What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-12 compared with 2020-11-09 · 39 added, 125 removed, 114 unchanged (59% of the section changed)

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and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

The following should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes for the nine months ended September 30, 2020 included in this Quarterly Report.

The following should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes for the three months ended March 31, 2021 included in this Quarterly Report.

Company Overview

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We are pursuing post-transplant AML as the lead indication for our first company-sponsored MultiTAA-specific T cell program.

The MultiTAA-specific T cell therapy has been well tolerated in an ongoing Phase 1 clinical trial conducted by our strategic partner Baylor College of Medicine, or BCM.

As reported in March 2019, eleven of the thirteen patients in the adjuvant disease setting dosed with the MultiTAA-specific T cell therapy after receiving an allogeneic stem cell transplant survived, ranging from 6 weeks to 2.5 years post-infusion, with nine of these remaining patients in continuing complete remission, or CCR.

Survival of the six patients with active disease ranged from 4 to 21 months, as compared to a historical survival rate of approximately 4.5 months for patients who receive the standard of care post-transplant.

We submitted an investigational new drug, or IND, application to the United States Food and Drug Administration, or the FDA, to initiate a Phase 2 clinical trial of MultiTAA-specific T cell therapy, which we refer to as MT-401 (zelenoleucel), in post-allogeneic hematopoietic stem cell transplant patients with AML in both the adjuvant and active disease setting.

In April 2020, the FDA granted orphan drug designation to MT-401 for the treatment of AML after receiving an allogeneic stem cell transplant.

The MultiTAA-specific T cell therapy has been well tolerated in an ongoing Phase 1 clinical trial in AML and myelodysplastic syndrome, or MDS, conducted by our strategic partner Baylor College of Medicine, or BCM.

As reported in a recent publication by Lulla et al., 11 of the 17 patients in the adjuvant disease setting dosed with the MultiTAA-specific T cell therapy after receiving an allogeneic hematopoietic stem cell transplant, or HSCT, never relapsed [median leukemia-free survival, or LFS, not reached at a median follow-up of 1.9 years], with 11 of 15 patients remaining alive (estimated two-year overall survival of 77%) at a median follow-up of 1.9 years post-infusion, which compares favorably with HSCT outcomes for risk-matched AML/MDS patients post-HSCT [median LFS of nine to 15 months and two-year survival probability of 42%].

Additionally, eight patients were treated for active disease that was resistant to salvage therapy post-HSCT with a median of five prior lines of therapy (range:

One of the eight patients crossed over from the adjuvant group, while two patients enrolled twice, but all three patients had active AML that failed another line of salvage therapy after their first MultiTAA-specific T cell infusion.

Two of the eight patients achieved objective responses, with one complete response and one partial response, with six patients continuing with stable disease.

We submitted an investigational new drug, or IND, application to the United States Food and Drug Administration, or the FDA, to initiate a Phase 2 clinical trial of MultiTAA-specific T cell therapy, which we refer to as MT-401 (zedenoleucel), in post-allogeneic HSCT patients with AML in both the adjuvant and active disease setting.

The dose administered in this multicenter trial is the approximate flat dose equivalent of the current maximum tolerated dose from the ongoing Phase 1 trial.

In the adjuvant setting, patients will be randomized to either MultiTAA-specific T cell therapy at approximately 90 days post-transplant versus standard of care observation, while the active disease patients will receive MT-401 following relapse post-transplant as part of a single-arm group.

In February 2020, we announced that the FDA has permitted us to initiate our Phase 2 clinical trial beginning with a safety lead-in portion of the trial, and we have begun to enroll patients.

We expect that we will be delayed in initiating this trial per previously communicated timelines due to the COVID-19 pandemic.

See “—Clinical Program Updates.” In April 2020, the FDA granted orphan drug designation to MT-401 for the treatment of AML after receiving an allogeneic stem cell transplant.

We expect to complete the safety lead-in portion of the trial in the first half of 2021.

We anticipate that we will initiate the remainder of the Phase 2 trial in the third quarter of 2021 and complete enrollment of 20 patients in that phase of the trial in the fourth quarter of 2021 in order to report results from the active disease arm of the trial in the first quarter of 2022.

We expect to begin manufacturing MT-401 for the Phase 2 trial at our cGMP manufacturing facility in the third quarter of 2021.

We reported interim data for an ongoing Phase 1/2 clinical trial of the MultiTAA-specific T cell therapy for the treatment of pancreatic adenocarcinoma being conducted by BCM.

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Our clinical-stage pipeline, including clinical trials being conducted by BCM and other partners, is set forth below:

Clinical Program Updates

MT-401 (zelenoleucel) for the Treatment of Post-Transplant AML

In February 2020, we announced that the FDA lifted the clinical hold on the Phase 2 clinical trial investigating the safety and efficacy of MT-401 for the treatment of patients with AML post-transplant permitting us to initiate the trial with the safety lead-in portion that is expected to enroll approximately six patients.

Three patients will be dosed with MT-401 manufactured with the legacy reagent used in the Phase 1 trial, and three patients will be dosed with MT-401 manufactured using a new reagent from an alternative supplier.

We anticipate using this supplier for clinical and commercial manufacturing of MT-401.

The FDA placed a partial clinical hold on the trial for the use of the MT-401 product manufactured using one of the reagents supplied by the alternative supplier until the final data and certificate of analysis for the reagent are reviewed and accepted by the FDA.

We have begun to enroll patients in the safety lead-in portion of the trial, and we continue to work to identify clinical trial sites.

Additionally, our alternate supplier has provided the new reagent for MT-401.

We continue to work with the vendor to receive the final data and certificate of analysis required by the FDA to satisfy the requirements for lifting the partial hold, but we expect that we will continue to be delayed in initiating this trial per previously communicated timelines due to the COVID-19 pandemic.

Results of Operations

In this discussion of our results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.

Comparison of the Three Months Ended September 30, 2020 and September 30, 2019

The following table summarizes the results of our operations for the three months ended September 30, 2020 and 2019:

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes the results of our operations for the three months ended March 31, 2021 and 2020:

For the Three Months Ended

September 30,

Total revenues

Operating expenses:

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Net loss per share, basic and diluted

Weighted average number of common shares outstanding

Operating Expenses

Operating expenses incurred during the three months ended September 30, 2020 were $7.4 million compared to $5.7 million during the three months ended September 30, 2019.

Significant changes and expenditures in operating expenses are outlined as follows:

Research and Development Expenses

Research and development expenses increased by 54% to $4.8 million for the three months ended September 30, 2020, compared to $3.1 million for the three months ended September 30, 2019.

The increase of $1.7 million in 2020 was primarily attributable to the following:

o increase of $0.8 million in headcount-related expenses as we increased the number of research and development personnel,

o increase of $0.8 million in process development expenses,

o increase of $0.2 million in sponsored research expenses from BCM agreements,

o increase of $0.2 million in other expenses, and

o decrease of $0.3 million in our peptide vaccine clinical trial expenses due to the stages of ongoing clinical trials and the decreased number of active patients in such trials.

General and Administrative Expenses

General and administrative expenses were $ 2.6 million and $2.5 million for the three months ended September 30, 2020 and 2019, respectively.

The increase in general and administrative expenses was mainly comprised of an increase in rent and insurance expenses offset by a decrease in legal and professional fees.

Other Income (Expense)

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the three months ended September 30, 2020 was $0 as compared to $(64,000) for the three months ended September 30, 2019.

Interest Income

Interest income was $5,000 and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and was attributable to interest income relating to funds that are held in U.S.

Treasury notes and U.S.

government agency-backed securities.

As part of the reaction to the COVID-19 pandemic, the Federal Reserve cut rates in mid-March to a range of 0.0% - 0.25%.

As such, we recorded lower interest income during the three months ended September 30, 2020.

We recorded a net loss of $7.4 million, or a net loss per share, basic and diluted of $(0.16), during the three months ended September 30, 2020, compared to a net loss of $5.5 million, or a net loss per share, basic and diluted of $(0.12), during the three months ended September 30, 2019.

The increase in our net loss during the three months ended September 30, 2020 compared to during the three months ended September 30, 2019 was due to the continued expansion of our research and development activities, and the overall growth of our corporate infrastructure.

We anticipate that we will continue to incur net losses in the future as we continue to invest in research and development activities, including clinical development of our MultiTAA T cell product candidates.

Comparison of the Nine months ended September 30, 2020 and September 30, 2019

The following table summarizes the results of our operations for the nine months ended September 30, 2020 and 2019:

For the Nine Months Ended

September 30,

Total revenues

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Change in fair value of warrant liabilities

Interest income

Net loss per share, basic and diluted

Weighted average number of common shares outstanding

During the nine months ended September 30, 2020, we received $0.5 million of a grant awarded to the Mayo Foundation from the U.S.

Department of Defense to fund the Phase 2 clinical trial of TPIV100 for the treatment of HER2/neu breast cancer.

The portion of the grant we received compensated us for clinical supplies manufactured by us for the clinical trial.

We did not receive any grant income during the nine months ended September 30, 2019.

Weighted average number of common shares outstanding, basic and diluted

Operating Expenses

Operating expenses incurred during the nine months ended September 30, 2020 were $20.8 million compared to $17.2 million during the nine months ended September 30, 2019.

Operating expenses incurred during the three months ended March 31, 2021 were $8.8 million compared to $6.6 million during the three months ended March 31, 2020.

Significant changes and expenditures in operating expenses are outlined as follows:

Research and Development Expenses

Research and development expenses increased by 42% to $12.9 million for the nine months ended September 30, 2020, compared to $9.1 million for the nine months ended September 30, 2019.

Research and development expenses increased by 48% to $5.6 million for the three months ended March 31, 2021, compared to $3.8 million for the three months ended March 31, 2020.

The increase of $1.8 million in 2021 was primarily attributable to the following:

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o increase of $0.2 million in sponsored research expenses from BCM agreements,

o increase of $0.3 million in rent and utilities,

o increase of $0.2 million in other expenses, and

o decrease of $1.1 million in our peptide vaccine clinical trial expenses due to the stages of ongoing clinical trials and the decreased number of active patients in such trials.

o increase of $0.4 million in depreciation expenses primarily attributable to our manufacturing facility and related expenses.

General and Administrative Expenses

General and administrative expenses were $7.9 million and $8.1 million for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in general and administrative expenses was mainly comprised of a decrease in legal and professional fees and other.

General and administrative expenses were $3.1 million and $2.8 million for the three months ended March 31, 2021 and 2020, respectively.

The increase in general and administrative expenses was mainly comprised of increases in rent, insurance expenses and in headcount-related expenses, offset by a decrease in legal and professional fees.

Other Income (Expense)

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the nine months ended September 30, 2020 was $31,000 as compared to $(80,000) for the nine months ended September 30, 2019.

Interest Income

Interest income was $0.1 million and $0.9 million for the nine months ended September 30, 2020 and 2019, respectively, and was attributable to interest income relating to funds that are held in U.S.

Interest income was $2,000 and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, and was attributable to interest income relating to funds that are held in U.S.

Treasury notes and U.S.

government agency-backed securities.

As part of the reaction to the COVID-19 pandemic, the Federal Reserve cut rates in mid-March to a range of 0.0% - 0.25%.

As such, we recorded lower interest income during the nine months ended September 30, 2020.

We recorded a net loss of $20.2 million, or a net loss per share, basic and diluted of $(0.43), during the nine months ended September 30, 2020, compared to a net loss of $16.3 million, or a net loss per share, basic and diluted of $(0.36) , during the nine months ended September 30, 2019.

The increase in our net loss during the nine months ended September 30, 2020 compared to during the nine months ended September 30, 2019 was due to the continued expansion of our research and development activities, increased expenses relating to future clinical trials, and the overall growth of our corporate infrastructure.

As part of the reaction to the COVID-19 pandemic, the Federal Reserve cut rates in mid-March of 2020 to a range of 0.0% - 0.25%.

As such, we recorded lower interest income during the three months ended March 31, 2021.

The increase in our net loss during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was due to the continued expansion of our research and development activities, increased expenses relating to future clinical trials, and the overall growth of our corporate infrastructure.

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We have financed our operations primarily through public and private offerings of our debt and equity securities.

The following table sets forth our cash and cash equivalents and working capital as of September 30, 2020 and December 31, 2019:

September 30,

The following table sets forth our cash and cash equivalents and working capital as of March 31, 2021 and December 31, 2020:

Cash and cash equivalents

Working capital

The following table summarizes our cash flows for the nine months ended September 30, 2020 and 2019:

For the Nine Months Ended

September 30,

The following table summarizes our cash flows for the three months ended March 31, 2021 and 2020:

For the Three Months Ended

Net Cash provided by (used in):

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Financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2020 was $12.6 million.

The use of cash primarily related to our net loss of $20.2 million, in addition to the effect of changes in asset and liability accounts, including an increase in prepaid expenses and deposits of $0.8 million, an increase in accounts payable and accrued liabilities of $4.0 million, a decrease in interest receivable of $0.06 million and a decrease in lease liabilities of $0.2 million.

Net cash used in operating activities during the nine months ended September 30, 2019 was $13.7 million.

The use of cash primarily related to our net loss of $16.3 million, in addition to the effect of changes in asset and liability accounts, including an increase in prepaid expenses and deposits of $1.8 million, an increase in accounts payable and accrued liabilities of $0.1 million, a decrease in lease liabilities of $0.1 million and a decrease in interest receivable of $0.03 million.

Net cash used in operating activities during the three months ended March 31, 2021 was $9.1 million compared to $4.1 million for the same period last year.

The changes in cash flow from operating activities during the three months ended March 31, 2020 were due to $8.8 million of net losses and a $2.4 million decrease from changes in operating assets and liabilities.

This was offset by $1.4 million of stock-based compensation, $0.5 million of depreciation expense and $0.3 million right-of-use asset amortization and lease liability accretion.

Investing Activities

Net cash used in investing activities was $7.0 million and $0.4 million for the purchase of property and equipment during the nine months ended September 30, 2020 and 2019, respectively.

The increase relates to $4.6 million in construction in progress towards the new modular cleanrooms in our manufacturing facility, an additional $1.3 million in laboratory equipment, $0.5 million in furniture and fixtures and $0.3 million in leasehold improvements at the new research facility.

Net cash used in investing activities was $0.4 million and $0.1 million for the purchase of property and equipment during the three months ended March 31, 2021 and 2020, respectively.

The increase relates to purchases of laboratory equipment for the manufacturing facility.

Financing Activities

Net cash provided by financing activities was $2.7 million during the nine months ended September 30, 2020, mainly due to the purchase of 1,407,470 shares of stock under the Purchase Agreement with Aspire Capital that provided proceeds to the Company of approximately $2.2 million, along with $0.5 million of proceeds from the exercise of stock warrants.

Net cash provided by financing activities was $0.8 million during the nine months ended September 30, 2019, due to the exercise of stock warrants and stock options.

Net cash provided by financing activities was $52.7 million during the three months ended March 31, 2021, due to the net proceeds received from the underwritten public offering.

Net cash provided by financing activities was $0.6 million during the three months ended March 31, 2020.

Future Capital Requirements

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If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

As of September 30, 2020, we had working capital of $24.3 million, compared to working capital of $43.5 million as of December 31, 2019.

Based on our revised clinical and research and development plans and our revised timing expectations related to the progress of our programs, and buildout of manufacturing and research facilities, and expansion of our corporate headquarters, we expect that our cash and cash equivalents as of September 30, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2021.

On March 16, 2021, we issued an aggregate of 32,282,857 shares of our common stock, for net proceeds of $52.6 million pursuant to an underwritten public offering.

As of March 31, 2021, we had working capital of $63.3 million, compared to working capital of $18.0 million as of December 31, 2020.

Based on our clinical and research and development plans and our timing expectations related to the progress of our programs, we expect that our cash and cash equivalents as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2023.

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

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Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

During fiscal 2020, we have entered into agreements to buildout a manufacturing facility, to lease a research lab and to expand our corporate headquarters in Houston, Texas.

We plan to continue to fund our operations and capital funding needs through equity and/or debt financing.

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In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

Aspire Common Stock Purchase Agreement

In February 2020, we entered into a common stock purchase agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the Purchase Agreement.

As of September 30, 2020, Aspire Capital had purchased 1,407,470 shares under the Purchase Agreement, providing aggregate proceeds to the Company of approximately $2.2 million.

In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital 345,357 shares of our common stock, or the Commitment Shares.

Under the Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a Purchase Notice directing Aspire Capital (as principal) to purchase up to 100,000 shares of our common stock per business day, up to $30.0 million of our common stock in the aggregate at a Purchase Price equal to the lesser of:

● the lowest sale price of our common stock on the purchase date;

● the arithmetic average of the three lowest closing sale prices for our common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date.

We and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as much as an additional 2,000,000 shares per business day.

In addition, on any date on which we submit a Purchase Notice to Aspire Capital in an amount equal to at least 100,000 shares, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice, or a VWAP Purchase Notice, directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of our common stock traded on its principal market on the next trading day, which we refer to as the VWAP Purchase Date, subject to a maximum number of shares we may determine.

The purchase price per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for our common stock traded on its principal market on the VWAP.

We may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.

The Purchase Agreement provides that we and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing sale price of our common stock is less than $0.25.

There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of sales of our common stock to Aspire Capital.

Aspire Capital has no right to require any sales by us but is obligated to make purchases from us as directed by us on future funding, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement.

The Purchase Agreement may be terminated by us at any time, at its discretion, without any cost to us.

Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement.

We expect to use any proceeds under the Purchase Agreement for working capital and general corporate purposes.

The Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement will be limited to 9,232,814 shares, including the Commitment Shares, or the Exchange Cap, which represents 19.99% of our outstanding shares of common stock as of the date of the Purchase Agreement, unless stockholder approval is obtained to issue more than 19.99%.

This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Purchase Agreement is equal to or greater than $2.41, which was the closing price of our shares on The Nasdaq Global Market immediately preceding the execution of the Purchase Agreement.

We are not required or permitted to issue any shares of common stock under the Purchase Agreement if such issuance would breach our obligations under the rules or regulations of The Nasdaq Global Market.

Critical Accounting Policies

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GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses in the periods presented.

We believe that the accounting estimates

employed are appropriate and resulting balances are reasonable;

We believe that the accounting estimates employed are appropriate and resulting balances are reasonable;

however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Going Concern

The below excludes any potential future funding provided by the Purchase Agreement with Aspire Capital.

We have no sources of revenue to provide incoming cash flows to sustain our future operations.

As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional capital.

The factors discussed above raise substantial doubt regarding our ability to continue as a going concern.

Our condensed consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business.

Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Off-Balance Sheet Arrangements

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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-Q

Item 2. Management’s Discussion and Analysis