MAGENTA THERAPEUTICS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
In
Coinciding with the decisions related to the programs and across the portfolio, we announced that we intended to conduct a comprehensive review of strategic alternatives for the company and its assets. As part of our strategic review process, we are exploring potential strategic alternatives that include, without limitation, an acquisition, merger, business combination or other transaction. We are also exploring strategic transactions regarding our product candidates and related assets, including, without limitation, licensing transactions and asset sales. There can be no assurance that the strategic review process or any transaction relating to a specific asset, will result in Magenta pursuing such a transaction(s), or that any transaction(s), if pursued, will be completed on terms favorable to Magenta and its stockholders in the existing Magenta entity or any possible entity that results from a combination of entities. If the strategic review process is unsuccessful, our board of directors may decide to pursue a dissolution and liquidation of Magenta.
Our product candidates have been designed to improve the patient experience when preparing for stem cell transplant or gene therapy. Our MGTA-117 product candidate was designed as an antibody drug conjugate, or ADC, designed to deplete CD117-expressing stem cells in the bone marrow in order to make room for subsequently transplanted stem cells or ex vivo gene therapy products. The process of making room in the bone marrow is known as conditioning, and the current standard of care for conditioning utilizes chemotoxic agents. Our second targeted conditioning product candidate, MGTA-45, is an ADC designed to selectively target and deplete both stem cells and immune cells, and it is intended to replace the use of chemotherapy-based conditioning prior to stem cell transplant in patients with blood cancers and autoimmune diseases. Lastly, our MGTA-145 product candidate, in combination with plerixafor, is designed to improve the stem cell mobilization process by which stem cells are mobilized out of the bone marrow and into the bloodstream to facilitate their collection for subsequent transplant back into the body for the purpose of resetting the immune system.
In
In
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
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and undertaking preclinical studies and clinical trials, including MGTA-117, MGTA-45 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. Net losses
were
We expect to continue to incur costs and expenditures in connection with the process of evaluating our strategic alternatives. There can be no assurance, however, that we will be able to successfully consummate any particular strategic transaction. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal, accounting and advisory fees and expenses and other related charges. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business. In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affects our business and decreases the remaining cash available for use in our business or the execution of our strategic plan. There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value, or achieve the anticipated results. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our stockholders.
Should we resume development of our product candidates, 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. In addition, we will incur substantial research and developments costs and other expenditures to develop such product candidates particularly as we:
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enroll and conduct clinical trials for our product candidates;
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initiate and conduct preclinical studies and clinical trials of our other product candidates;
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develop any other future product candidates we may choose to pursue;
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seek marketing approval for any of our product candidates that successfully complete clinical development, if any;
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maintain compliance with applicable regulatory requirements;
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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;
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maintain, expand, protect and enforce our intellectual property portfolio;
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develop and expand our sales, marketing and distribution capabilities for our product candidates for which we obtain marketing approval, if any; and
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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.
If we resume development of our product candidates, 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.
Should we resume development of our product candidates, we will need substantial additional funding to support our continuing operations. 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.
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As of
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 the
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 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 vaccines, the effect of any relaxation of current
restrictions within the
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:
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employee-related expenses, including salaries and related costs, and stock-based compensation expense, for employees engaged in research and development functions;
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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 third-party contract development and manufacturing organizations, or CDMOs, that manufacture drug products for use in our preclinical studies and clinical trials;
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facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and
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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.
Should we resume development of our product candidates, the successful development and commercialization is highly uncertain. This is due to the numerous risks and uncertainties, including the following:
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successful completion of preclinical studies and clinical trials;
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receipt and related terms of marketing approvals from applicable regulatory authorities;
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raising additional funds necessary to complete clinical development of and commercialize our product candidates;
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obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates;
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making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;
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developing and implementing marketing and reimbursement strategies;
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establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
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acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
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effectively competing with other therapies;
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obtaining and maintaining third-party coverage and adequate reimbursement;
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protecting and enforcing our rights in our intellectual property portfolio;
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maintaining a continued acceptable safety profile of the products following approval; and
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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 have historically been 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 our research and development expenses to decrease in the near future as we halted the development of our product candidates while we explore strategic alternatives. Should we resume development of our product candidates, we expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress.
Inflation generally affected 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, pre-commercialization, accounting and audit services. We expect our general and administrative expenses to decrease in the near future due to recent workforce reductions. We do expect to incur significant costs, however, related to our exploration of strategic alternatives, including legal, accounting and advisory expenses and other related charges.
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
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we also had available research and orphan drug tax credit carryforwards for
federal and state income tax purposes of
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
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vendors in connection with the preclinical development activities;
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CROs in connection with preclinical and clinical trials;
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CDMOs in connection with the production of preclinical and clinical trial materials; and
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investigative sites in connection with clinical trials.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation
We measure compensation expense for all stock options and other stock-based awards granted to employees, directors and non-employees based on the fair value on the date of the grant and recognize such compensation expense over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue awards with either service-only vesting conditions and record expense using the straight-line method or service and performance vesting conditions and record expense when achievement of the performance condition becomes probable using the graded-vesting method. We have historically granted stock options with exercise prices equivalent to the fair value of our common stock as of the date of the grant. The fair value of our common stock is based on quoted market prices. We estimate the fair value of each stock option award using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. We do not estimate and apply a forfeiture rate as we have elected to account for forfeitures as they occur.
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Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, 2022 2021 Change (in thousands) Operating expenses: Research and development$ 55,141 $ 46,766 $ 8,375 General and administrative 25,761 27,926 (2,165 ) Total operating expenses 80,902 74,692 6,210 Loss from operations (80,902 ) (74,692 ) (6,210 ) Interest and other income, net 4,440 3,556 884 Net loss$ (76,462 ) $ (71,136 ) $ (5,326 )
Research and Development Expenses
Year Ended December 31,
2022 2021 Change
(in thousands)
Direct research and development expenses by
program:
Conditioning $ 22,951 $ 9,677 $ 13,274
Mobilization 2,819 5,203 (2,384 )
Cell therapy 18 684 (666 )
Unallocated expenses:
Personnel-related (including stock-based
compensation) 18,878 18,418 460
Consultant (including stock-based
compensation) 667 1,488 (821 )
Facility related and other 9,808 11,296 (1,488 )
Total research and development expenses
Expenses related to our conditioning program increased primarily due to an
increase of
The increase in personnel-related costs was due primarily to an increase in
severance resulting from our headcount reductions, partially offset by a
decrease in stock-based compensation. Personnel-related costs for the years
ended
General and Administrative Expenses
Year Ended December 31,
2022 2021 Change
(in thousands)
Personnel-related (including stock-based
compensation) $ 13,165 $ 13,902 $ (737 )
Professional and consultant 5,308 6,555 (1,247 )
Facility related and other 7,288 7,469 (181 )
Total general and administrative expenses
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The decrease in personnel-related costs was due primarily to a decrease in
stock-based compensation, partially offset by an increase in headcount.
Personnel-related costs for the years ended
Interest and Other Income, Net
Interest income and other income, net for the year 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
We have a shelf registration statement on Form S-3, or the Shelf on file with
the
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Year Ended December 31,
2022 2021
(in thousands)
Net cash used in operating activities $ (67,090 ) $ (59,531 )
Net cash provided by (used in) investing activities (9,812 ) 43,428
Net cash provided by financing activities 2,878 89,601
Net increase (decrease) in cash, cash equivalents and
restricted cash$ (74,024 ) $ 73,498 Operating Activities
During the year ended
During the year ended
Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses in both periods were generally due to the timing of vendor invoicing and payments.
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Investing Activities
During the year ended
During the year ended
Financing Activities
During the year ended
During the year ended
Funding Requirements
We currently expect our expenses to decrease in 2023 compared to 2022 due to our
decision to halt further development of our product candidates and conduct
workforce reductions while we explore strategic alternatives. If we decide to
resume the development of our product candidates, however, we expect our
expenses to increase in order to advance 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 and subject to our pursuit of a potential strategic transaction and the consummation of such potential transaction, we expect to finance our future 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 resume the development of our product candidates and 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.
Nasdaq Delisting Notice
As previously disclosed, on
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Contractual Obligations and Commitments
Our cash flows are dependent on a number of factors in addition to our operational expenditures, including our contractual and other obligations. As a result, our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.
Lease Obligations
We have a sublease for up to approximately 69,000 square feet of office and
laboratory space in
Research and Development and Manufacturing Agreements
We enter into contracts in the normal course of business with CROs, CDMOs and other third parties for clinical trials, preclinical research studies and testing and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation and in some cases, wind-down costs. The exact amount of such obligations is dependent on the timing of termination and the terms of the related agreement and are not known.
License and Collaboration Agreements
In
We have a license agreement with the President and Fellows of
In
As of
Restructuring Costs
In
Advisory Fee
In
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Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
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