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Item 5. Market for Registrant’s Common Equity

2021-03-03 compared with 2020-03-03 · 21 added, 546 removed, 28 unchanged (95% of the section changed)

MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Certain Information Regarding the Trading of Our Common Stock

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Holders of Our Common Stock

As of January 31, 2020, there were approximately 26 holders of record of shares of our common stock.

This number does not include

stockholders for whom shares are held in nominee or street name.

Securities Authorized for Issuance Under Equity Compensation

The information required by Item 5 of Form 10-K regarding equity compensation plans is

incorporated herein by reference to Item 12 of Part III of this Annual Report.

As of January 31, 2021, there was approximately one holder of record of shares of our common stock.

The actual number of holders of our common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by Item 5 of Form 10-K

regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.

Recent Sales of Unregistered Securities

Use of Proceeds from Initial Public

On June 25, 2018, we completed the initial public offering of our common stock pursuant to which we issued and sold

6,666,667 shares of our common stock at a price to the public of $15.00 per share.

All of the shares issued and sold in the initial

public offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No.

333-225178), which was declared effective by the

SEC on June 20, 2018.

Use of Proceeds from Initial Public Offering

On June 25, 2018, we completed the initial public offering of our common stock pursuant to which we issued and sold 6,666,667 shares of our common stock at a price to the public of $15.00 per share.

All of the shares issued and sold in the initial public offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1

which was declared effective by the SEC on June 20, 2018.

Following the sale of the shares in connection with the closing of our initial public offering, the offering terminated.

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Morgan Securities LLC and Cowen & Co.

acted as joint

book-running managers and Wedbush PacGrow acted as lead manager of our initial public offering.

We received aggregate gross proceeds from

our initial public offering of approximately $100.0 million, or aggregate net proceeds of approximately $89.9 million after deducting underwriting discounts and commissions and offering expenses.

None of the underwriting discounts and

commissions or offering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10 percent or more of our common stock or to any of our affiliates.

We have not used any of the net proceeds from the offering to make payments, directly or indirectly, to any director or officer of ours, or

any of their associates, to any person owning 10 percent or more of our common stock or to any affiliate of ours.

acted as joint book-running managers and Wedbush PacGrow acted as lead manager of our initial public offering.

We received aggregate gross proceeds from our initial public offering of approximately $100.0 million, or aggregate net proceeds of approximately $89.9 million after deducting underwriting discounts and commissions and offering expenses.

None of the underwriting discounts and commissions or offering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10 percent or more of our common stock or to any of our affiliates.

We have not used any of the net proceeds from the offering to make payments, directly or indirectly, to any director or officer of ours, or any of their associates, to any person owning 10 percent or more of our common stock or to any affiliate of ours.

We have invested the remaining net proceeds from the offering in money market accounts.

There has been no material change in our

planned use of the net proceeds from the offering as described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on June 21, 2018.

There has been no material change in our planned use of the net proceeds from the offering as described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on June 21, 2018.

Issuer Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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Shares (or Units)

Part of Publicly

Announced Plans or

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(or Units) that

May Yet be Purchased

Under the Plans or

3 unchanged sentences

Represents shares of restricted common stock of Magenta Therapeutics, Inc.

repurchased in connection with the

termination of certain employees employment with Magenta Therapeutics, Inc.

repurchased in connection with the termination of certain employees’ employment with Magenta Therapeutics, Inc.

Under the terms of the applicable restricted stock award agreements, such shares were repurchased by Magenta Therapeutics, Inc.

at the amount originally paid by such

employees for such shares.

at the amount originally paid by such employees for such shares.

SELECTED FINANCIAL DATA

You should read the following selected financial data together with our consolidated financial statements and the related notes appearing at

the end of this Annual Report on Form 10-K and the Managements Discussion and Analysis of Financial Condition and Results of Operations section.

We have derived the statement of operations

data for the years ended December 31, 2019, 2018 and 2017 and the balance sheet data as of December 31, 2019 and 2018 from our audited consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

The selected statements of operations data for the year ended December 31, 2016 and the balance sheet data as of December 31, 2017 and 2016 is derived from our audited consolidated financial

statements not included in this Annual Report on Form 10-K.

Our historical results are not necessarily indicative of the results that may be expected in any future period.

Year Ended December 31,

(in thousands, except share and per share data)

Statement of Operations Data:

Operating expenses:

Research and development (1)

General and administrative (1)

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Interest and other income, net

Total other income (expense), net

Accretion of redeemable convertible preferred stock to redemption value

Cumulative dividends on redeemable convertible preferred stock

Reversal of cumulative dividends on redeemable convertible preferred stock

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Weighted average common shares outstanding, basic and diluted

Amounts include stock-based compensation expense, as follows:

Year Ended December 31,

(in thousands)

Research and development

General and administrative

As of December 31,

(in thousands)

Balance Sheet Data:

Cash, cash equivalents and marketable securities

Working capital

Redeemable convertible preferred stock

Total stockholders equity (deficit)

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in

conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis or set forth

elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

result of many factors, including those factors set forth in the Risk Factors section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in,

or implied by, the forward-looking statements contained in the following discussion and analysis.

We are a clinical-stage biotechnology company developing novel medicines to bring the curative power of immune reset to more patients with

autoimmune diseases, blood cancers and genetic diseases.

Resetting the immune system through stem cell transplant is a well-established

and often curative medical procedure involving a two-step process:

(i) removing the disease-causing cells and (ii) replacing them with healthy cells to rebuild the immune system.

As it exists today,

stem cell transplant is a large market opportunity, but currently only approximately 40 percent of eligible patients receive a curative immune reset because of the risks and toxicities associated with the transplant procedure.

New approaches

are needed to extend immune reset to more patients, including drugs to:

collect sufficient stem cells to rebuild a healthy immune system, remove disease-causing cells and prevent complications in rebuilding the new immune system.

At Magenta, we believe we are uniquely positioned to address these opportunities and to lead a new era in immune reset.

Our portfolio of

product candidates includes biologics, small molecules and a cell therapy designed as new approaches to extend the curative power of immune reset through transplant to more patients across many diseases.

Currently, only a fraction of eligible

patients with these diseases receive a transplant because the risks and challenges outweigh the potential for a cure.

These include diseases where transplant is a standard of care (e.g., blood cancers such as acute myelogenous leukemia,

myelodysplastic syndromes, multiple myeloma, and non-Hodgkin lymphoma), diseases where transplant is performed but limited in use (e.g., hemoglobinopathies such as sickle cell disease and beta-thalassemia) and

autoimmune diseases (e.g., multiple sclerosis and systemic sclerosis).

Emerging clinical data suggest that immune reset through stem cell transplant may represent a breakthrough approach with curative potential for patients with severe autoimmune

For example, recent results from multiple clinical trials show that patients with autoimmune diseases, including multiple sclerosis and systemic sclerosis, can be cured with a transplant.

However, based on our epidemiology analyses,

currently only approximately 1 to 2% of eligible patients with these autoimmune diseases in the U.S.

and Europe receive a stem cell transplant.

To harness the curative power of immune reset through stem cell transplant for more patients, we have created a new stem cell biology

discovery platform and are developing a comprehensive portfolio of novel therapeutics.

Our programs will allow more patients to benefit through a more precise stem cell transplant process.

This includes targeted conditioning medicines that remove

the disease-causing cells before transplant (conditioning program), a medicine for stem cell collection for donors and patients (mobilization program) and a cell therapy with a high stem cell dose to rebuild a healthy immune system (cell therapy

Our conditioning programs, including MGTA-117, are designed to selectively remove disease-causing stem and/or immune cells from a patient prior to transplant, and to be far less toxic than the decades-old radiation and chemotherapy-based approaches, which are still the only available options.

Within our mobilization program, MGTA-145 is our first-line stem cell

mobilization product candidate, and it is designed to enable physicians to more easily collect a greater number of blood stem cells, known as hematopoietic stem cells or HSCs, from patients and donors to improve patient outcomes and scale the

capacity of transplant and apheresis centers.

MGTA-456 is a cell therapy designed to provide a high dose of stem cells that are well matched to the patient, and it has the potential to allow more

patients to have a better chance for a successful stem cell transplant.

Our program to prevent post-transplant complications is designed to target the donor immune cells within the patient that cause Graft vs.

Host Disease, or GvHD, and allow safe

rebuilding of a healthy immune system (post-transplant complications program).

We intend to become a fully integrated discovery,

development and commercial company that will pioneer the field of immune reset.

We believe that our product portfolio will offer significant commercial synergies.

We are developing our products so that they can each be used individually or in

combination with each other.

As a result, our portfolio could be utilized in a manner tailored to the patients disease, such that a patient may receive more than one Magenta therapy as part of their individual immune reset journey.

Since our inception in 2015, we have focused substantially all of our efforts and financial resources on organizing and staffing our company,

business planning, raising capital, acquiring and developing our technology, identifying potential product candidates, and undertaking preclinical studies, and in the case of MGTA-456 and MGTA-145, clinical trials.

We do not have any products approved for sale and have not generated any revenue from product sales.

In June 2018, we completed an initial public offering, or IPO, of our common stock, pursuant to which we issued and sold 6,666,667 shares of

common stock at a public offering price of $15.00 per share, resulting in net proceeds of $89.9 million after deducting underwriting discounts and commissions and other offering expenses.

In May 2019, we issued and sold 4,887,500 shares of

our common stock, including the underwriters exercise in full of their option to purchase additional shares of common stock, in a follow-on public offering at a public offering price of $13.25 per share,

resulting in net proceeds of $60.3 million after underwriting discounts and commission and other offering expenses.

Prior to our common stock offerings, we funded our operations primarily with proceeds from the sales of redeemable convertible

preferred stock and issuance of convertible notes.

Since our inception, we have incurred significant operating losses.

Our ability to

generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

Our net losses were $76.8 million and $57.5 million,

respectively, for the years ended December 31, 2019 and 2018.

As of December 31, 2019, we had an accumulated deficit of $179.5 million.

We expect to continue to incur significant expenses and increasing operating losses for at least

the next several years.

We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we:

continue enrollment in our Phase 2 clinical trials of MGTA-456 in

patients with inherited metabolic disorders and in patients with blood cancer and initiate additional clinical trials for MGTA-145;

prepare for and initiate our preclinical studies and clinical trials of our product candidates, including MGTA-117;

develop any other future product candidates we may choose to pursue;

seek marketing approval for any of our product candidates that successfully complete clinical development, if

maintain compliance with applicable regulatory requirements;

develop and scale up our capabilities to support our ongoing preclinical activities and clinical trials for our

product candidates and commercialization of any of our product candidates for which we obtain marketing approval, if any;

maintain, expand, protect and enforce our intellectual property portfolio;

develop and expand our sales, marketing and distribution capabilities for our product candidates for which we

obtain marketing approval, if any;

expand our operational, financial and management systems and increase personnel, including to support our

clinical development and commercialization efforts and our operations as a public company.

We will not generate revenue

from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates.

If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses

related to developing our commercialization capability to support product sales, marketing and distribution.

Further, we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

Until such time

as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing and distribution or licensing

arrangements.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

If we fail to raise capital or enter into such agreements as, and when, needed, we may have to

significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

are able to generate product sales, we may not become profitable.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to

reduce or terminate our operations.

As of December 31, 2019, we had cash, cash equivalents and marketable securities of

$145.7 million.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2021.

See Liquidity and

Capital Resources.

Components of Our Results of Operations

To date, we have not

generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future.

If our development efforts for our product candidates are successful and result in regulatory approval, we may

generate revenue in the future from product sales.

If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or

collaboration agreements.

We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates.

We may never succeed in obtaining regulatory approval for any of our product candidates.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and

the development of our product candidates, which include:

employee-related expenses, including salaries and related costs, and stock-based compensation expense, for

employees engaged in research and development functions;

expenses incurred in connection with the preclinical and clinical development of our product candidates,

including under agreements with contract research organizations, or CROs;

the cost of consultants and contract manufacturing organizations, or CMOs, that manufacture drug products for use

in our preclinical studies and clinical trials;

facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance

of facilities, insurance and supplies;

payments made under third-party licensing agreements.

We expense research and development costs to operations as incurred.

Advance payments for goods or services to be received in the future for

use in research and development activities are recorded as prepaid expenses.

The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Our direct research and development expenses are tracked on a

program-by-program basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors, CMOs and CROs in connection with

our preclinical and clinical development activities.

We do not allocate employee costs, costs associated with our platform technology or facility expenses, including depreciation or other indirect costs, to specific product development programs

because these costs are deployed across multiple product development programs and, as such, are not separately classified.

The successful

development and commercialization of our product candidates is highly uncertain.

This is due to the numerous risks and uncertainties, including the following:

successful completion of preclinical studies and clinical trials;

receipt and related terms of marketing approvals from applicable regulatory authorities;

raising additional funds necessary to complete clinical development of and commercialize our product candidates;

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory

exclusivity for our product candidates;

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical

and commercial supplies of our product candidates;

developing and implementing marketing and reimbursement strategies;

establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if

and when approved, whether alone or in collaboration with others;

acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

effectively competing with other therapies;

obtaining and maintaining third-party coverage and adequate reimbursement;

protecting and enforcing our rights in our intellectual property portfolio;

maintaining a continued acceptable safety profile of the products following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change

the costs and timing associated with the development of that product candidate.

We may never succeed in obtaining regulatory approval for any of our product candidates.

Research and development activities are central to our business model.

Product candidates in later stages of clinical development generally

have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect research and development costs to increase significantly for the

foreseeable future as our product candidate development programs progress.

However, we do not believe that it is possible at this time to accurately project total program-

specific expenses through commercialization.

There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and

various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, and stock-based compensation, for personnel in executive,

finance and administrative functions.

General and administrative expenses also include direct and allocated facility-related costs, insurance costs as well as professional fees for legal, patent, consulting, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued

research activities and development of our product candidates.

We also anticipate that we will incur increased costs associated with continuing to operate as a growing public company.

Interest and Other Income, Net

Interest and other income, net, consists of interest income and miscellaneous income and expense unrelated to our core operations.

Since our inception, we have not recorded any U.S.

federal or state income tax benefits for the net losses we have incurred in each year or for

our earned research and orphan drug tax credits, due to our uncertainty of realizing a benefit from those items.

As of December 31, 2019, we had net operating loss carryforwards for federal income tax purposes of $75.7 million, of which

$17.5 million begin to expire in 2035 and $58.2 million can be carried forward indefinitely.

As of December 31, 2019, we had net operating loss carryforwards for state income tax purposes of $78.1 million which begin to expire in

As of December 31, 2019, we also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $6.2 million and $1.6 million, respectively, which begin to expire in 2035 and 2030,

respectively.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S., or GAAP.

preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and

liabilities in our consolidated financial statements.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for

making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different

assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial

statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated

financial statements.

Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development

This process involves reviewing open contracts and purchase

orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for

the service when we have not yet been invoiced or otherwise notified of actual costs.

The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when

contractual milestones are met;

however, some require advance payments.

We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time.

periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary.

Examples of estimated accrued research and development expenses include fees paid to:

vendors in connection with the preclinical development activities;

CROs in connection with preclinical and clinical trials;

CMOs in connection with the production of preclinical and clinical trial materials;

investigative sites in connection with clinical trials.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended

pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to

contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense.

In accruing service fees, we estimate the time period

over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may

result in reporting amounts that are too high or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

measure all stock options and other stock-based awards granted to employees and directors and, commencing January 1, 2019, to non-employees based on the fair value on the date of the grant and recognize

compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

Generally, we issue stock options and restricted stock awards, or RSAs, with either service-only vesting

conditions and record expense using the straight-line method or service and performance vesting conditions and record expense using the graded-vesting method.

We have historically granted stock options with exercise prices equivalent to the fair

value of our common stock as of the date of the grant.

The fair value of our common stock is based on quoted market prices.

We estimate the fair value of each stock option award using the Black-Scholes option-pricing model, which uses as inputs the

fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected

dividend yield.

Prior to the adoption of Accounting Standards Update, or ASU, 2018-07 on

January 1, 2019, we measured the fair value of stock-based awards granted to non-employees on the date at which the related service was complete.

Compensation expense was recognized over the period during

which services were rendered by such non-employee consultants until completed.

At the end of each financial reporting period prior to completion of the service, the fair value of these awards was re-measured using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model for options and the then-current fair value of our common stock for

restricted stock.

We do not estimate and apply a forfeiture rate as we have elected to account for forfeitures as they occur.

Results of Operations

Comparison of the Years Ended December 31, 2019 and 2018

The following table summarizes our results of operations for the years ended December 31, 2019 and 2018:

Year Ended December 31,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest and other income, net

Research and Development Expenses

Year Ended December 31,

(in thousands)

Direct research and development expenses by program:

Post-Transplant Complications

Unallocated expenses:

Personnel related (including stock-based compensation)

Consultant fees

Facility related and other

Total research and development expenses

Expenses related to our conditioning program increased primarily as a result of higher preclinical costs for

manufacturing to support our investigational new drug, or IND, enabling studies and future clinical trials.

The increase in expenses related to our mobilization program was due to an increase in clinical trial costs related to our MGTA-145 Phase 1 clinical trial, which was initiated in April 2019, partially offset by a decrease in preclinical costs.

Expenses related to our cell therapy program increased primarily due to higher manufacturing

costs to support the investigator-initiated Phase 2 clinical trial of MGTA-456 in patients with blood cancers that was initiated in December 2018 and our ongoing clinical trials.

In addition, expenses related

to our cell therapy program increased due to manufacturing process development.

The increase in personnel related costs included in

unallocated expenses was due to an increase in headcount in our research and development function.

The decrease in consultant fees was primarily due to a decrease in stock-based compensation expense.

Consultant fees for the years ended

December 31, 2019 and 2018 included stock-based compensation expense of $1.6 million and $3.3 million, respectively.

The increase in facility related and other costs was primarily due to higher facility costs related to the sublease

agreement for our Cambridge, Massachusetts facility, which we entered into in May 2018.

General and Administrative Expenses

Year Ended December 31,

(in thousands)

Personnel related (including stock-based compensation)

Professional and consultant fees

Facility related and other

Total general and administrative expenses

The increase in personnel related costs was primarily a result of an increase in headcount and an increase in

stock-based compensation expense.

Personnel related costs for the years ended December 31, 2019 and 2018 included stock-based compensation expense of $5.4 million and $4.5 million, respectively.

The increase in professional and

consultant fees was primarily due to an increase in costs associated with operating as a public company, as well as costs incurred for pre-commercialization activities.

The increase in facility related and

other costs was primarily due to higher facility costs related to the sublease agreement for our Cambridge, Massachusetts facility, which we entered into in May 2018, as well as director and officer insurance costs.

Interest and Other Income, Net

The increase in interest and other income, net was primarily due to an increase of $2.4 million of rental income from the sublease of a

portion of our Cambridge, Massachusetts facility as well as an increase in interest income of $1.4 million resulting from the investment of the net proceeds from our follow-on public offering in May 2019,

our IPO in June 2018, and our series C redeemable convertible preferred stock financing in April 2018.

Comparison of the Years

Ended December 31, 2018 and 2017

The following table summarizes our results of operations for the years ended

December 31, 2018 and 2017:

Year Ended December 31,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest and other income, net

Research and Development Expenses

Year Ended December 31,

(in thousands)

Direct research and development expenses by program:

Post-Transplant Complications

Unallocated expenses:

Personnel related (including stock-based compensation)

Consultant fees

Facility related and other

Total research and development expenses

Expenses related to our conditioning program increased primarily as a result of costs incurred in connection

with our collaboration agreement with Heidelberg Pharma Research GmbH for an upfront technology access fee, research exclusivity fees, target-specific development options and payments for research support related to our drug discovery efforts,

primarily lead optimization.

Conditioning program costs also increased due to our proof of mechanism and ongoing lead optimization in non-human primate studies.

The increase in expense related to our

mobilization program was due to an increase in preclinical costs for toxicology studies and manufacturing to support our IND enabling studies.

Expenses related to our cell therapy program decreased primarily as a result of the prior year cost of in-licensing technology of $9.3 million for the rights to MGTA-456 under a license agreement with Novartis International

Pharmaceutical Ltd.

This decrease was partially offset by increased clinical trial and manufacturing costs during the year ended December 31, 2018 incurred for our MGTA-456 Phase 2 trial for inherited

metabolic disorders, which we initiated in December 2017, and preparation for planned additional clinical trials in indications beyond inherited metabolic disorders.

The increase in spending related to our post-transplant complications program was

due to costs related to our drug discovery efforts, primarily target validation.

The increase in personnel related costs included in

unallocated expenses was due to an increase in headcount and stock-based compensation expense in our research and development function.

Personnel related costs for the year ended December 31, 2018 and 2017 included stock-based compensation

expense of $2.7 million and $0.3 million, respectively.

The increase in consultant fees was due to an increase in stock-based compensation issued to non-employees of $2.0 million, from

$1.3 million for the year ended December 31, 2017 to $3.3 million for the year ended December 31, 2018.

The increase in facility related and other costs was primarily due to higher facility costs related to the sublease agreement

for our Cambridge, Massachusetts facility, which we entered into in May 2018.

General and Administrative Expenses

Year Ended December 31,

(in thousands)

Personnel related (including stock-based compensation)

Professional and consultant fees

Facility related and other

Total general and administrative expenses

The increase in personnel related costs was primarily a result of an increase in stock-based

compensation expense and an increase in headcount.

Personnel related costs for the year ended December 31, 2018 and 2017 included stock-based compensation expense of $4.5 million and $0.6 million, respectively.

The increase in

professional and consultant fees was primarily due to an increase in patent costs and fees associated with operating as a public company.

The increase in facility related and other costs was primarily due to higher facility costs related to the

sublease agreement for our Cambridge, Massachusetts facility, which we entered into in May 2018, as well as director and officer insurance costs and an increase in information technology-related expenses.

Interest and Other Income, Net

The increase in interest and other income, net was primarily due to an increase in interest income of $1.9 million resulting from the

investment of our net proceeds from our IPO in June 2018 and our sale of series C redeemable convertible preferred stock in April 2018.

In addition, the increase was due to $0.4 million of rental income from the sublease of a portion of our

Cambridge, Massachusetts facility.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses.

We have not yet commercialized any of our product candidates and we do not

expect to generate revenue from sales of any product candidates for several years, if at all.

In June 2018, we completed the IPO of our common stock, pursuant to which we issued and sold 6,666,667 shares of common stock at a public offering price of

$15.00 per share, resulting in net proceeds of $89.9 million after deducting underwriting discounts and commissions and other offering expenses.

In May 2019, we issued and sold 4,887,500 shares of our common stock, including the

underwriters exercise in full of their option to purchase additional shares of common stock, in a follow-on public offering at a public offering price of $13.25 per share, resulting in net proceeds of

$60.3 million after underwriting discounts and commissions and other offering expenses.

Prior to our IPO and follow-on offering, we had funded our operations primarily with proceeds from the sales of

redeemable convertible preferred stock and issuance of convertible notes.

On August 8, 2019, we filed a shelf registration statement

on Form S-3, or Shelf, with the Securities and Exchange Commission, or SEC, which covers the offering, issuance and sale by us of up to an aggregate of $350.0 million of our common stock, preferred stock,

debt securities, warrants and/or units of any combination thereof.

We simultaneously entered into a Sales Agreement with Cowen and Company, LLC, as sales agent, to provide for the issuance and sale by the Company of up to $100.0 million of our

common stock from time to time in at-the-market offerings under the Shelf, which we refer to as the ATM Program.

The Shelf was declared effective by the SEC

on August 19, 2019.

As of December 31, 2019, no sales have been made pursuant to the ATM Program.

The following table summarizes our sources and uses of cash for each of the periods presented:

Year Ended December 31,

(in thousands)

Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Operating Activities

During the year ended December 31, 2019, operating activities used $57.1 million of cash, primarily resulting from our net loss of

$76.8 million, partially offset by non-cash charges of $10.8 million and cash

provided by changes in our operating assets and liabilities of $8.8 million.

Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2019

consisted primarily of a $5.0 million increase in deferred rent and a $5.2 million increase in accounts payable and accrued expenses and other current liabilities, partially offset by an increase of $1.4 million in prepaid expenses

and other current assets.

During the year ended December 31, 2018, operating activities used $41.9 million of cash, primarily

resulting from our net loss of $57.5 million, partially offset by non-cash charges of $11.5 million and cash provided by changes in our operating assets and liabilities of $4.2 million.

provided by changes in our operating assets and liabilities for the year ended December 31, 2018 consisted primarily of a $4.7 million increase in accounts payable and accrued expenses and other current liabilities, and a $1.2 million

increase in long-term liabilities, all partially offset by an increase of $1.8 million in prepaid expenses and other current assets.

During the year ended December 31, 2017, operating activities used $22.3 million of cash, primarily resulting from our net loss of

$35.5 million, partially offset by non-cash charges of $11.9 million and cash provided by changes in our operating assets and liabilities of $1.3 million.

Net cash provided by changes in our

operating assets and liabilities for the year ended December 31, 2017 consisted primarily of a $2.2 million increase in accounts payable and accrued expenses, partially offset by an increase of $0.9 million in prepaid expenses and

other current assets.

Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses in both periods

were generally due to growth in our business and the timing of vendor invoicing and payments.

The increase in deferred rent was primarily due to a lease incentive received from our landlord related to our sublease agreement for our Cambridge,

Massachusetts facility, which we entered into in May 2018.

Investing Activities

During the year ended December 31, 2019, net cash provided by investing activities was primarily attributable to net maturities of

marketable securities of $4.6 million, partially offset by purchases of property and equipment of $3.1 million, consisting primarily of lab equipment and leasehold improvements.

During the year ended December 31, 2018, net cash used in investing activities was primarily attributable to purchases of marketable

securities of $84.0 million and purchases of property and equipment of $7.7 million primarily related to leasehold improvements and lab equipment for our Cambridge, Massachusetts facility.

During the year ended December 31, 2017, we used $2.2 million to purchase property and equipment.

Financing Activities

During the year ended December 31, 2019, net cash provided by financing activities was $62.3 million, consisting of proceeds from our

follow-on public offering, net of underwriting discounts, commissions and offering costs, of $60.3 million and proceeds from the exercise of stock options of $2.0 million.

During the year ended December 31, 2018, net cash provided by financing activities was $142.1 million, consisting primarily of

proceeds from our IPO, net of underwriting discounts, commissions and offering costs, of $89.9 million and net proceeds of $52.2 million from the sale of series C redeemable convertible preferred stock.

During the year ended December 31, 2017, net cash provided by financing activities was $71.5 million, consisting primarily of

$6.3 million of the remaining proceeds received in January 2017 from the sale of series A redeemable convertible preferred stock that we recorded as other receivable as of December 31, 2016, $15.4 million of proceeds from the sale of

additional shares of series A redeemable convertible preferred stock and $49.8 million of net proceeds received from the sale of series B redeemable convertible preferred stock.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical

activities and clinical trials for our product candidates in development.

In addition, we expect to incur additional costs associated with operating as a public company.

The timing and amount of our operating expenditures will depend largely on:

the initiation, progress, timing, costs and results of current and future preclinical studies and clinical trials

for our product candidates;

the clinical development plans we establish for these product candidates;

the number and characteristics of product candidates that we develop or may

the terms of any collaboration agreements we may choose to conclude;

the outcome, timing and cost of meeting and maintaining compliance with regulatory requirements established by

the Food and Drug Administration, the European Medical Agency and other comparable foreign regulatory authorities;

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property

the cost of defending intellectual property disputes, including patent infringement actions brought by third

parties against us;

the effect of existing or new competing technological and market developments;

the cost and timing of completion of commercial-scale outsourced manufacturing activities;

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we

may receive regulatory approval in regions where we choose to commercialize our products on our own.

December 31, 2019, we had cash, cash equivalents and marketable securities of $145.7 million.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital

expenditure requirements into the fourth quarter of 2021.

We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Because of the numerous risks and

uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements.

Our future funding requirements will depend on and could

increase significantly as a result of many factors, including those listed above.

Until such time, if ever, as we can generate

substantial product revenue, we expect to finance our operations through a combination of equity offerings, including sales under our ATM Program, debt financings, collaborations, strategic alliances and marketing, distribution or licensing

arrangements.

We do not currently have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders ownership interest will be diluted, and

the terms of these securities may include liquidation or other preferences that adversely affect our stockholders rights as a common stockholder.

Debt financing and preferred equity financing, if available, may involve agreements that include

covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances

or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be

favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization

efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

The following summarizes our principal contractual obligations and commitments as of December 31, 2019 and the effects such obligations

are expected to have on our liquidity and cash flow in future periods:

Payments Due By Period

Less Than 1 Year

More Than 5 Years

(in thousands)

Operating leases (1)

In May 2018, we entered into a sublease, as amended, for up to approximately 69,000 square feet of office and

laboratory space in Cambridge, Massachusetts.

The term of the lease expires in February 2028.

We enter into contracts

in the normal course of business with CROs, CMOs and other third parties for clinical trials, preclinical research studies and testing and manufacturing services.

These contracts are cancelable by us upon prior written notice.

Payments due upon

cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation.

These payments are not included in the preceding table as the amount and

timing of such payments are not known.

We have also entered into license and collaboration agreements with third parties, which are in

the normal course of business.

We have not included future payments under these agreements in the table of contractual obligations above since obligations under these agreements are contingent upon future events such as our achievement of specified

development, regulatory, and commercial milestones, or royalties on net product sales.

As of December 31, 2019, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet

arrangements, as defined in the rules and regulations of the SEC.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is

disclosed in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.

We are a smaller reporting company, as defined in Rule 12b-2 under

the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity