MERUS N.V. Our management's discussion and analysis of our financial condition and results
of operations are based upon our unaudited condensed consolidated financial
statements included in this Quarterly Report on Form 10-Q, which have been
prepared by us in accordance with accounting principles generally accepted in
Overview General
We are a clinical-stage oncology company developing innovative antibody therapeutics. Our pipeline of full-length human multispecific antibody candidates are generated from our proprietary technology platforms, which are able to generate a diverse array of antibody binding domains, or Fabs, against virtually any target. Each antibody binding domain consists of a target-specific heavy chain paired with a common light chain. Multiple binding domains can be combined to produce novel multispecific antibodies that bind to a wide range of targets and display novel and innovative biology. These platforms, referred to as Biclonics® and Triclonics®, allow us to generate large numbers of diverse panels of bispecific and trispecific antibodies, respectively, which can then be functionally screened in large-scale cell-based assays to identify those unique molecules that possess novel biology, which we believe are best suited for a given therapeutic application. Further, by binding to multiple targets, Biclonics® and Triclonics® may be designed to provide a variety of mechanisms of action, including simultaneously blocking receptors that drive tumor cell growth and survival and mobilizing the patient's immune response by engaging T cells, and/or activating various killer cells to eradicate tumors.
Our technology platforms employ an assortment of patented technologies and techniques to generate human antibodies. We utilize our patented MeMo® mouse to produce a host of antibodies with diverse heavy chains and a common light chain that are capable of binding to virtually any antigen target. We use our patented heavy chain and CH3 domain dimerization technology to generate substantially pure bispecific and trispecific antibodies. We employ our patented Spleen to Screen® technology to efficiently screen panels of diverse heavy chains, designed to allow us to rapidly identify Biclonics® and Triclonics® therapeutic candidates with differentiated modes of action for pre-clinical and clinical testing.
Using our Biclonics® platform we have produced, and are currently developing, the following candidates: MCLA-128 (zenocutuzumab) for the potential treatment of solid tumors that harbor Neuregulin 1 (NRG1) gene fusions; MCLA-158 (petosemtamab) for the potential treatment of solid tumors; MCLA-145 for the potential treatment of solid tumors, and MCLA-129, for the potential treatment of lung and other solid tumors. Furthermore, we have a pipeline of proprietary antibody candidates in pre-clinical development and intend to further leverage our Biclonics® and Triclonics® technology platforms to identify multispecific antibody candidates and advance them into clinical development.
Funding Our Operations
We are a clinical-stage company and have not generated any revenue from product sales. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our antibody candidates from discovery through pre-clinical development and into clinical trials and seek regulatory approval and pursue commercialization of any approved antibody candidate. In addition, if we obtain regulatory approval for any of our antibody candidates, if appropriate, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.
We anticipate that we will require additional financing 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 public or private equity or debt financings or other sources, which may include collaborations, business development and licensing opportunities with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies' stock have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. See "Impact of
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COVID-19 Pandemic" below and "Risk Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations" in Part II, Item 1A of this Quarterly Report on Form 10-Q. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
Based on our current operating plan, we expect that our existing cash, cash
equivalents and marketable securities of
Clinical Programs
Zenocutuzumab, or "Zeno" (MCLA-128: HER3 x HER2 Biclonics®): NRG1 gene fusion (NRG1+) cancers and other solid tumors
We continue to enroll patients in the phase 1/2 eNRGy trial to assess the safety and anti-tumor activity of Zeno monotherapy in NRG1+ cancers.
In
•
As of the
•
Overall Response Rate (ORR) per RECIST criteria as assessed by investigator was 34% (27/79) (95% Cl: 24%-46%) across multiple tumor types
•
Pancreatic ductal adenocarcinoma ORR 42% (8/19) (95% CI: 20-67%)
•
Non-small cell lung cancer (NSCLC) ORR 35% (16/46) (95% CI: 21-50%)
•
Tumor shrinkage was observed in 70% of patients (55/79)
•
Median time to response was 1.8 months, and median duration of exposure was 6.3 months
•
Median duration of response was 9.1 months, and 20/83 patients were continuing treatment as of the data cutoff date
•
Zeno has demonstrated a consistent and well tolerated safety profile, with few grade 3 or 4 treatment-related adverse events
As announced in 2021, based on feedback received from the
We believe the favorable safety profile of Zeno may also allow for future use and, potential benefit in combination with other cancer therapies. Accordingly, we are initiating a clinical trial evaluating Zeno in combination with afatinib for NRG1+ NSCLC. In addition, beyond NRG1+ cancer, we are initiating a clinical trial evaluating Zeno as a treatment for castration resistant prostate cancer, and are actively exploring the ways in which targeting both HER2 and HER3 with Zeno has potential for the treatment of other cancers.
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In
Petosemtamab, or "Peto" (MCLA-158: Lgr5 x EGFR Biclonics®): Solid Tumors Dose expansion continues in phase 1 trial: clinical update planned for 1H2023
We are developing petosemtamab for the potential treatment of solid tumors. Our phase 1 clinical trial of petosemtamab is ongoing in the dose expansion phase.
We plan to provide a clinical update for Peto at a medical conference in the first half of 2023. The planned presentation will provide the opportunity to present a robust update across the program, including approximately 40 patients with head and neck squamous cell carcinoma cohort with meaningful clinical follow up, and an update on the gastro-esophageal cohort, to inform clinical develop strategy and planned regulatory interactions.
MCLA-145 (CD137 x PD-L1 Biclonics®): Solid Tumors Phase 1 trial continues
We are developing MCLA-145 in an ongoing phase 1 trial for the potential treatment of solid tumors. MCLA-145 is designed to recruit, activate and prevent the exhaustion of tumor-infiltrating T-cells. The trial consists of a dose escalation phase, followed by a planned dose expansion phase. We are also planning to evaluate the combination of MCLA-145 with a PD-1 blocking antibody.
MCLA-129 (EGFR x c-MET Biclonics®): Solid Tumors Phase 1 trial continues: clinical update planned for 2H2022
We are developing MCLA-129 as a potential treatment for solid tumors, including
non-small cell lung cancer (NSCLC). In
In
We plan to provide a clinical update in the second half of 2022.
Impact of COVID-19 Pandemic
The current COVID-19 pandemic has presented a substantial public health and
economic challenge around the world and is affecting our employees, communities,
clinical trial sites and business operations, as well as the
While we are currently continuing our ongoing clinical trials, the COVID-19
pandemic and related precautions have directly or indirectly impacted
enrollment, new, planned clinical trial site openings, patient visits, and
on-site monitoring of our clinical trials and source verification of clinical
data required for presentation of clinical data for zenocutuzumab, petosemtamab,
MCLA-145 and MCLA-129. We have observed a low to moderate impact on clinical
trial enrollment and operations, and a moderate impact on patient monitoring
visits as a consequence of the COVID-19 pandemic during the second quarter ended
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As a result of the COVID-19 pandemic, certain of our CROs and third-party
suppliers, as well as collaborators in the
In response to the spread of COVID-19, on
At this time, there remains significant uncertainty caused by the COVID-19 pandemic and impact of related responses. The future impact of COVID-19 on our business and clinical trials will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence. See "Risk Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations." in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Collaborations
Refer to Item 1, "Business-Our Collaborations" and Note 12, "Collaborations," of the notes to our consolidated financial statements included in our Annual Report on Form 10-K and Note 8, "Collaborations," to our unaudited condensed consolidated interim financial statements elsewhere in this Quarterly Report on Form 10-Q for a description of the key terms of our arrangements.
Discussion and Analysis of our Results of Operations
Comparison of the three and six months ended
Revenue
The following is a comparison of revenue:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
(In millions) (In millions)
Incyte $ 7.5 $ 7.3 $ 0.2 $ 13.8 $ 14.0 $ (0.2 )
Lilly 5.2 4.6 0.6 10.2 6.0 4.2
Other - 0.5 (0.5 ) 0.3 0.7 (0.4 )
Total revenue $ 12.7 $ 12.4 $ 0.3 $ 24.3 $ 20.7 $ 3.6
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Collaboration revenue for the three months ended
Collaboration revenue for the six months ended
As of
Operating Expenses
The following is a comparison of operating expenses:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
(In millions) (In millions)
Research and development $ 31.1 $ 24.6 $ 6.5 $ 58.1 $ 45.4 $ 12.7
General and administrative 12.7 10.6 2.1 24.4 19.9 4.5
Total operating expenses $ 43.8 $ 35.2 $ 8.6 $ 82.5 $ 65.3 $ 17.2 Research and development expense for the three months ended
Research and development expense for the six months ended
General and administrative expense for the three months ended
General and administrative expense for the six months ended
Other Income (Loss), Net
The following is a comparison of other income, net:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
(In millions) (In millions)
Interest (expense) income, net
24.6 (4.5 ) 29.1 32.3 7.7 24.6
Other (losses) gains , net 0.6 0.1 0.5 1.1 (0.4 ) 1.5
Total other income (loss), net
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Other income (loss), net consists of interest earned on our cash and cash equivalents held on account, accretion of investment earnings and net foreign exchange gains on our foreign denominated cash, cash equivalents and marketable securities. Other gains or losses relate to the issuance and settlement of financial instruments.
Income Tax Expense
The following is a comparison of income tax expense:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
(In millions) (In millions)
Current $ 0.3 $ 0.2 $ 0.1 $ 0.1 $ (0.2 ) $ 0.3
Deferred (0.2 ) (0.1 ) (0.1 ) 0.2 0.3 (0.1 )
Total tax expense (benefit), net
We are subject to income taxes in
Net Loss
Net loss for the three and six months ended
Material Changes in Financial Condition
Sources of Cash
As of
As of
Funding Requirements
Our primary uses of capital are clinical trial costs, chemistry, manufacturing and control costs to manufacture and supply drug product for our clinical trials, third-party research and development services, laboratory and related supplies, financial services, legal and other regulatory expenses and general overhead costs.
Because our product candidates are in various stages of clinical and pre-clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report on Form 10-Q, as the pandemic continues to evolve globally. See "Impact of COVID-19 Pandemic" above and "Risk Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations" in Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of the possible impact of the COVID-19 pandemic on our business.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings, collaboration arrangements, license agreements, other business development opportunities with third parties and government grants.
Except for any obligations of our collaborators or licensees to make license, milestone or royalty payments under our agreements with them, and government grants, we do not have any committed external sources of liquidity and currently have no credit facility. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants
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limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration arrangements, license agreements or other business development opportunities in the future, we may have to relinquish valuable rights to our technologies or intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise any additional funds that may be needed through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our 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.
Outlook
Based on our current operating plan, research and development plans and our
timing expectations related to the progress of our programs, and the additional
capital raised through the sale of equity during the quarter ended
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