MiNK Therapeutics, Inc. 10-Q

Item 1. Financial Statements. MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 29,846,915 $ 38,888,828 Prepaid expenses 104,400 1,761 Other current assets 378,125 744,321 Total current assets 30,329,440 39,634,910 Equipment, net of accumulated depreciation of $ 213,610 and $ 168,605 at June 30, 2022 and December 31, 2021, respectively 787,541 606,595 Total assets $ 31,116,981 $ 40,241,505 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 4,790,598 $ 2,995,645 Accrued liabilities 2,844,792 1,763,688 Other current liabilities 2,196,962 5,760,609 Due to related parties 7,594,791 5,945,094 Total current liabilities 17,427,143 16,465,036 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock, par value $ 0.00001 per share; 150,000,000 shares authorized; 33,669,694 and 33,476,523 shares issued at June 30, 2022 and December 31, 2021, respectively 337 335 Additional paid-in capital 109,230,018 107,349,265 Accumulated other comprehensive income (loss) 1,297,188 ( 625,269 ) Accumulated deficit ( 96,837,705 ) ( 82,947,862 ) Total stockholders’ equity 13,689,838 23,776,469 Total liabilities and stockholders’ equity $ 31,116,981 $ 40,241,505 See accompanying notes to unaudited condensed consolidated financial statements. 1 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Operating expenses: Research and development $ 5,876,092 $ 3,584,611 $ 11,153,427 $ 6,682,322 General and administrative 1,822,339 867,896 3,919,293 1,462,877 Change in fair value of convertible affiliated note — 1,159,873 — 475,437 Operating loss ( 7,698,431 ) ( 5,612,380 ) ( 15,072,720 ) ( 8,620,636 ) Other income (expense), net: Interest income (expense), net 26,377 ( 805,049 ) 25,529 ( 1,548,744 ) Other income (expense), net 1,559,312 82,267 1,157,348 ( 11,976 ) Net loss $ ( 6,112,742 ) $ ( 6,335,162 ) $ ( 13,889,843 ) $ ( 10,181,356 ) Per common share data: Basic and diluted net loss per common share $ ( 0.18 ) $ ( 0.26 ) $ ( 0.41 ) $ ( 0.42 ) Weighted average number of common shares outstanding 33,619,449 24,177,315 33,562,278 24,177,315 Other comprehensive income (loss): Foreign currency translation gain (loss) $ 1,399,686 $ ( 165,714 ) $ 1,922,457 $ 187,591 Comprehensive loss $ ( 4,713,056 ) $ ( 6,500,876 ) $ ( 11,967,386 ) $ ( 9,993,765 ) See accompanying notes to unaudited condensed consolidated financial statements. 2 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) Common Stock Treasury Stock Accumulated Number of Shares Par Value Additional Paid-In Capital Number of Shares Par Value Other Comprehensive Income (Loss) Accumulated Deficit Total Balance at December 31, 2021 33,476,523 $ 335 $ 107,349,265 — $ — $ ( 625,269 ) $ ( 82,947,862 ) 23,776,469 Net loss — — — — — — ( 7,777,101 ) ( 7,777,101 ) Other comprehensive income — — — — — 522,771 — 522,771 Option exercises 84,391 1 688 — — — — 689 Grant and recognition of stock options — — 741,773 — — — — 741,773 Recognition of parent stock options — — 43,733 — — — — 43,733 Balance at March 31, 2022 33,560,914 $ 336 $ 108,135,459 — $ — $ ( 102,498 ) $ ( 90,724,963 ) $ 17,308,334 Net loss — — — — — — ( 6,112,742 ) ( 6,112,742 ) Other comprehensive income — — — — — 1,399,686 — 1,399,686 Grant and recognition of stock options — — 796,924 — — — — 796,924 Recognition of parent stock options — — 3,886 — — — — 3,886 Option exercises 48,118 — 301 — — — — 301 Forfeiture of restricted stock ( 20,872 ) — ( 75 ) — — — — ( 75 ) Issuance of shares for employee bonuses 125,199 1 293,523 ( 43,665 ) ( 157,194 ) — — 136,330 Retirement of treasury shares ( 43,665 ) — — 43,665 157,194 — — 157,194 Balance at June 30, 2022 33,669,694 $ 337 $ 109,230,018 — $ — $ 1,297,188 $ ( 96,837,705 ) $ 13,689,838 3 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) Common Stock Treasury Stock Accumulated Number of Shares Par Value Additional Paid-In Capital Number of Shares Par Value Other Comprehensive Income (Loss) Accumulated Deficit Total Balance at December 31, 2020 24,177,315 $ 242 $ 383,711 — $ — $ ( 1,523,038 ) $ ( 52,735,092 ) $ ( 53,874,177 ) Net loss — — — — — — ( 3,846,194 ) ( 3,846,194 ) Other comprehensive income — — — — — 353,305 — 353,305 Grant and recognition of stock options — — 263,081 — — — — 263,081 Recognition of parent stock options — — 19,949 — — — — 19,949 Balance at March 31, 2021 24,177,315 $ 242 $ 666,741 — $ — $ ( 1,169,733 ) $ ( 56,581,286 ) $ ( 57,084,036 ) Net loss — — — — — — ( 6,335,162 ) ( 6,335,162 ) Other comprehensive loss — — — — — ( 165,714 ) — ( 165,714 ) Grant and recognition of stock options — — 356,097 — — — — 356,097 Recognition of parent stock options — — 51,206 — — — — 51,206 Balance at June 30, 2021 24,177,315 $ 242 $ 1,074,044 — $ — $ ( 1,335,447 ) $ ( 62,916,448 ) $ ( 63,177,609 ) See accompanying notes to unaudited condensed consolidated financial statements. 4 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 13,889,843 ) $ ( 10,181,356 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 55,386 33,841 Share-based compensation 1,586,316 690,333 Gain on partial forgiveness of liability ( 2,790,809 ) — Interest accrued on convertible affiliated note — 1,548,744 Change in fair value of convertible affiliated note — 475,437 Changes in operating assets and liabilities: Prepaid expenses ( 102,694 ) 320,678 Accounts payable 1,610,291 ( 890,774 ) Accrued liabilities 1,558,953 582,443 Other operating assets and liabilities 3,150,815 ( 208,233 ) Net cash used in operating activities ( 8,821,585 ) ( 7,628,887 ) Cash flows from investing activities: Purchases of plant and equipment ( 62,413 ) ( 137,440 ) Net cash used in investing activities ( 62,413 ) ( 137,440 ) Cash flows from financing activities: Proceeds from option exercises 990 — Purchase of treasury shares to satisfy tax withholdings ( 157,194 ) — Proceeds from issuance of convertible affiliated note — 6,676,772 Net cash provided by (used in) financing activities ( 156,204 ) 6,676,772 Effect of exchange rate changes on cash ( 1,711 ) 56,746 Net decrease in cash and cash equivalents ( 9,041,913 ) ( 1,032,809 ) Cash and cash equivalents, beginning of period 38,888,828 2,691,156 Cash and cash equivalents, end of period $ 29,846,915 $ 1,658,347 Supplemental cash flow information: Cash paid for interest $ 1,550 $ — Supplemental disclosures - non-cash activities: Purchases of plant and equipment in accounts payable and accrued liabilities $ 200,553 $ — Issuance of common stock, $ 0.00001 par value, for payment of employee bonuses 293,524 — See accompanying notes to unaudited condensed consolidated financial statements. 5 MINK THERAPEUTICS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Business and Liquidity MiNK Therapeutics, Inc. (“MiNK” or the “Company”) is a clinical stage biopharmaceutical company pioneering the discovery, development and manufacturing of allogeneic, off-the-shelf, invariant natural killer T (“iNKT”) cell therapies to treat cancer and other immune-mediated diseases. iNKT cells are a distinct T cell population that combine durable memory responses with the rapid cytolytic features of natural killer cells. iNKT cells offer distinct therapeutic advantages as a platform for allogeneic therapy in that the cells naturally home to tissues, aid clearance of tumors and infected cells and suppress graft-versus-host-disease. MiNK’s proprietary platform is designed to facilitate scalable and reproducible manufacturing for off-the-shelf delivery. As such, the Company believes that its approach represents a highly versatile application for therapeutic development in cancer and immune diseases. MiNK is leveraging its platform and manufacturing capabilities to develop a wholly owned or exclusively licensed pipeline of both native and engineered iNKT cells. Since inception, in 2017, until the completion of the Company’s initial public offering (“IPO”), the Company financed its operations primarily through funding from Agenus Inc. (“Agenus”), its parent company. The Company has incurred losses since inception and, as of June 30, 2022, had an accumulated deficit of $ 96.8 million. MiNK expects to continue incurring operating losses and negative cash flows for the foreseeable future. Based on the Company’s current plans and projections, MiNK believes its cash and cash equivalents balance as of June 30, 2022 of $ 29.8 million will be sufficient to satisfy its liquidity requirements for more than one year from when these financial statements were issued. Management continually monitors the Company’s liquidity position and adjusts spending as needed in order to preserve liquidity. The Company’s future liquidity needs will be determined primarily by the success of its operations with respect to the progression of the Company’s product candidates and key development and regulatory events in the future. Potential sources of additional funding for the Company include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for the Company’s portfolio programs and product candidates with one or more third parties, (2) securing debt financing and/or (3) selling equity securities. MiNK’s product candidates are in various stages of development and significant additional expenditures will be required if the Company starts new trials, encounters delays in its programs, applies for regulatory approvals, continues development of its technologies, expands its operations, and/or brings its product candidates to market. The eventual total cost of each clinical trial is dependent on a number of factors such as trial design, length of the trial, number of clinical sites, and number of patients. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive, and uncertain. Because all of the Company’s programs are at an early stage of clinical development, the Company is unable to reliably estimate the cost of completing its research and development programs or the timing for bringing such programs to various markets or substantial partnering or out-licensing arrangements, and, therefore, when, if ever, material cash inflows are likely to commence. (2) Significant Accounting Policies The Company’s significant accounting policies are disclosed in the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 18, 2022. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual consolidated financial statements. In the opinion of the Company’s management, the condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of the Company’s financial position and operating results. All significant intercompany transactions and accounts have been eliminated in consolidation. Operating results for the six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially from those estimates. 6 For the Company’s foreign subsidiaries, the local currency is the functional currency. Assets and liabilities of its foreign subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while expenses are translated into U.S. dollars using average exchange rates during the period. The cumulative translation adjustment resulting from changes in exchange rates are included in the condensed consolidated balance sheets as a component of accumulated other comprehensive income ( loss ) in total stockholders’ equity ( deficit ) . (3) Net Loss Per Share Basic loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding. Diluted loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding plus the dilutive effect of outstanding instruments such as stock options. Because the Company reported a net loss for all periods presented, diluted loss per common share is the same as basic loss per common share, as the effect of utilizing the fully diluted share count would have reduced the net loss per common share. Therefore, the following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of June 30, 2022 and 2021, as they would be anti-dilutive: Six Months Ended June 30, 2022 2021 Stock options 6,397,673 4,845,203 Non-vested shares 695,750 — (4) Investments Cash equivalents consisted of the following as of June 30, 2022 (in thousands): June 30, 2022 Cost Estimated Fair Value Institutional money market funds $ 26,027 $ 26,027 (5) Accrued and Other Current Liabilities Accrued liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands): June 30, 2022 December 31, 2021 Payroll $ 508 $ 575 Professional fees 657 531 Contract manufacturing costs 458 — Research services 1,215 656 Other 7 2 Total $ 2,845 $ 1,764 Other current liabilities of $ 2.2 million and $ 5.3 million as of June 30, 2022 and December 31, 2021, respectively, represent the advance received under the Company’s research and development agreement with the Belgium Walloon Region Government (“Walloon Region”). The Company received notice that the Walloon Region had obtained a default judgment seeking repayment of approximately $ 2.2 million of the advance based upon the Company allegedly not providing required notification that research and operations in the region were discontinued. The Company reduced the recorded liability from the prior total of all amounts received under the advance from the Walloon Region, and recorded a gain of approximately $ 2.7 million in “other income (expense), net” on its condensed consolidated statement of operations for the period ended June 30, 2022. The Company continues to evaluate its options to resolve the dispute relating to the remaining outstanding liability. (6) Share-based Compensation Plans The Company primarily uses the Black-Scholes option pricing model to value options granted to employees and non-employees, as well as options granted to members of the Company’s Board of Directors. All stock option grants have 10-year terms and generally vest ratably over a 3 or 4-year period. 7 A summary of option activity for the six-month period ended June 30, 2022 is presented below: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2021 4,871,822 $ 1.38 Granted 2,060,100 3.11 Exercised ( 132,509 ) 0.01 Forfeited ( 171,260 ) 2.71 Expired ( 230,481 ) 0.68 Outstanding at June 30, 2022 6,397,673 $ 1.95 8.43 $ 3,264,203 Vested or expected to vest at June 30, 2022 6,397,673 $ 1.95 8.43 $ 3,264,203 Exercisable at June 30, 2022 2,603,119 $ 1.09 7.78 $ 2,282,204 The weighted average grant-date fair values of options granted during the six-month period ended June 30, 2022, was $ 2.15 . During the six-month period ended June 30, 2022, all options were granted with exercise prices equal to the market value of the underlying shares of common stock on the grant date. As of June 30, 2022, there was $ 5.8 million of unrecognized share-based compensation expense related to these stock options which, if all milestones are achieved, will be recognized over a weighted average period of 2.9 years. A summary of non-vested stock activity for the six-month period ended June 30, 2022 is presented below: Nonvested Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2021 723,580 $ 2.91 Granted 125,199 3.60 Vested ( 125,199 ) 3.60 Forfeited ( 27,830 ) 0.01 Outstanding at June 30, 2022 695,750 $ 3.03 As of June 30, 2022, there was $ 1.3 million of unrecognized share-based compensation expense related to these non-vested shares which will be recognized over a weighted average period of 1.2 years. Stock based compensation expense also includes expense related to awards to employees of the Company from the Agenus 2019 Equity Incentive Plan. The impact on the Company’s results of operations from share-based compensation for the three and six months ended June 30, 2022 and 2021, was as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Research and development $ 126,361 $ 54,123 $ 244,565 $ 85,278 General and administrative 674,449 353,180 1,341,751 605,055 Total share-based compensation expense $ 800,810 $ 407,303 $ 1,586,316 $ 690,333 (7) Related Party Transactions Until the completion of its IPO, the Company relied on Agenus for all of its working capital requirements. For the periods presented, certain of the Company’s operations were fully integrated with Agenus, including, but not limited to, corporate functions such as finance, human resources, information technology and legal functions. The Company’s consolidated financial statements reflect all costs of doing business related to these operations. In September 2021, the Company entered into an Intellectual Property Assignment and License Agreement with Agenus (the “New Assignment and License Agreement”), upon which the prior intercompany agreement between Agenus and MiNK was 8 terminated. Pursuant to the New Assignment and License Agreement, Agenus assigned to the Company certain patent rights and know-how related to its iNKT cell platform, product candidates and other patents and know-how related to its business. In addition to the patent rights assigned to the Company by Agenus, the Company also received an exclusive, royalty-free, sublicensable license to research, develop, manufacture and commercialize certain licensed technology in the field. The New Assignment and License Agreement further provides for the Company to grant Agenus a field-limited, non-exclusive, royalty-free license under the assigned patent rights, subject to MiNK’s discretion and provided such access would not reasonably result in a disruption of planned MiNK activities. Agenus has also agreed to provide the Company with Agenus’ biological material upon written request in order for the Company to use such material in its development activities of a combination therapy. Agenus may withhold the transfer of biological material, including, but not limited to, checkpoint modulating antibodies, for various reasons, including if such transfer would reasonably result in a disruption of planned Agenus activities. For any materials Agenus does share with the Company, the parties have agreed to enter into a separate agreement governing the transfer and providing for joint ownership of the data. Agenus has agreed that during the full term of the New Assignment and License Agreement, and for three years thereafter, it will not develop, manufacture or commercialize an iNKT cell therapy, directly or indirectly by transferring such technology. The Company has the sole responsibility to develop, manufacture and commercialize products under this New Assignment and License Agreement. The Company may terminate the New Assignment and License Agreement without cause upon 90 days ’ prior written notice to Agenus. Either party may terminate if they believe there has been a material breach which has not been cured within 90 days (or 45 days for breach of payment obligations) of receiving such notice. Effective April 1, 2022, the Company entered into an Amended and Restated Intercompany Services Agreement (the “New Intercompany Agreement”) with Agenus, which amended and restated the Intercompany General & Administrative Agreement between the Company and Agenus dated September 10, 2021 (the “Prior Intercompany Agreement”). Under the New Intercompany Agreement, Agenus provides the Company with certain general and administrative support, including, without limitation, financial, facilities management, human resources and information technology administrative support (the “Agenus Services”), and the Company and Agenus provide each other with certain research and development services (the “R&D Services”) and other support services, including legal and regulatory support (the “Shared Services”). The Company is required to pay 10 % of Agenus’ costs related to the Agenus Services, and the costs of R&D Services are based upon pass-through costs related to such services plus an allocation of the costs of the employees performing the services. No payment will be due from either party for the Shared Services, provided that the services provided by each party are proportional in scope and volume. The Company is also entitled to use Agenus’ business offices and laboratory space and equipment in exchange for the Company contributing a proportionate payment for the use of such facilities and equipment, and the Company will be covered by certain Agenus insurance policies, subject to certain conditions, including the Company paying the cost of such coverage. Either party may terminate the New Intercompany Agreement upon 60 days’ prior written notice and individual services upon 30 days’ prior written notice. Allocated Agenus services primarily include payroll related expenses, facility costs, insurance and stock-based compensation, and are included in the accompanying financial statements based on certain estimates and allocations described above. Under the Prior Intercompany Agreement, the allocation methods primarily included time devoted to activities and headcount-based allocations. Agenus business services and occupancy costs were allocated to the Company based on the Company’s headcount as a percentage of Agenus’ and the Company was required to pay 105 % of Agenus’ costs for these business services and occupancy costs. Research services were charged between the entities based on hours recorded by Agenus employees as time spent on specific projects, applied to hourly wage rates, and the Company paid 110 % of Agenus’ costs for these research services. As such, these allocations may not be indicative of the actual amounts that would have been recorded had the Company operated as an independent, publicly traded company for the periods presented. Allocation of Agenus services, net of approximately $ 470,000 and $ 937,000 for the three months ended June 30, 2022 and 2021, respectively, and $ 1.3 million and $ 1.2 million for the six months ended June 30, 2022 and 2021, respectively, is included in “Operating expenses” in the Company’s statement of operations and “Due to related parties” in the Company’s condensed consolidated balance sheet. Effective April 12, 2022, the Company entered into a Master Services Agreement with Atlant Clinical Ltd. (“Atlant”), a subsidiary of Agenus, to provide clinical trial support services to the Company, including an eTMF platform, medical monitoring and data manager services. The Company’s Audit and Finance Committee approved the engagement under its related-party transactions policy for up to $ 250,000 in services. These services are expected to be completed over the remainder of 2022. As of June 30, 2022, the Company had entered into work orders with Atlant totaling approximately $ 155,000 , plus out of pocket expenses which are to pass through to Company at cost. For the three and six months ended June 30, 2022, approximately $ 37,000 related to these services is included in “Research and development” expense in the Company’s condensed consolidated statements of operations. In February 2021, the Company entered into a fifth Convertible Promissory Note (the “Note”) with Agenus with terms identical to the convertible promissory note, as amended, issued to Agenus on April 1, 2019, increasing the amount of borrowing capacity to up to $ 50.0 million and extending the maturity to July 1, 2022. In September 2021, the Company entered into an amendment to the 9 convertible promissory note with Agenus to provide, among other things, that the Note would automatically convert into the Company’s common stock upon the completion of the IPO . In accordance with the terms of the Note, interest was computed on the basis of a 360-day year at 8 % and accrued but was not payable until converted or paid. The Note was automatically converted, at a rate equal to the quotient obtained by dividing (i) the amount due on the date of conversion by (ii) 80 % of the per share price of the Company’s common stock sold in the IPO, into 5,451,958 shares of the Company’s common stock upon completion of the IPO in October 2021, and was not outstanding at June 30, 2022. (8) Fair Value Measurement The Company measured the Note at fair value. In connection with the IPO, the Note was automatically converted into 5,451,958 shares of the Company’s common stock and was not outstanding as of June 30, 2022. The fair value of the Note at June 30, 2021 was $ 52.5 million, based on the Level 2 valuation hierarchy of the fair value measurements standard using a scenario based present value methodology that was derived by evaluating the nature and terms of each note and considering the prevailing economic and market conditions at the balance sheet date. The impact of the change in the fair value for the six months ended June 30, 2021 was $ 475,000 . (9) Contingencies The Company may currently be, or may become, a party to legal proceedings. While the Company currently believes that the ultimate outcome of any of these proceedings will not have a material adverse effect on its financial position, results of operations, or liquidity, litigation is subject to inherent uncertainty and consumes both cash and management attention. (10) Recent Accounting Pronouncements No new accounting pronouncement issued or effective during the six months ended June 30, 2022 had or is expected to have a material impact on the Company’s consolidated financial statements or disclosures. 10