform and subsequent discovery capabilities. The original design logic was: if the first molecule didn't work out, there were three more discovery-stage projects as "backups." But Eli Lilly chose not to even consider the backups.
This "complete overhaul" decision-making model contrasts sharply with the typical behavior of MNCs in collaborations a few years ago. In the past, large companies typically showed greater tolerance for the failure of individual projects in early collaborations; for example, pausing one project while moving on to another was standard practice. However, Eli Lilly's approach this time indicates that MNCs' patience with collaborative portfolios is systematically shrinking. When a target hypothesis is disproven, subsequent projects on the same platform struggle to gain trust.
What's left of Foghorn?
The 40% layoff is Foghorn's direct response to the termination of this partnership. The workforce will be reduced from 106 to 65, with severance costs amounting to approximately $2.3 million (about RMB 15 million). The cash runway has been extended to the second half of 2029. As of June 2026, the company has $167.6 million in cash reserves.
On paper, Foghorn is "alive." But the distance between being alive and living a meaningful life may be farther than imagined.
Foghorn has focused its remaining resources on four self-developed projects: an EP300 degrader (for hematologic malignancies and prostate cancer), a CBP degrader, an oral immune-inflammatory program, and an induction-adjacent platform. Currently, all four projects are in the preclinical stage , and Foghorn has gone from a company with "clinical data to tell" to one that is "purely storytelling."
For biotech companies, the valuation logic for preclinical pipelines is completely different from that for clinical stages. With Phase I data, investors can make probabilistic judgments based on efficacy signals; with only preclinical data, valuation becomes a price based on faith in the platform's technology and the team's capabilities. Foghorn's market capitalization is approximately $130 million, and the market's valuation based on this faith is clearly not high.
Gottschalk's statement in the announcement is noteworthy: "We built Foghorn based on our ability to design drugs on challenging molecular targets and used that ability to build our own pipeline." The subtext is that the failure of FHD-909 was not a failure of drug design capability, but rather a failure of the target biology hypothesis. However, the market may not make this distinction. When a company's core collaboration is terminated and its core pipeline is relegated to pre-clinical trials, investors tend to equate "choosing the wrong target" with "the company's incompetence."
Furthermore, the competitive landscape for EP300 and CBP degraders is far more crowded than that for SMARCA2. Foghorn does not have a first-mover advantage on either of these targets, and with its cash runway extending to 2029, the company must advance at least one project to a clinical stage with differentiated data within the next three years. Otherwise, the next "strategic priority adjustment" may not be a 40% reduction in staff, but a more radical option.
Paradigm Shift in MNC Collaboration Strategies
The Foghorn incident becomes clearer when viewed within the context of Eli Lilly's overall plans for 2026.
Six months ago, Eli Lilly announced the acquisition of in vivo CAR-T company Kelonia Therapeutics for up to $7 billion, with an upfront payment of $3.25 billion; it also acquired Ajax Therapeutics for up to $2.3 billion, in order to expand its hematologic oncology pipeline.
On one hand, they established a four-year partnership with a $300 million upfront payment, only to decisively sever ties after receiving Phase I data; on the other hand, they directly acquired a clinical-stage company with a $3.25 billion upfront payment. This isn't a contradiction; it's a strategic upgrade.
Lilly's logic has shifted: for early-stage projects where the target hypothesis hasn't been validated, they use a "low down payment + milestone" partnership model for trial and error; for assets whose platform technology has already received initial validation, they directly acquire them with cash to lock them in. The Foghorn partnership falls into the former category; Lilly bought the right to "see the cards" for $300 million. When the cards were revealed, it was discovered that the synthetic lethality of SMARCA2/4 did not hold true in humans, the cost of seeing the cards was sunk, but the cost of continuing to bet was too high. With Kelonia's in vivo CAR-T platform, Lilly had clearly seen enough cards and chose to buy the entire deck directly.
This strategic shift has profound implications for the biotech ecosystem. Over the past decade, license-out and early-stage partnerships have been among the most important ways for biotech companies to validate their value. Securing an initial payment from a major corporation (MNC) signifies that the target and technology platform have received "certification from a major player." However, when MNCs treat early-stage partnerships as "disposable call options" rather than "long-term assets that need nurturing," the value of this certification is diminishing.
Foghorn isn't the first biotech company to be "returned." The termination of partnerships leads to staff redundancy, often followed by layoffs. In August 2025, Genentech terminated its $1.7 billion oncology collaboration agreement with Bicycle Therapeutics, which subsequently laid off 25% of its workforce. In August 2026, Lisata Therapeutics laid off 72% of its employees and sued its partners after its merger agreement fell through. Foghorn's 40% layoff rate is in the middle of this "return wave," more severe than Bicycle but slightly better than Lisata.
Foghorn wasn't returned due to manufacturing issues or a shift in strategic focus; rather, it was because the target hypothesis was disproven in clinical trials. This means that all companies still racing in the SMARCA2 field face the same question: Is there a problem with Foghorn's execution, or is the target itself flawed?
Coincidentally, Prelude Therapeutics had suspended its SMARCA2 degrader project several months before Foghorn, also due to disappointing Phase I data. Two independent teams, different molecular entities, and different technical approaches, both failed on the same biological hypothesis regarding the target.
Conclusion
When Eli Lilly turned its back on Foghorn after seeing the first-phase data, the company's 48% plunge was more than just a stock market disaster for a biotech company. It marked a colder reality: large companies' patience for early-stage partnerships is running out, and the era of "big company endorsement" as a valuation anchor for biotech companies may be coming to an end.
For biotech companies still waiting for MNC "certification," Foghorn's story provides a stark contrast: when partners start managing early pipelines with a "call option" mentality, the window of opportunity to tell a story based on a cooperation agreement is shorter than imagined.
Source: https://news.yaozh.com/archive/49163.html