You should read the following discussion and analysis of financial condition and operating results together with our financial statements and related notes appearing in this Quarterly Report on Form 10-Q ("Form 10-Q") and those included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "Form 10-K"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the "Risk Factors" section of this Form 10-Q, 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. For convenience of presentation some of the numbers have been rounded in the text below. Unless the context requires otherwise, references in this Management's Discussion and Analysis of Financial Condition and Results of Operations to the "Company," "we," "us" and "our" refer toMeiraGTx Holdings plc and its subsidiaries.
Overview
We are a vertically integrated, clinical-stage gene therapy company with six programs in clinical development and a broad pipeline of preclinical and research programs. We have core capabilities in viral vector design and optimization, gene therapy manufacturing as well as a potentially transformative gene regulation technology. Led by an experienced management team, we have taken a portfolio approach by licensing, acquiring and developing technologies that give us depth across both product candidates and indications. Though initially focusing on ophthalmology, salivary gland and neurodegenerative disease programs, we intend to expand our focus in the future to develop additional gene therapy treatments for patients suffering from a range of serious diseases. We are an exempted company incorporated under the laws of theCayman Islands in 2018, and prior to that, we commenced operations asMeiraGTx Limited , a private limited company incorporated under the laws ofEngland andWales in 2015. Our discussion of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States ("GAAP"). Since our formation, we have devoted substantially all of our resources to developing our technology platform, establishing our viral vector manufacturing facilities and our plasmid and DNA production facility and developing manufacturing processes, advancing the product candidates in our ophthalmology, salivary gland and neurodegenerative disease programs, building our intellectual property portfolio, organizing and staffing our company, developing our business plan, raising capital, and providing general and administrative support for these operations. To date, we have financed our operations primarily with cash on hand and proceeds from the sales of our Series A ordinary shares, convertible preferred C shares and ordinary shares. ThroughMarch 31, 2021 , we received gross proceeds of approximately$446.0 million from sales of our ordinary shares, Series A ordinary shares and convertible preferred C shares and$100.0 million from the collaboration, option and license agreement withJanssen Pharmaceuticals, Inc. ("Janssen"), one of the Janssen Pharmaceuticals Companies of Johnson & Johnson (the "Collaboration Agreement"). As ofMarch 31, 2021 , we had cash and cash equivalents of$199.4 million , as well as$12.0 million in receivables due from Janssen in the second quarter of 2021 in connection with the Collaboration Agreement. We are a clinical stage company and have not generated any product revenues to date. We have six clinical programs and a pipeline of preclinical programs. Since inception, we have incurred significant operating losses. Our net losses for the three-month periods endedMarch 31, 2021 and 2020 were$23.6 million and$15.7 million , respectively. As ofMarch 31, 2021 , we had an accumulated deficit of$284.6 million . We do not expect to generate revenue from sales of any products for several years, if at all. InMarch 2019 , we received an upfront payment in the amount of$100.0 million from the Collaboration Agreement. Additionally, pursuant to the Collaboration Agreement, we are eligible to receive research and development funding and potential milestone payments and royalties. Our total operating expenses were$26.6 million and$19.9 million for the three-month periods endedMarch 31, 2021 and 2020, respectively. While we expect our operating expenses to increase substantially in connection with our ongoing development activities related to our product candidates, including the planned advancement of AAV-RPGR into the Phase 3 Lumeos clinical trial for the treatment of patients with XLRP and the initiation of a Phase 3 clinical trial of AAV-RPE65 for the treatment of retinal dystrophy associated with mutations in the RPE65 gene, we believe that certain 25
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of these increases will be partially offset by the research funding in connection with the Collaboration Agreement. In addition to these planned Phase 3 trials, we anticipate that our expenses will also increase due to costs associated with our clinical development program targeting achromatopsia due to mutations in the CNGB3 or CNGA3 gene. In addition, we expect to continue incurring increasing costs associated with our clinical activities for AAV-AQP1 for the treatment of radiation-induced xerostomia and xerostomia associated with Sjogren's syndrome. We expect to file an IND application for AAV-GAD in the third quarter of 2021 following the release of the clinical material manufactured in ourLondon cGMP facility. We also incurred expenses during the three-month period endedMarch 31, 2021 and expect to continue to incur expenses related to research activities in additional therapeutic areas to expand our pipeline, hiring additional personnel in manufacturing, research, clinical operations, quality and other functional areas, and associated cash and share-based compensation expense, as well as the further development of internal manufacturing capabilities and capacity and other associated costs including the management of our intellectual property portfolio. We will require additional capital in the future, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable us to complete the development and potential commercialization of our product candidates. Furthermore, we expect to continue incurring costs associated with being a public company. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs. The COVID-19 outbreak and mitigation measures also have had and may continue to have an adverse impact on global economic conditions, which could have an adverse effect on our ability to raise capital when needed. Based on our cash and cash equivalents atMarch 31, 2021 , we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the middle of 2023. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. See "Liquidity and Capital Resources." Because of the numerous risks and uncertainties associated with the development of our product candidates, any future product candidates, our platform and technology and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Any future debt financing or preferred equity or other financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interests. If we raise additional funds through collaborations, strategic alliances, 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 when needed, we may be required to delay, limit, reduce, or terminate our product development programs, any future commercialization efforts or further development of our manufacturing facilities or processes, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Because of the numerous risks and uncertainties associated with drug development, we are unable to 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 revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. 26
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Highlights and Recent Developments
Recent Clinical Development Highlights and Anticipated 2021 Milestones
AAV-RPGR for the Treatment of X-Linked Retinitis Pigmentosa (XLRP):
? We and our development partner Janssen continue to prepare for initiation of
the Phase 3 Lumeos clinical trial.
We and Janssen intend to present additional data from the Phase 1/2 clinical
? trial of X-linked retinitis pigmentosa (MGT009) at medical meetings later this
year.
AAV-RPE65 for the Treatment of RPE65-associated Retinal Dystrophy:
? We continue to anticipate initiating a Phase 3 pivotal trial of AAV-RPE65 in
the second half of 2021.
AAV-AQP1 for the Treatment of Grade 2/3 Radiation-Induced Xerostomia:
? Dosing in the second cohort of the AQUAx phase 1 trial is ongoing and we expect
to complete enrollment in 2021. Four clinical sites are now open in the
? We are currently planning a phase 2 study and expect to initiate this trial in
the second half of 2022.
AAV-GAD for the Treatment of Parkinson's Disease:
? We expect to file an Investigational New Drug (IND) application in the third
quarter of 2021 with material manufactured from our cGMP facility in
Riboswitch Gene Regulation Platform:
We continue to generate in-vivo data demonstrating regulation of multiple
? therapeutic genes in multiple tissues. We plan to host an R&D day in the second
half of 2021 detailing our proprietary riboswitch gene regulation platform,
including data to support potential therapeutic targets.
AAV-CNGB3 and AAV-CNGA3 for the Treatment of Achromatopsia (ACHM):
We and Janssen continue to advance the ongoing clinical development of
? AAV-CNGB3 and AAV-CNGA3 for the treatment of ACHM associated with mutations in
the CNGB3 and CNGA3 genes.
On
o Track designation to our AAV-CNGA3 gene therapy product candidate for the
treatment of ACHM caused by mutations in the CNGA3 gene.
We and Janssen have now completed dosing of both adults and pediatric patients
o in the Phase 1/2 dose escalation study of AAV-CNGA3 and expect to provide an
update on further clinical studies for both AAV-CNGB3 and AAV-CNGA3 later in
2021.
Recent Corporate Development Highlights
Manufacturing and Supply Chain:
We have made significant progress optimizing our proprietary AAV manufacturing
platform process. With our internal plasmid facility now operational, we
? continue to expedite bringing the entire manufacturing process and supply chain
in-house to more rapidly and cost-effectively bring innovative and potentially
curative treatments to patients.
Components of Our Results of Operations
License Revenue
Our license revenue consisted of the amortization of the upfront payment we received in connection with the Collaboration Agreement.
Operating Expenses
Our operating expenses since inception have consisted primarily of general and administrative costs and research and development costs.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and office facility-related expenses, which include direct depreciation costs. We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support increased research and development activities. We have also incurred, and expect to continue to incur, increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq andSEC requirements; director and officer insurance costs; and investor and public relations costs.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
? employee-related expenses, including salaries, benefits and travel of our
research and development personnel;
expenses incurred in connection with third-party vendors that conduct clinical
? and preclinical studies and manufacture the drug product for the clinical
trials and preclinical activities;
? acquisition of in process research and development;
costs associated with clinical and preclinical activities including costs
? related to facilities, supplies, rent, insurance, certain legal fees,
share-based compensation, and depreciation; and
? expenses incurred with the development and operation of our manufacturing
facilities.
We expense research and development costs as incurred.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we initiate additional preclinical and clinical trials of our existing product candidates, including the planned advancement of AAV-RPGR into the Phase 3 Lumeos clinical trial for the treatment of patients with XLRP and the initiation of a Phase 3 clinical trial of AAV-RPE65 for the treatment of retinal dystrophy associated with mutations in the RPE65 gene, and continue to discover and develop additional product candidates. Certain of these increases in research and development costs will be partially offset by the research funding provided in connection with the Collaboration Agreement we entered into inJanuary 2019 . We cannot determine with certainty the duration and costs of future clinical trials of our product candidates or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our existing product candidates or any other product candidate we may develop will depend on a variety of factors, including:
the scope, rate of progress, expense and results of clinical trials of our
? existing product candidates, as well as of any future clinical trials of other
product candidates and other research and development activities that we may conduct; 28 Table of Contents
? uncertainties in clinical trial design and patient enrollment rates;
the actual probability of success for our product candidates, including the
? safety and efficacy, early clinical data, competition, manufacturing capability
and commercial viability;
? significant and changing government regulation and regulatory guidance;
? the timing and receipt of any marketing approvals;
? the expense of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights; and
? business interruptions from the COVID-19 pandemic that may affect any of the
foregoing.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or anotherU.S. or foreign regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
Other non-operating income (expense)
Other non-operating income (expense) includes the following:
Foreign currency loss
Our condensed consolidated financial statements are presented inU.S. dollars, which is our reporting currency. The financial position and results of operations of our subsidiariesMeiraGTx UK II Limited , MeiraGTx Ireland DAC,MeiraGTx Netherlands B.V. andMeiraGTx B.V. are measured using the foreign subsidiaries' local currency as the functional currency. These entities' cash accounts holdingU.S. dollars and intercompany payables and receivables are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the condensed consolidated statements of operations and comprehensive loss. Expenses of such subsidiaries have been translated intoU.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the condensed consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders' equity and as other comprehensive loss on the condensed consolidated statements of operations and comprehensive loss.
Critical Accounting Policies and Use of Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgements that affect the reporting amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgements, including those related to license and collaboration revenue, share-based compensation and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from our sources. Actual results may differ from these estimates under different assumptions. The Company's critical accounting policies, significant judgements and estimates are included in the Company's Form 10-K for the year endedDecember 31, 2020 and Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q. 29 Table of Contents Results of Operations
Comparison of Three Months Ended
2021 2020 Change (in thousands)
License revenue - related party$ 4,595 $ 4,210 $
385 Operating expenses: General and administrative 9,918 11,806 (1,888) Research and development 16,709 8,083 8,626 Total operating expenses 26,627 19,889 6,738 Loss from operations (22,032) (15,679) (6,353) Other non-operating income (expense) Foreign currency loss (1,615) (757) (858) Interest income 89 789 (700) Interest expense (59) (34) (25) Net loss (23,617) (15,681) (7,936) Other comprehensive (loss) income: Foreign currency translation for the three-month periods endedMarch 31, 2021 and 2020, respectively (271) 3,946 (4,217) Total comprehensive loss$ (23,888) $ (11,735) $ (12,153) License Revenue
License revenue was
General and Administrative Expenses
General and administrative expenses were$9.9 million for the three months endedMarch 31, 2021 , compared to$11.8 million for the three months endedMarch 31, 2020 . The decrease of$1.9 million was primarily due to a decrease of$2.4 million in payroll and payroll related costs and$1.7 million in share-based compensation due to certain restricted ordinary shares issued to certain members of senior management inJune 2018 becoming fully vested inJune 2020 . These decreases were partially offset by increases of$0.6 million in insurance costs,$0.6 million in rent and facilities costs,$0.5 million in consulting fees,$0.2 million in legal and accounting fees,$0.1 million in depreciation and$0.2 million in other office related costs.
Research and Development Expenses
Research and development expenses for the three months endedMarch 31, 2021 were$16.7 million , compared to$8.1 million for the three months endedMarch 31, 2020 . The increase of$8.6 million was primarily due to increases of$3.0 million in costs related to our pre-clinical research and clinical trials and$2.5 million in payroll and payroll related costs due to the expansion of our clinical trials and manufacturing capabilities. Additional increases include$1.7 million in license fees,$0.9 million in share-based compensation,$0.8 million in depreciation and a decrease of$2.3 million in research funding provided under our Collaboration Agreement with Janssen, which was partially offset by decreases of$2.2 million of costs related to the manufacture of material for our clinical trials and$0.4 million in other research and development costs. 30 Table of Contents Foreign Currency Loss
Foreign currency loss was$1.6 million for the three months endedMarch 31, 2021 compared to a loss of$0.8 million for the three months endedMarch 31, 2020 . The increase in the loss of$0.9 million was primarily due to a weakening of theU.S. dollar against the pound sterling and euro during the three months endedMarch 31, 2021 .
Other Comprehensive (Loss) Income - Foreign Currency Translation (Loss) Gain
Foreign currency translation adjustments resulted in a translation loss of$0.3 million for the three months endedMarch 31, 2021 compared to a translation gain of$3.9 million for the three months endedMarch 31, 2020 . The change in the amount of$4.2 million was primarily due to a weakening of theU.S. dollar against the pound sterling and euro during the three months endedMarch 31, 2021 .
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. For the three months endedMarch 31, 2021 , we generated$9.1 million of positive cash flows from operations. However, the Company generally does not generate positive cash flows from operations and there are no assurances that we will generate positive cash flows in the future. Additionally, there are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of our product candidates. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting preclinical studies and clinical trials for our product candidates, building out internal capacity to have products manufactured to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. In addition, onAugust 4, 2020 we entered into agreements to acquire our second cGMP viral vector manufacturing facility and our first cGMP plasmid and DNA production facility in Shannon,Ireland to expand our manufacturing and supply chain capabilities. We closed on the acquisition of the first building inAugust 2020 and on the second building inJanuary 2021 . As a result of these incurred and expected expenses, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.
We do not currently have any approved products and have never generated any
revenue from product sales. We have historically financed our operations
primarily through cash on hand and proceeds from the sale of our ordinary
shares, series A ordinary shares and convertible preferred C shares. In
Based on our current cash and cash equivalents atMarch 31, 2021 and the research funding we expect to receive under the Collaboration Agreement, we estimate that we will be able to fund our operating expenses and capital expenditure requirements into the middle of 2023. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Cash Flows
As of
For the
three-month periods ended
2021 2020 (in thousands) Net cash provided by (used in) operating activities $ 9,086 $ (12,384) Net cash used in investing activities (18,868) (4,036) Net cash provided by financing activities 136 165 Decrease in cash $ (9,646) $ (16,255) 31 Table of Contents Operating Activities During the three months endedMarch 31, 2021 , our cash provided by operating activities of$9.1 million was primarily due to our receipt of reimbursements under the Collaboration Agreement as well as tax incentives, which was partially offset by a net loss of$23.6 million as we incurred expenses associated with research activities on our clinical programs, manufacturing of our clinical trial materials, preclinical research programs and general and administrative expenses. The net loss included non-cash charges of$8.2 million , which consisted of$4.8 million of share-based compensation,$1.6 million of a foreign currency loss and$1.8 million of depreciation and amortization. Additionally, operating assets, consisting of accounts receivable-related party, prepaid expenses, tax incentive receivable, security deposits and other current assets, decreased by$32.6 million and operating liabilities, consisting of accounts payable, accrued expenses, deferred revenue - related party and other current liabilities, decreased by$8.1 million . During the three months endedMarch 31, 2020 , our cash used in operating activities of$12.4 million was primarily due to our net loss of$15.7 as we incurred expenses associated with research activities on our clinical programs, manufacturing of our clinical trial materials, preclinical research programs and general and administrative expenses. The net loss included non-cash charges of$7.2 million , which consisted of$5.7 million of share-based compensation, foreign currency loss of$0.8 million , and depreciation and amortization of$0.8 million , which was partially offset by a gain on termination of lease liability of$0.1 million . Additionally, operating assets, consisting of accounts receivable, prepaid expenses, tax incentive receivable, security deposits and other current assets, decreased by$0.8 million and operating liabilities, consisting of accounts payable, accrued expenses, and deferred revenue - related party, decreased by$4.7 million .
Investing Activities
Net cash used in investing activities for the three months endedMarch 31, 2021 of$18.9 million consisted primarily of$8.9 million in payments for the acquisition of the second building and long-term lease for our manufacturing facility inIreland ,$5.5 million in connection with investments in subsidiaries and$4.5 million for purchases of property and equipment for our manufacturing, laboratory and process development facilities and buildout costs of our new facilities. Net cash used in investing activities for the three months endedMarch 31, 2020 of$4.0 million consisted of purchases of property and equipment, primarily for our manufacturing and process development facilities.
Financing Activities
Net cash provided by financing activities was$0.1 million for the three months endedMarch 31, 2021 , which consisted of proceeds from the exercise of share options.
Net cash provided by financing activities was
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements under applicable
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, (the "JOBS Act"), permits an "emerging growth company," which we are, to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. 32 Table of Contents
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