Item 2. Management’s Discussion and Analysis
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q
of Magenta Therapeutics, Inc. (the “Company”) contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any express or implied statements that do not relate to historical or current facts or matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “seeks,” “endeavor,” “potential,” “continue” or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q
and include, but are not limited to, statements about:
•
the timing and the success of clinical trials of MGTA-145
and any other product candidates;
•
the outcomes of our preclinical studies, including of MGTA-117;
•
our ability to enroll patients in our clinical trials at the pace that we project;
•
whether the results of our trials will be sufficient to support domestic or foreign regulatory approvals for MGTA-145
or any other product candidates we may develop;
•
our ability to establish clinical programs moving forward in multiple indications, with a rapidly advancing portfolio and sustainable platform;
•
regulatory actions with respect to our product candidates or our competitors’ products and product candidates, including our ability to develop a bioassay and hold successful discussions with the FDA to resolve the clinical hold placed on our Investigational New Drug Application to initiate a Phase 1/2 clinical trial of MGTA-117
in patients with acute myeloid leukemia, or AML, and myelodysplastic syndrome, or MDS;
•
our ability to obtain, including on an expedited basis, and maintain regulatory approval of MGTA-145
or any other product candidates we may develop;
•
the level of expenses related to any of our product candidates or clinical development programs;
•
our expectation that our existing capital resources will be sufficient to enable us to fund our planned development of MGTA-145
and any other product candidates we may identify and pursue;
•
the benefits of the use of MGTA-145
or any other product candidate, if approved;
•
our ability to successfully commercialize MGTA-145
or any other product candidates we may identify and pursue, if approved;
•
our ability to successfully find collaborators for E478 or any of our current and future programs and product candidates;
•
the rate and degree of market acceptance of MGTA-145
or any other product candidates we may identify and pursue;
•
our ability to obtain orphan drug designation for any of our product candidates we may identify and pursue;
•
our expectations regarding government and third-party payor coverage and reimbursement;
•
our ability to manufacture MGTA-145
or any other product candidate in conformity with the U.S. Food and Drug Administration’s requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;
•
our ability to successfully build a specialty sales force and commercial infrastructure;
•
our ability to compete with companies currently producing or engaged in the clinical development of treatments for the disease indications that we pursue and treatment modalities that we develop;
•
our reliance on third parties to conduct our clinical trials;
•
our reliance on third-party contract manufacturers to manufacture and supply our product candidates for us;
•
our ability to retain and recruit key personnel;
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•
our ability to obtain and maintain intellectual property protection for MGTA-145
or any other product candidates we may identify and pursue;
•
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;
•
our expectations regarding the time during which we will continue to be an emerging growth company or smaller reporting company as defined in federal securities regulations;
•
our financial performance; and
•
developments and projections relating to our competitors or our industry.
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including without limitation, risks, uncertainties and assumptions regarding the continuing impact of the novel coronavirus, or COVID-19, pandemic
on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results under “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q,
as well as our other reports filed with the Securities and Exchange Commission, or the SEC, which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.
Overview
Magenta Therapeutics is a clinical-stage biotechnology company developing novel medicines to bring the curative power of stem cell transplants to more patients with blood cancers, genetic diseases and autoimmune diseases.
Magenta’s drug development pipeline includes multiple product candidates designed to improve stem cell transplants. Our lead clinical program is designed to more efficiently and reliably mobilize and collect sufficient functional stem cells for use in stem cell transplantation, a process known as mobilization. We are also developing product candidates that are designed to deplete targeted cells in the bone marrow to make space for the bone marrow to receive newly transplanted stem cells, a process known as conditioning. Our mobilization program is intended to enable rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells for transplant. Magenta’s targeted conditioning programs are intended to enhance the efficacy of and/or reduce the dosing levels, intensity or, in some cases, even the need for chemotoxic agents.
Stem cell transplant is an established and, for certain patients, can be a curative medical procedure that can reset a patient’s blood and immune system after the patient has received treatment for certain blood cancers, genetic diseases or autoimmune diseases. Stem cell transplants involve a three-step process: (i) stem cells are mobilized out of the patient’s or donor’s bone marrow and collected from the blood (or, in rare cases, surgically extracted from their bone marrow); (ii) the patient’s bone marrow is cleared of any remaining stem cells in order to make space to receive new transplanted stem cells; and (iii) the stem cells are transplanted into the patient via infusion where they fasten to, or engraft in, the bone marrow and grow into the blood cells and platelets that form the basis of a reset and rebuilt blood and immune system. All transplants are categorized as either autologous or allogeneic depending on the source of the new stem cells for the transplant. In an autologous transplant, the patient’s own stem cells are used. In an allogeneic transplant, patients receive cells from a stem cell donor.
Stem cell transplant, whether autologous or allogeneic, has broad applicability across disease settings, including blood cancers, gene therapies for genetic diseases and autoimmune diseases. It is the current standard of care for certain blood cancers such as AML, MDS, multiple myeloma and non-Hodgkin’s
lymphoma. Hematopoietic stem cell, or HSC, -based gene therapies also rely on the same steps of the stem cell transplant process with an additional step where collected stem cells are gene-corrected or modified to address the underlying disease prior to transplant. Such gene therapy approaches that leverage the stem cell transplant procedure are being investigated by numerous companies in a variety of diseases, including sickle cell disease, beta-thalassemia and lysosomal storage disorders. Autoimmune diseases such as multiple sclerosis and systemic sclerosis may also benefit from resetting the immune system through stem cell transplant.
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Currently, the number of days required to mobilize and collect a patient’s or donor’s stem cells is a minimum of five days in blood cancer patients and healthy donors and as many as 30 days or more in patients with sickle cell disease. When planning for a patient’s transplant, transplanting physicians cannot reliably predict at the outset how long it will take for patients to mobilize the number of cells required. Many patients require multiple collections, including approximately 40% of blood cancer patients and 75% of sickle cell disease patients. In addition, each day scheduled for attempted mobilization and collection can cause an accumulation of both the direct costs associated with the repeated use of mobilization agents and other healthcare resources, including personnel time, and the indirect costs associated with the need to block time in the limited number of chairs in transplant centers that are used to collect stem cells. Similarly, HSC-based
gene therapies could benefit from more efficient collection of stem cells which could potentially reduce gene therapy manufacturing timelines and costs. Additionally, there are no approved mobilization options for patients with sickle cell disease and autoimmune diseases, and the off-label
use of currently available medicines is associated with significant safety risks including vaso-occlusive events in sickle cell disease patients.
Magenta is developing MGTA-145 as
a new first-line standard of care for stem cell mobilization in a broad range of diseases, for both autologous and allogeneic transplants. MGTA-145, a
CXCR2 agonist, works in combination with plerixafor, a CXCR4 antagonist, to harness a complementary physiological mechanism for stem cell mobilization. The goal of MGTA-145 is
to be the preferred first-line mobilization option for all patients and donors through rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells. In 2020, we completed a Phase 1 clinical trial in healthy volunteers to evaluate the ability of MGTA-145,
in combination with plerixafor, to mobilize stem cells. Based on the results of the study, we have advanced the program into three ongoing and planned Phase 2 clinical trials, including an autologous transplant trial in multiple myeloma patients; an allogeneic transplant trial with healthy donor cells collected for transplant in patients with acute myeloid leukemia, myelodysplastic syndromes or acute lymphocytic leukemia, or ALL; and lastly, a planned trial in partnership with bluebird bio, Inc. to mobilize and collect the stem cells of sickle cell disease patients.
In addition to the opportunity to address the challenges in mobilization and collection of stem cells, Magenta also seeks to improve patient conditioning prior to transplant. Conditioning is the process by which patients are treated with chemotherapy prior to transplant to ensure that the bone marrow has sufficient space to receive newly transplanted stem cells. Currently, only approximately 50% of eligible patients receive a stem cell transplant, in part because of the risks and toxicities of the chemotherapeutic agents available today.
Magenta is developing a suite of novel antibody drug conjugates, or ADCs, for conditioning, a step in the transplant process that currently relies on the use of systemic chemotherapy agents and radiation. We are seeking to replace these toxic, non-targeted conditioning
agents with targeted ADCs.
Magenta’s lead conditioning program, MGTA-117,
is designed to selectively deplete stem cells and reduce the need for high-dose or high-intensity chemotherapeutic agents in oncology applications and potentially eliminate the use of busulfan in gene therapy applications. MGTA-117 targets
CD117, which is highly expressed on the cell surface of HSCs and leukemia cells, making it an ideal target for conditioning across broad sets of diseases, including certain blood cancers, hemoglobinopathies (sickle cell disease and beta-thalassemia) and inherited metabolic disorders.
Our additional research-stage conditioning programs target stem and/or immune cells and are being designed to eliminate toxic chemotherapy conditioning regimens across multiple disease settings. Our C100 program focuses on addressing opportunities in immune reset for autoimmune diseases. Our C300 program is being designed to provide for lymphodepletion prior to cell therapies such as chimeric antigen receptor T cells, or CAR-T.
Magenta is also evaluating two programs with potential in cell therapy. Each is a small molecule used to manufacture a high number of functional stem cells, from either a donor or gene-modified stem cells from a patient. MGTA-456
is a cell therapy designed to generate higher cell doses that are well matched to the patient, which has been shown to improve the speed and success of engraftment in stem cell transplant and improve disease outcomes. In June 2020, we announced that we discontinued enrollment in our Phase 2 trial of MGTA-456
in inherited metabolic diseases. Enrollment in an investigator-initiated trial in patients with blood cancers has been completed, and we plan to use these data, when available, to inform a decision regarding future program development in blood cancers. Our second cell therapy program, E478, is a small molecule aryl hydrocarbon receptor, or AHR, antagonist which
uses the same mechanism used to manufacture MGTA-456
to expand gene-modified HSCs for stem cell-based gene therapy and genome editing.
Magenta intends to become a fully integrated discovery, development and commercial company in the field of stem cell transplant. We are developing our product candidates to be used individually or, in some cases, in combination with each other. As a result, our portfolio could be tailored to the patient’s disease, such that a patient may receive more than one Magenta therapy as part of his or her individual stem cell transplant.
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We are experiencing operational and other challenges as a result of the novel coronavirus, or COVID-19,
global pandemic, which could delay or halt the development of our product candidates. See “Item 1A. Risk Factors” for further discussion of the current and expected impact on our business and product candidates.
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-145
and MGTA-456,
clinical trials. We do not have any products approved for sale and have not generated any revenue from product sales.
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. Net losses were $34.4 million and $74.9 million for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively. As of June 30, 2021, we had an accumulated deficit of $288.8 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 in connection with our ongoing activities, particularly as we:
•
initiate, enroll and conduct Phase 2 clinical trials for MGTA-145;
•
initiate and conduct 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 any;
•
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; and
•
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.
Because of 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. Even if we 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 June 30, 2021, we had cash, cash equivalents and marketable securities of $207.8 million. Based on our operating plan, 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 third quarter of 2023. See “—Liquidity and Capital Resources.”
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Recent Developments
MGTA-117 Updates
On July 21, 2021, we announced that we had received a clinical hold letter from the U.S. Food and Drug Administration, or FDA, related to our Investigational New Drug Application filed in June 2021 to initiate a Phase 1/2 clinical trial of MGTA-117
in patients with AML and MDS.
The FDA is requiring that we develop an additional bioassay to be used in conjunction with the pharmacokinetics, or PK, and pharmacodynamics, or PD, model to inform dose escalation decisions in addition to safety monitoring. This was the only clinical hold item identified by the FDA and does not relate to the toxicology or manufacturing of MGTA-117.
We have initiated the development of the bioassay and intend to work closely with the FDA to determine the application of the bioassay for dose escalation. The FDA has indicated its willingness to continue its engagement on this issue through its “Type A” meeting structure, which we anticipate will help facilitate communication and resolution of the clinical hold.
Upon successful resolution of the clinical hold, we anticipate starting the Phase 1/2 dose escalation study and evaluating the safety, PK and PD of MGTA-117 as a single agent with possible anti-tumor therapeutic benefit in a relapsed/refractory AML and MDS patient population. We expect to work with the FDA on an ongoing basis to transition the study to targeted conditioning in the primary target population of HSC transplant-eligible AML and MDS patients after adequate data related to the safety, PK and PD of MGTA-117 have been collected in the relapsed/refractory AML and MDS patient population. As the program progresses, we also plan to explore MGTA-117 as a targeted conditioning agent prior to the delivery of gene-corrected cells associated with ex vivo
gene therapy.
Impact of the COVID-19
Pandemic
In March 2020, COVID-19
was declared a pandemic by the World Health Organization. as a result, more than 40 states and certain U.S. territories, including the Commonwealth of Massachusetts where our operations are located, instituted quarantines, restrictions on travel, “stay at home” rules, restrictions on types of businesses that may continue to operate and restrictions on the types of construction projects that may continue. As a result, the COVID-19
pandemic has caused significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets.
We have been carefully monitoring the COVID-19
pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and their families and to reduce the spread of COVID-19
in the Cambridge community. We have established a work-from-home policy for all employees, as well as safety measures for those using our offices and laboratory facilities that are designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19
pandemic. We will continue to assess those measures as COVID-19-related
guidelines evolve. We have also maintained efficient communication with our partners and clinical sites as the COVID-19
pandemic has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs.
The future impact of the COVID-19
pandemic on our industry, the healthcare system and our current and future operations and financial condition will, however, depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption of available COVID-19
vaccines, as well as the effect of any relaxation of current restrictions within the Cambridge community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A. Risk Factors” for a discussion of the potential adverse impact of COVID-19
on our business, results of operations and financial condition.
Components of Our Results of Operations
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;
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•
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; and
•
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:
•
the continuing impact of the COVID-19
pandemic on our industry, the healthcare system, and our current and future operations;
•
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; and
•
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 and plans.
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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 and 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.
Income Taxes
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, 2020, we had net operating loss carryforwards for federal income tax purposes of $182.3 million, of which $17.5 million begin to expire in 2035 and $164.8 million can be carried forward indefinitely. As of December 31, 2020, we had net operating loss carryforwards for state income tax purposes of $184.6 million which begin to expire in 2035. As of December 31, 2020, we also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $8.4 million and $2.0 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 United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that of our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K
for the year ended December 31, 2020, on file with the SEC, the following involve the most judgment and complexity:
•
accrued research and development expenses; and
•
stock-based compensation.
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Results of Operations
Comparison of the Three Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:
Three Months Ended June 30,
2021
2020
Change
(in thousands)
Operating expenses:
Research and development
$
11,129
$
12,610
$
(1,481
)
General and administrative
6,481
7,402
(921
)
Total operating expenses
17,610
20,012
(2,402
)
Loss from operations
(17,610
)
(20,012
)
2,402
Interest and other income, net
682
933
(251
)
Net loss
$
(16,928
)
$
(19,079
)
$
2,151
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Research and Development Expenses
Three Months Ended June 30,
2021
2020
Change
(in thousands)
Direct research and development expenses by program:
Conditioning
$
2,163
$
4,159
$
(1,996
)
Mobilization
1,282
726
556
Cell Therapy
235
1,799
(1,564
)
Unallocated expenses:
Personnel related (including stock-based compensation)
4,767
3,244
1,523
Consultant (including stock-based compensation)
220
306
(86
)
Facility related and other
2,462
2,376
86
Total research and development expenses
$
11,129
$
12,610
$
(1,481
)
Expenses related to our conditioning program decreased primarily due to a decrease in manufacturing costs as we completed our GMP manufacturing activities to support the submission of an investigational new drug application and future clinical trials. The increase in expenses related to our mobilization program was primarily due to an increase in process development activities to support future manufacturing. Expenses related to our cell therapy program decreased primarily due to the discontinuance of enrollment in our Phase 2 trial in inherited metabolic diseases in June 2020.
The increase in personnel related costs was due primarily to an increase in headcount in our research and development function.
General and Administrative Expenses
Three Months Ended June 30,
2021
2020
Change
(in thousands)
Personnel related (including stock-based compensation)
$
3,025
$
3,724
$
(699
)
Professional and consultant
1,706
2,042
(336
)
Facility related and other
1,750
1,636
114
Total general and administrative expenses
$
6,481
$
7,402
$
(921
)
The decrease in personnel related costs was primarily due to a decrease in stock-based compensation. Personnel related costs for the three months ended June 30, 2021 and 2020 included stock-based compensation expense of $1.1 million and $1.7 million, respectively. The decrease in professional and consultant costs was primarily due to lower patent costs.
Interest and Other Income, Net
Interest income and other income, net for the three months ended June 30, 2021 consisted primarily of sublease income of $0.7 million and interest income of less than $0.1 million. Interest income and other income, net for the three months ended June 30, 2020 consisted primarily of sublease income of $0.7 million and interest income of $0.2 million.
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Comparison of the Six Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:
Six Months Ended June 30,
2021
2020
Change
(in thousands)
Operating expenses:
Research and development
$
22,857
$
26,573
$
(3,716
)
General and administrative
13,450
14,683
(1,233
)
Total operating expenses
36,307
41,256
(4,949
)
Loss from operations
(36,307
)
(41,256
)
4,949
Interest and other income, net
1,890
2,166
(276
)
Net loss
$
(34,417
)
$
(39,090
)
$
4,673
Research and Development Expenses
Six Months Ended June 30,
2021
2020
Change
(in thousands)
Direct research and development expenses by program:
Conditioning
$
4,518
$
7,950
$
(3,432
)
Mobilization
2,292
2,020
272
Cell Therapy
634
3,599
(2,965
)
Unallocated expenses:
Personnel related (including stock-based compensation)
9,307
7,416
1,891
Consultant (including stock-based compensation)
457
640
(183
)
Facility related and other
5,649
4,948
701
Total research and development expenses
$
22,857
$
26,573
$
(3,716
)
Expenses related to our conditioning program decreased primarily due to a decrease in manufacturing costs as we completed our GMP manufacturing activities to support the submission of an investigational new drug application and future clinical trials. Expenses related to our cell therapy program decreased primarily due to the discontinuance of enrollment in our Phase 2 trial in inherited metabolic diseases in June 2020.
The increase in personnel related costs was due primarily to an increase in headcount in our research and development function. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility.
General and Administrative Expenses
Six Months Ended June 30,
2021
2020
Change
(in thousands)
Personnel related (including stock-based compensation)
$
6,295
$
7,558
$
(1,263
)
Professional and consultant
3,468
3,888
(420
)
Facility related and other
3,687
3,237
450
Total general and administrative expenses
$
13,450
$
14,683
$
(1,233
)
The decrease in personnel related costs was primarily due to a decrease in stock-based compensation. Personnel related costs for the six months ended June 30, 2021 and 2020 included stock-based compensation expense of $2.4 million and $3.4 million, respectively. The decrease in professional and consultant costs was primarily due to lower patent costs and lower pre-commercialization
activities. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility.
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Interest and Other Income, Net
Interest income and other income, net for the six months ended June 30, 2021 consisted primarily of sublease income of $1.9 million and interest income of less than $0.1 million. Interest income and other income, net for the six months ended June 30, 2020 consisted primarily of sublease income of $1.4 million and interest income of $0.8 million. The increase in sublease income of $0.5 million was due to higher sublessor operating expenses. The decrease in interest income was primarily due to lower interest rates on invested balances.
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 an initial public offering of our common stock resulting in net proceeds of $89.9 million after deducting underwriting discounts and commissions and other offering expenses. In May 2019, we completed a follow-on
public offering resulting in net proceeds of $60.3 million after deducting underwriting discounts and commissions and other offering expenses. In June 2020, we issued and sold 8,625,000 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 $8.00 per share, resulting in net proceeds of $64.6 million after deducting underwriting discounts and commission and other offering expenses. In May 2021, we issued and sold 9,599,998 shares of our common stock in a private placement at a purchase price of $9.00 per share, resulting in net proceeds of $86.1 million, after deducting offering expenses.
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 June 30, 2021, no sales have been made pursuant to the ATM Program.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Six Months Ended June 30,
2021
2020
(in thousands)
Cash used in operating activities
$
(29,774
)
$
(35,862
)
Cash provided by investing activities
37,382
40,359
Cash provided by financing activities
89,274
66,719
Net increase in cash, cash equivalents and restricted cash
$
96,882
$
71,216
Operating Activities
During the six months ended June 30, 2021, operating activities used $29.8 million of cash, primarily resulting from our net loss of $34.4 million and net cash used by changes in our operating assets and liabilities of $1.2 million, partially offset by non-cash
charges of $5.8 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2021 consisted primarily of a decrease of $1.6 million in accounts payable and accrued expenses and other current liabilities, partially offset by a decrease of $0.3 million in prepaid expenses and other current assets.
During the six months ended June 30, 2020, operating activities used $35.9 million of cash, primarily resulting from our net loss of $39.1 million and net cash used by changes in our operating assets and liabilities of $3.1 million, partially offset by non-cash
charges of $6.3 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2020 consisted of a decrease of $4.0 million in accounts payable and accrued expenses and other current liabilities, partially offset by a decrease of $0.7 million in prepaid expenses and other current assets and an increase of $0.2 million in long-term deferred rent.
Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in both periods were generally due to the timing of vendor invoicing and payments.
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Investing Activities
During the six months ended June 30, 2021, net cash provided by investing activities was primarily attributable to maturities of marketable securities of $37.5 million.
During the six months ended June 30, 2020, net cash provided by investing activities was primarily attributable to net maturities of marketable securities of $40.5 million.
Financing Activities
During the six months ended June 30, 2021, net cash provided by financing activities was $89.3 million consisting of proceeds from the private placement, net of offering costs of $86.3 million and proceeds from the exercise of stock options of $2.9 million.
During the six months ended June 30, 2020, net cash provided by financing activities was $66.7 million, consisting of proceeds from our follow-on
public offering, net of underwriting discounts and commissions, of $64.9 million and proceeds from the exercise of stock options of $1.8 million.
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. As of June 30, 2021, we had cash, cash equivalents and marketable securities of $207.8 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 third quarter of 2023. 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. Although we continue to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
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 Quarterly Report on Form 10-Q.
Item 3.
Quantitative and Qualitative Disclosures about Market Risks.
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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.