FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q ofMagenta 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: • our expectation that our existing capital resources will be sufficient to enable us to fund our currently planned development of MGTA-117, MGTA-145 and our other product candidates; • the anticipated benefits of our revised operating plan and our expectation that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024; • the initiation, timing and success of clinical trials of MGTA-117, MGTA-145 and any other product candidates; • our ability to commence and enroll patients in our clinical trials at the pace that we project; • regulatory actions with respect to our product candidates or our competitors' products and product candidates; • the outcomes of our preclinical studies; • our ability to manufacture MGTA-117, MGTA-145 or any other product candidate in conformity with theU.S. Food and Drug Administration's requirements and to scale up manufacturing of our product candidates to commercial scale, if approved; • whether the results of our trials will be sufficient to support domestic or foreign regulatory approvals for MGTA-117, MGTA-145 or any other product candidates we may develop; • our reliance on third parties to conduct our clinical trials; • our reliance on third-party contract development and manufacturer organizations to manufacture and supply our product candidates for us; • our ability to establish clinical programs moving forward in multiple indications, with a rapidly advancing portfolio and sustainable platform; • our ability to obtain, including on an expedited basis, and maintain regulatory approval of MGTA-117, 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; • the benefits of the use of MGTA-117, MGTA-145 or any other product candidate, if approved; • our ability to successfully commercialize MGTA-117, MGTA-145 or any other product candidates we may identify and pursue, if approved; • the rate and degree of market acceptance of MGTA-117, MGTA-145 or any other product candidates we may identify and pursue; • our expectations regarding government and third-party payor coverage and reimbursement; • our ability to obtain and maintain intellectual property protection for MGTA-117, 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 ability to successfully build a specialty sales force and commercial infrastructure; 18
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Table of Contents • 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 ability to successfully find collaborators for any of our current and future programs and product candidates; • our ability to retain and recruit key personnel; • 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 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 theSecurities and Exchange Commission , or theSEC , 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's drug development pipeline includes multiple clinical and preclinical product candidates designed to improve stem cell transplants. We are 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 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. Our first targeted conditioning program, MGTA-117, has entered clinical development in a Phase 1/2 trial, and our second program, a CD45-antibody drug conjugate, or CD45-ADC, is advancing in preclinical development. In addition to our conditioning programs, we are also developing a product candidate, MGTA-145, to improve the process by which stem cells are stimulated out of the bone marrow and into the bloodstream so they are available for collection for future reinfusion, known as mobilization, which is required for all transplants and gene therapy applications. MGTA-145 is a Phase 2 clinical stage program intended to enable rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells for transplant. In addition to our product candidates, Magenta's research efforts are evaluating several early-stage targets that include targeted lymphodepletion prior to therapies such as chimeric antigen receptor T-cells or CAR-T. We also have a cell therapy program, E478, which is a small molecule aryl hydrocarbon receptor, or AHR, antagonist designed to increase the numbers of gene-modified HSCs for stem cell-based gene therapy and genome editing. InDecember 2021 , we notifiedNovartis International Pharmaceutical Ltd. , or Novartis, of our termination of the Novartis license related to our cell therapy program, MGTA-456, which became effective 90 days from the date of notification.
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 or together with other therapies. 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.
COVID-19
continues to present operational and other challenges 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.
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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 clinical trials, including MGTA-117 and MGTA-145. 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
• initiate, enroll and conduct a Phase 1/2 clinical trial for MGTA-117 and Phase 2 clinical trial for MGTA-145; • initiate and conduct preclinical studies and clinical trials of our other product candidates; • 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. Additionally, 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. Accordingly, if we fail to raise capital or enter into necessary strategic agreements, or fail to ever become profitable, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates, and we may also be forced to reduce or terminate our operations.
As of
Recent Developments
OnApril 14, 2022 , we announced our plan to more narrowly focus our capital allocation on the MGTA-117 targeted conditioning program, the CD45-ADC (antibody-drug conjugate) IND-enabling activities and the MGTA-145 stem cell mobilization efforts in sickle cell disease while also de-prioritizing other portfolio investments. We made certain reductions in our planned spending related to research platform-related investments in new disease targets, paused certain MGTA-145 investments, including the program's planned MGTA-145 dosing and administration optimization clinical trial in healthy subjects and reduced planned general and administrative expenses. In connection with these reductions to our planned spending, we also reduced our workforce by 14%. Our revised operating plan allows us to extend our cash runway into the second quarter of 2024. 20
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Table of Contents Impact of the COVID-19 Pandemic The COVID-19
pandemic, including the emergence of various variants, has caused and could
continue to cause significant disruptions to the
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 theCambridge community. We have established a hybrid 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 depend on future developments, which are highly uncertain and cannot be predicted with confidence. These developments may include, without limitation, changes in the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, the effect of any relaxation of current restrictions within theCambridge 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. 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; • the cost of consultants and third-party contract development and manufacturing organizations, or CDMOs, 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, CDMOs and CROs in connection with our preclinical and clinical development activities. We do not allocate employee costs, costs associated with our platform technology or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following:
• successful completion of preclinical studies and clinical trials; • receipt and related terms of marketing approvals from applicable regulatory authorities; • raising additional funds necessary to complete clinical development of and commercialize our product candidates; 21
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• obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates; • making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates; • developing and implementing marketing and reimbursement strategies; • establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; • acceptance of our products, if and when approved, by patients, the medical community and third-party payors; • effectively competing with other therapies; • obtaining and maintaining third-party coverage and adequate reimbursement; • protecting and enforcing our rights in our intellectual property portfolio; • maintaining a continued acceptable safety profile of the products following approval; and • the continuing impact of the COVID-19 pandemic on our industry, the healthcare system, and our current and future operations.
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.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. While we do not believe that inflation had a material effect on our financial condition and results of operations during the periods presented, it may result in increased costs in the foreseeable future.
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.
Interest and Other Income, Net
Interest and other income, net, consists of interest income and miscellaneous income and expense unrelated to our core operations.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31, 2022 2021 Change (in thousands) Operating expenses: Research and development$ 16,547 $ 11,728 $ 4,819 General and administrative 7,287 6,969 318 Total operating expenses 23,834 18,697 5,137 Loss from operations (23,834 ) (18,697 ) (5,137 ) Interest and other income, net 884 1,208 (324 ) Net loss$ (22,950 ) $ (17,489 ) $ (5,461 )
Research and Development Expenses
Three Months Ended March 31, 2022 2021 Change (in thousands) Direct research and development expenses by program: Conditioning$ 6,436 $ 2,355 $ 4,081 Mobilization 1,132 1,010 122 Cell therapy 31 399 (368 ) Unallocated expenses: Personnel related (including stock-based compensation) 5,888 4,540 1,348 Consultant (including stock-based compensation) 277 237 40 Facility related and other 2,783 3,187 (404 )
Total research and development expenses
Expenses related to our conditioning program increased primarily due to an increase of$2.4 million in costs related to MGTA-117 and an increase of$1.5 million in costs related to CD45-ADC. The increase in MGTA-117 was primarily due to costs incurred upon the achievement of a development milestone under our collaboration agreement. The increase in CD45-ADC was primarily due to higher preclinical and manufacturing costs to support our investigational new drug, or IND, enabling studies. Expenses related to our cell therapy program decreased as result of the discontinuance of our MGTA-456 program.
The increase in personnel related costs was due primarily to an increase in
headcount in our research and development function partially offset by a
decrease in stock-based compensation. Personnel related costs for the three
months ended
General and Administrative Expenses
Three Months Ended March 31, 2022 2021 Change (in thousands) Personnel related (including stock-based compensation)$ 3,452 $ 3,270 $ 182 Professional and consultant 1,612 1,762 (150 ) Facility related and other 2,223 1,937 286
Total general and administrative expenses
The increase in facility related and other was primarily due to higher
recruiting costs partially offset by lower operating costs related to our
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Interest and Other Income, Net
Interest income and other income, net for the three months ended
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. Since our initial public offering in
OnAugust 8, 2019 , we filed a shelf registration statement on Form S-3, or Shelf, with theSEC 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 withCowen and Company, LLC , as sales agent, to provide for the issuance and sale by the Company of up to$100.0 million of our common stock from time to time in "at-the-market" offerings under the Shelf, which we refer to as the ATM Program. The Shelf was declared effective by theSEC onAugust 19, 2019 . As ofMarch 31, 2022 , no sales have been made pursuant to the ATM Program.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented: Three Months Ended March 31, 2022 2021 (in thousands) Net cash used in operating activities$ (19,741 ) $ (16,774 ) Net cash provided by (used in) investing activities (40,144 ) 7,493 Net cash provided by financing activities - 418 Net decrease in cash, cash equivalents and restricted cash$ (59,885 ) $ (8,863 ) Operating Activities During the three months endedMarch 31, 2022 , operating activities used$19.7 million of cash, primarily resulting from our net loss of$23.0 million , partially offset by non-cash charges of$3.2 million . Net cash used by changes in our operating assets and liabilities for the three months endedMarch 31, 2022 was less than$0.1 million and consisted of a decrease of$0.7 million in operating lease liabilities partially offset by an increase of$0.5 million in accounts payable and accrued expenses and other current liabilities and a decrease of$0.1 million in prepaid expenses and other current assets. During the three months endedMarch 31, 2021 , operating activities used$16.8 million of cash, primarily resulting from our net loss of$17.5 million and net cash used by changes in our operating assets and liabilities of$2.3 million , partially offset by non-cash charges of$3.0 million . Net cash used by changes in our operating assets and liabilities for the three months endedMarch 31, 2021 consisted primarily of a decrease of$2.2 million in accounts payable and accrued expenses and other current liabilities.
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.
Investing Activities
During the three months ended
During the three months ended
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Financing Activities
During the three months ended
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. As of
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, marketing and distribution arrangements, 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, marketing and distribution arrangements, 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 our continuing operations, if at all.
Contractual Obligations and Commitments
During the three months endedMarch 31, 2022 , there were no material changes to our contractual obligations and commitments described in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , as filed with theSEC .
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.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe 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 endedDecember 31, 2021 , on file with theSEC , 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.
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