MOLECULAR TEMPLATES, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with the unaudited financial information and
the notes thereto included appearing elsewhere in this Quarterly Report on Form
10-Q, and the audited financial information and the notes thereto included in
our Annual Report on Form 10-K for the year ended
Overview
Business
ETBs use a genetically engineered version of the SLTA. In its wild-type form, Shiga-like Toxin or "SLT" is thought to induce its own entry into a cell when proximal to the cell surface membrane, self-route to the cytosol, and enzymatically and irreversibly shut down protein synthesis via ribosome inactivation. SLTA is normally coupled to its cognate Shiga-like Toxin B subunit, or SLTB, to target the CD77 cell surface marker, a non-internalizing glycosphingolipid. In our scaffold, a genetically engineered SLTA subunit with no cognate SLTB component is genetically fused to antibody domains or fragments specific to a target, resulting in a biologic therapeutic that can identify the particular target and specifically kill the cell. The antibody domains may be substituted with other antibody domains having different specificities to allow for the rapid development of new drugs to selected targets in cancer and other serious diseases.
ETBs combine the specificity of an antibody with SLTA's potent mechanism of cell destruction. Based on the disease setting, we have created ETBs that have reduced immunogenicity and are capable of delivering additional payloads into a target cell. Immunogenicity is the ability of a foreign substance to provoke an immune response in a host. ETBs have relatively predictable pharmacokinetic, or PK, profiles and can be rapidly screened for desired activity in robust cell-based and animal-model assays. Because SLTA can induce internalization against non- and poorly-internalizing receptors, the universe of targets for ETBs should be substantially larger than that seen with antibody drug conjugates, or ADCs, which are not likely to be effective if the target does not readily internalize the ADC payload.
ETBs have a differentiated mechanism of cell kill in cancer therapeutics (the inhibition of protein synthesis via ribosome destruction), and we have preclinical and clinical data demonstrating the utility of these molecules in chemotherapy-refractory cancers. ETBs have shown good tolerability in multiple animal models as well as a generally favorable tolerability profile in our clinical studies to date. We believe the target specificity of ETBs, their ability to self-internalize, their potent and differentiated mechanism of cell kill and their tolerability profile provide opportunities for the clinical development of these agents to address multiple cancer types.
We have developed ETBs to various targets, including PD-L1, HER2, CD38, and CTLA-4. PD-L1 and CTLA-4 are key immune checkpoint pathways and are validated targets expressed in a variety of solid tumor cancers and immune cells. The differentiated MOA of our ETBs allows for a novel approach to immuno-oncology targets by: (i) dismantling the tumor micro-environment (TME) through the depletion of immunosuppressive immune cells and (ii) delivering high avidity MHC-I antigens to the tumor to directly alter the tumor's immunophenotype. The altering of the tumor's immunophenotype is unique and leverages the intrinsic intracellular routing properties of ETBs through a process we call Antigen Seeding.
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[[Image Removed]] Immuno-Oncology ETBs
We filed an Investigational New Drug, or IND, application for MT-6402, our ETB
targeting PD-L1, in
As of
Targeted Solid Tumor ETBs
We filed an IND for MT-5111, our ETB targeting HER2, in
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Pharmacokinetic (PK) data confirm the predicted human PK based on non-human
primate studies. PK modeling has suggested that doses equal to or greater than
10 ?g/kg are likely needed for efficacy. To date, we have not observed any cases
of clinically significant cardiotoxicity in human subjects
As of our
Serum concentration of MT-5111 showed predictable and dose-proportional
increasing exposure beginning with the 6.75 ?g/kg cohort. Higher MT-5111 doses
(6.75 ?g/kg and above) appear to saturate circulating soluble HER2 (sHER2)
receptors with patients' HER2 levels stabilizing or decreasing at higher doses.
The HER2-positive breast cancer expansion cohort initiated in
We are encouraged by the safety profile to date in these heavily pretreated patients and believe the observed PK in patients suggests potentially clinically active dose levels.
Hematologic Malignancy Targeted ETBs
MT-0169, our ETB targeting CD38, had its IND filed in
The revised protocol for the ongoing Phase I study for MT-0169 in patients with
relapsed/refractory multiple myeloma or non-Hodgkins lymphoma is now open. The
revised protocol began at the lower dose of MT-0169 at 5 ?g/kg to reduce the
risk of adverse events observed at the initial dose and to enable patients to
continue MT-0169 therapy for a longer duration that may drive tumor benefit. We
are opening new sites for the Phase I study and enrollment resumed in
To date, we have not observed any cases of capillary leak syndrome (CLS) (any
grade) in human subjects
Preclinical ETB Pipeline
MT-8421, our ETB targeting CTLA-4, along with MT-6402, represent our unique
approach to immuno-oncology based on dismantling the TME through direct
cell-kill of tumor and immune cells and not only the blocking of ligand-ligand
interactions seen with current antibody therapeutics. The ETB approach includes
potent destruction of CTLA-4+ Tregs via enzymatic ribosome destruction, and the
mechanism of cell kill is independent of TME. There is also preferential
activity on high CTLA-4 expressing Tregs in the TME. Preclinical data from
MT-8421 shared at the
We expect to provide periodic updates on MT-6402, MT-8421, MT-5111 and MT-0169 throughout 2022. We continue to advance our pipeline of next-generation ETBs, including MT-8421, our ETB targeting CTLA-4, along with ETBs targeting TROP2, TIGIT, and BCMA.
We have built up multiple core competencies around the creation and development of ETBs. We developed the ETB technology in-house and continue to make iterative improvements in the scaffold and identify new uses of the technology. We also developed the proprietary process for manufacturing ETBs under Current Good Manufacturing Process, or cGMP regulatory standards and continue to make improvements to our manufacturing processes.
We have conducted multiple cGMP manufacturing runs with our compounds and believe this process is robust and could support commercial production with gross margins that are similar to those seen with antibodies.
Impact of COVID-19
In
The extent to which the COVID-19 pandemic, and other similar outbreaks of contagious diseases, may impact our business, financial condition and results of operations will depend on the manner in which this pandemic continues to evolve and future developments in response thereto, which are highly uncertain and cannot be predicted with confidence and which may include, among other things, the ultimate severity, intensity and duration of this pandemic (including any resurgences); impact of the new COVID-19 variants, the rollout of COVID-19 vaccines? governmental, business or other actions that have been, or will be, taken in response to
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this pandemic, including restrictions on travel and mobility, business closures and imposition of social distancing measures? impacts of the pandemic on the vendors or distribution channels in our or our partners' supply chain and ability to continue to manufacture our investigational products? impacts of the pandemic on the conduct of our clinical trials, including with respect to enrollment rates, staffing shortages, availability of investigators and clinical trial sites or monitoring of data? and impacts of the pandemic on the regulatory agencies with which we interact in the development, review, approval and commercialization of our therapeutic products.
We continue to monitor the evolving pandemic situation and are able to implement any risk mitigation actions Company-wide, if necessary, in accordance with applicable government and health laws and regulations.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales to customers. We do not expect to receive any revenue from any ETB candidates that we or our current or future collaboration partners develop, including MT-6402, MT-5111, MT-0169, MT-8421 and other pre-clinical ETB candidates, until we obtain regulatory approval and commercialize such biologics. Our revenue consists principally of collaboration revenue and grant revenue.
Research and Development revenue primarily relates to our collaboration agreement with Bristol Myers Squibb which is accounted for using the percentage-of-completion cost-to-cost method.
Grant revenue relates to our CPRIT grant for a CD38 ETB (MT-0169). CPRIT grant funds for MT-0169 are provided to us in arrears as cost reimbursement where revenue is recognized as allowable costs are incurred. Revenue recognized in excess of amounts collected are recorded as unbilled revenue.
For more information about our revenue recognition policy, please see Note 1,
"Organization and Summary of Significant Accounting Policies" to our audited
consolidated financial statements for the year ended
Research and Development Expenses
Research and development expenses consist principally of:
• salaries for research and development staff and related expenses,
including stock-based compensation expenses;
• costs for current good manufacturing practices ("cGMP") manufacturing of
drug substances and drug products by contract manufacturers;
• fees and other costs paid to clinical trials sites and clinical research
organizations, ("CROs"), in connection with the performance of clinical
trials and preclinical testing;
• costs for consultants and contract research;
• costs of laboratory supplies and small equipment, including maintenance; and
• depreciation of long-lived assets.
Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including the initiation and enrollment of subjects in clinical trials and manufacture of drug or biologic materials for clinical trials. We expect research and development expenses to increase as we advance the clinical development of MT-6402, MT-5111, and/or MT-0169, and further advance the research and development of our pre-clinical ETB candidates, such as MT-8421, and our other earlier stage drugs or biologics. The successful development of our ETB candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from any of our ETB candidates. This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
• the scope, rate of progress and expense of our research and development
activities;
• clinical trials and early-stage results;
• the terms and timing of regulatory approvals; and
• the ability to market, commercialize and achieve market acceptance for
MT-6402, MT-5111, MT-0169, MT-8421, or any other ETB candidate that we or
our current or future collaboration partners may develop in the future.
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Any of these variables with respect to the development of MT-6402, MT-5111,
MT-0169, MT-8421, or any other ETB candidate that we may develop could result in
a significant change in the costs and timing associated with the development of
such candidates. For example, if the FDA, the
General and Administrative Expenses
Our general and administrative expenses consist principally of:
• salaries for employees other than research and development staff,
including stock-based compensation expenses;
• professional fees for auditors and other consulting expenses related to
general and administrative activities;
• professional fees for legal services related to the protection and
maintenance of our intellectual property and regulatory compliance;
• cost of facilities, communication and office expenses;
• information technology services; and
• depreciation of long-lived assets.
We expect that our general and administrative costs will increase in the future as our business expands and we increase our headcount to support the expected growth in our operating activities. Additionally, we expect these expenses will also increase in the future as we incur additional costs associated with operating as a public company. These increases will likely include additional legal fees, accounting and audit fees, management board and supervisory board liability insurance premiums and costs related to investor relations. In addition, we expect to grant stock-based compensation awards to key management personnel and other employees.
Other Income (Expense)
Other income (expense) mainly includes interest income earned on our cash and marketable securities balances held, and interest expense on our outstanding borrowings.
Results of Operations Revenues
The table below summarizes our revenues as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Research and development
revenue, related party $ - $ 12,899 $ - $ 13,136
Research and development
revenue, other 4,417 2,235 $ 12,903 5,218
Total revenue $ 4,417 $ 15,134 $ 12,903 $ 18,354 Research and Development Revenue - from related party
The decrease in research and development revenue - from related parties for the
three and six months ended
For more information about our prior and current collaboration agreements,
please see Note 3 "Research and Development Agreements" to our unaudited
consolidated financial statements for the three and six months ended
Research and Development Revenue - other
The increase for the three and six months ended
For more information about our prior and current collaboration agreements,
please see Note 3 "Research and Development Agreements" to our unaudited
consolidated financial statements for the three and six months ended
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Operating Expenses
The table below summarizes our operating expenses as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Research and development expenses
$ 27,931 $ 30,049 $ 57,048 $ 59,598
Research and Development Expenses
The table below summarizes our research and development expenses as follows (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Program costs $ 6,455 $ 7,280 $ 12,921 $ 14,591
Employee compensation 9,163 10,083 20,202 21,182
Laboratory costs 3,164 1,521 4,021 2,557
Other research and development costs 2,583 2,243 5,718 4,117
Total research and development expenses
Research and development ("R&D") expenses increased
Program costs decreased
Employee compensation costs decreased by
Other R&D costs increased
General and Administrative Expenses
General and administrative expenses decreased
Nonoperating activities
The table below summarizes our nonoperating activities as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Interest and other income, net
(1,092 ) (767 ) (2,142 ) (1,268 )
Total nonoperating activities
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Interest and Other Income and Interest Expense
The increase in interest and other income for the three and six months ended
The increase in interest expense for the three and six months ended
Liquidity and Capital Resources
Sources of Funds
We have devoted substantially all of our resources to developing our ETB candidates and platform technology, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capital and providing for general and administrative support for these operations. We plan to increase our research and development expenses for the foreseeable future as we continue to advance MT-6402, MT-5111, MT-0169, MT-8421 and our earlier-stage pre-clinical programs. At this time, due to the inherently unpredictable nature of preclinical and clinical development and given the early stage of our programs and drug or biologic candidates, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize our drugs or biologics, if and when approved. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations.
In addition, we cannot forecast which drugs or biologics, if and when approved, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
We expect to incur substantial additional losses in the future as we expand our
research and development cost-sharing activities with our collaboration partner.
We believe such investment is strategically aligned with increasing the value of
our technology. For the six months ended
To date, we have financed our operations through public offerings of common and preferred stock, private placements of equity securities, a reverse merger, and upfront and milestone payments received from our prior and current collaboration agreements, as well as funding from governmental bodies and bank and bridge loans.
In
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our lead ETB candidates through clinical trials, progress our pipeline ETB candidates from discovery through pre-clinical development, and seek regulatory approval and pursue commercialization of our ETB candidates. In addition, if we obtain regulatory approval for any of our ETB candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional technology to augment or enable development of future ETB candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.
As a result, we will need 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 and debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. 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.
At
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Cash Flows
Comparison of Six Months Ended
The table below summarizes our cash flows for the six months ended
Six Months Ended
June 30,
2022 2021
Net cash used in/provided by operating activities $ (46,165 ) $ 16,884
Net cash used in/provided by investing activities 47,392 (90,710 )
Net cash used in/provided by financing activities (274 ) 91,698
Net increase in cash, cash equivalents and restricted cash
The decrease in net cash used in operating activities for the six months ended
The increase in net cash provided by investing activities for the six months
ended
The decrease in net cash provided by financing activities for the six months
ended
Operating and Capital Expenditure Requirements
We have not achieved profitability since our inception and had an accumulated
deficit of
We expect our expenses to increase substantially in connection with our ongoing development activities related to MT-6402, MT-5111, MT-0169, and MT-8421, our collaboration with Bristol Myers Squibb, our other pre-clinical programs, and expanding our operating capabilities. In addition, we expect to incur additional costs associated with operating as a public company. We anticipate that our expenses will increase substantially if and as we:
• support the PD-L1 program and the ongoing Phase I study for MT-6402;
• support the ongoing Phase I study of MT-5111;
• file an IND for MT-8421, our ETB targeting CTLA-4;
• support the ongoing Phase I study of MT-0169;
• continue the research and development of ETB candidates targeting TROP2,
TIGIT, BCMA, and other targets, including completing pre-clinical studies
and commencing clinical trials;
• research activities through the designation of the development
candidate(s) with Bristol Myers Squibb;
• seek to enhance our technology platform using our antigen-seeding
technology approach to immuno-oncology;
• seek regulatory approvals for any ETB candidates that successfully
complete clinical trials;
• potentially establish a sales, marketing and distribution infrastructure
and scale up manufacturing capabilities to commercialize any drugs for
which we may obtain regulatory approval;
• add clinical, scientific, operational, financial and management
information systems and personnel, including personnel to support our
product development and potential future commercialization efforts and to
support our increased operations;
• experience any delays or encounter any issues resulting from any of the
above, including but not limited to failed studies, complex results,
safety issues or other regulatory challenges;
• service long-term debt; and
• complete the expansion of the Company's research and development spaces.
Because of the numerous risks and uncertainties associated with the development of MT-6402, MT-5111, MT-0169, and MT-8421, our collaboration with Bristol Myers Squibb and our other pre-clinical programs, and because the extent to which we may enter into collaborations with third parties for development of these ETB candidates is unknown, we are unable to estimate the amount of increased capital outlays and operating expenses associated with completing the research and development of our ETB candidates.
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Our future capital requirements for MT-6402, MT-5111, MT-0169, MT-8421 or our other pre-clinical programs will depend on many factors, including:
• the progress, timing and completion of pre-clinical testing and clinical
trials for our current or any future ETB candidates;
• the number of potential new ETB candidates we identify and decide to develop;
• the costs involved in growing our organization to the size needed to allow
for the research, development and potential commercialization of our
current or any future ETB candidates;
• the costs involved in filing patent applications and maintaining and
enforcing patents or defending against claims or infringements raised by
third parties;
• the time and costs involved in obtaining regulatory approval for our ETB
candidates and any delays we may encounter as a result of evolving
regulatory requirements or adverse results with respect to any of these
ETB candidates;
• any licensing or milestone fees we might have to pay during future
development of our current or any future ETB candidates;
• selling and marketing activities undertaken in connection with the
anticipated commercialization of our current or any future ETB candidates
and costs involved in the creation of an effective sales and marketing
organization; and
• the amount of revenues, if any, we may derive either directly or in the
form of royalty payments from future sales of our ETB candidates, if
approved.
Identifying potential ETB candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our ETB candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs or biologics that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
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 debt securities, stockholders' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect their rights as stockholders. Additional debt financing and 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 capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute stockholders' ownership interest.
If we raise additional funds through collaborations, governmental grants, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or ETB 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 or any future commercialization efforts or grant rights to develop and market ETB candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations
are based on our unaudited condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
Recently Adopted Accounting Pronouncements
For a discussion of recently adopted accounting pronouncements see the
discussion in our Annual Report on Form 10-K for the year ended
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Recent Accounting Pronouncements Not Yet Adopted
For a discussion of recently issued accounting pronouncements and
interpretations not yet adopted by us, see Note 1, "Organization and Summary of
Significant Accounting Policies", to our unaudited condensed financial
statements for the quarter ended
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
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