RUBIUS THERAPEUTICS Objective
The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our financial condition and results of operations from management's perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are reasonably likely to impact our future performance. As such, the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSecurities and Exchange Commission , orSEC , onFebruary 25, 2022 . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, 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 Quarterly Report on 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.
Overview
We are a clinical-stage biopharmaceutical company that is biologically engineering red blood cells or RBCs, to develop an entirely new class of cellular medicines called Red Cell Therapeutics, or RCTs, for the treatment of cancer and autoimmune diseases. Based on our vision that human red blood cells are the foundation of the next significant innovation in medicine, we have developed a programmable and highly versatile platform, which we call the RED PLATFORM, to biologically engineer and culture allogeneic cellular therapies that enable multiple applications, or modalities. We believe that the advantage of the platform is that once a modality is validated, as we have demonstrated with our lead product candidate RTX-240 for the treatment of advanced cancers, we increase the likelihood that all the programs within that modality will work, underscoring the broad potential of the RED PLATFORM to help patients. As part of theAmerican Association for Cancer Research Annual Meeting inApril 2022 , we presented updated clinical data from our ongoing Phase 1 arm of RTX-240 in patients with locally advanced or relapsed/refractory solid tumors, which we believe provides clinical validation for our RED PLATFORM and supports the development of our entire oncology pipeline of RCTs. We continue to enroll patients in our Phase 1 arm evaluating RTX-240 in combination with pembrolizumab in patients with advanced solid tumors and have added an additional cohort to evaluate the combination in patients with non-small cell lung cancer (NSCLC) and renal cell carcinoma (RCC) to inform a Phase 2 clinical trial. We plan to report initial clinical data for RTX-240 in combination with pembrolizumab in advanced solid tumors and data from the initial NSCLC and RCC patients enrolled in the expansion cohort during the second half of 2022. InJanuary 2022 , we began dosing patients in the Phase 1/2 clinical trial of RTX-224, our second broad immune agonist, for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 clinical trial of RTX-224 by year-end 2022 or during the first quarter of 2023. At theFederation of Clinical Immunology Societies 2022 Annual Meeting inJune 2022 , we presented new preclinical data that demonstrated the prevention of type 1 diabetes and bystander suppression in a stringent preclinical model from an ongoing experiment. These findings are potentially translatable to multiple T cell-mediated autoimmune diseases, including multiple sclerosis and celiac disease. We continue to advance our manufacturing capabilities and achieved significant manufacturing milestones, including successfully scaling our manufacturing to 200L bioreactors in support of a potential future pivotal trial for RTX-240 and potential commercialization, as ofApril 2022 . This results in a process at a scale four times our previous 50L bioreactor process. We continue to provide uninterrupted clinical supply for the Phase 1 RTX-240 and the Phase 1 RTX-224 clinical trials. We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization.
Highlights of our clinical product candidates, RTX-240 and RTX-224 are described further below.
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Broad Immune Stimulation for the Treatment of Cancer
RTX-240
InApril 2022 , we announced updated clinical data from the ongoing Phase 1/2 clinical trial of monotherapy RTX-240 in advanced solid tumors that we believe provides clinical validation of the RED PLATFORM's potential ability to stimulate adaptive and innate immunity to generate clinical responses in cancer patients with refractory disease. RTX-240 is an allogeneic, off-the-shelf cellular therapy product candidate that is engineered to simultaneously present hundreds of thousands of copies of the costimulatory molecule 4-1BB ligand (4-1BBL) and IL-15TP (trans-presentation of IL-15 on IL-15R?) in their native forms. RTX-240 is designed to broadly stimulate the immune system by activating and expanding both NK and CD8+ memory T cells to generate a potent anti-tumor response. The data reported inApril 2022 at theAmerican Association for Cancer Research Annual Meeting included initial safety (n=34) and efficacy (n=27) data from the monotherapy RTX-240 Phase arm in relapsed/refractory or locally advanced solid tumors. Nine dose cohorts were completed at the time of the data cutoff onMarch 4, 2022 . Enrollment continues in the 5e10 Q3W dose cohort. As of the cutoff date, disease control was observed in 10 patients (1 partial response, 2 unconfirmed partial responses and 7 with stable disease), 9 of whom had previously experienced disease progression on prior anti-PD-1/anti-PD-L1 therapy.
There were three best responses of partial response (PR) in NSCLC, anal cancer and uveal melanoma patients:
•an unconfirmed PR (uPR) with 41% decrease of all target lesions and a notable decrease of an external protruding chest wall mass in a patient with NSCLC whose disease had progressed on prior anti-PD-L1 therapy;
•a confirmed PR with a 54% reduction in the target lesions in a patient with metastatic anal cancer whose disease had progressed on anti-PD-L1 therapy; and
•a uPR with 100% decrease of the target hepatic lesion and resolution of multiple non-target hepatic lesions in a patient with metastatic uveal melanoma whose disease had progressed on anti-PD-1 therapy.
The uPR in NSCLC and 5 cases of stable disease (SD) were observed across the 3e10 cohorts, including 3 SDs in patients with metastatic NSCLC and 2 with RCC supporting expansion of the Phase 1 arm of RTX-240 plus pembrolizumab to include a cohort of NSCLC and RCC patients.
As of the cutoff date, RTX-240 has been generally well tolerated with no treatment-related or investigator-identified immune-related Grade 3/4 adverse events and no dose-limiting toxicities.
Based on the totality of clinical, tolerability and pharmacodynamic data, a recommended monotherapy Phase 2 dose of 5e10 cells administered every 3 weeks was selected. This dose will be further explored in the combination expansion cohort of NSCLC and RCC patients. Enrollment continues in the monotherapy arm of the trial at the recommended Phase 2 dose of 5e10 cells administered every 3 weeks. InJune 2021 , we began dosing patients in the arm of our RTX-240 clinical trial that is evaluating RTX-240 as a combination therapy with pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid tumors. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may have synergy with immune checkpoint inhibition and could potentially overcome resistance to PD-1 inhibition. Based on the updated clinical results from the ongoing Phase 1 arm of monotherapy RTX-240 in advanced solid tumors, we expanded the Phase 1 arm of RTX-240 in combination with pembrolizumab to evaluate the combination in up to 20 patients with NSCLC and RCC to inform a Phase 2 clinical trial. Patients who have experienced disease progression with 1-2 prior treatment regimens in the metastatic setting are eligible for the trial. If patients previously have received a PD-1/PD-L1 regimen, a prior response of either SD ?6 months, PR or complete response is required. We expect to report initial clinical results from this arm of the ongoing Phase 1/2 clinical of RTX-240 in advanced solid tumors and the initial data from the NSCLC and RCC cohort during the second half of 2022.
RTX-224
RTX-224 is an allogeneic cellular therapy that is engineered to express hundreds
of thousands of copies of 4-1BBL and interleukin-12 (IL-12), on the cell
surface. RTX-224 is designed as a broad immune agonist of both adaptive and
innate responses, designed to activate CD8+ and CD4+ T cells, activate and
expand NK cells, and promote antigen presentation. It is expected to produce a
broad and potent anti-tumor T cell response and an innate immune response, and
have anti-
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tumor activity in those tumor types with known sensitivity to T cell killing, including tumor types with high mutational burden, PD-L1 expression and known responsiveness to checkpoint inhibitors. The combination of IL-12 and 4-1BBL has the potential to broadly induce an immune response in patients with solid tumors and may serve as the bridge between the innate and adaptive immune systems. InJanuary 2022 , we began dosing patients in the Phase 1/2 clinical trial of RTX-224 for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 trial by year-end 2022 or during the first quarter of 2023. InNovember 2021 , we presented preclinical data for RTX-224 at theSociety for Immunotherapy of Cancer's 36th Annual Meeting, showing that RTX-224 activated immune cells in the spleen and blood, leading to their trafficking into the tumor microenvironment to deliver an anti-tumor effect in our preclinical models.
Antigen-Specific Immune Tolerance for the Treatment of Autoimmune Diseases
RTX-T1D (Type 1 Diabetes)
InJune 2022 , we presented new preclinical data at theFederation of Clinical Immunology Societies (FOCIS) 2022 Annual Meeting demonstrating tolerance induction and bystander suppression in the non-obese diabetic, or NOD, preclinical model. This is a spontaneous model of autoimmune diabetes which has clear similarities to the human disease. From the ongoing experiment, we showed new efficacy data in the NOD preclinical model demonstrating that by increasing to 3 doses administered and optimizing the dosing schedule, bystander suppression was achieved at 25 weeks by delivering only two antigens, indicating disease prevention caused by many autoantigens. We also established efficacy in the BDC2.5 adoptive transfer model with data showing that repeated dosing extends duration of disease protection, reverses established inflammation (which is important for the treatment of existing autoimmunity), and induces two types of regulatory T cells, resulting in protection against re-challenge with disease-causing cells.
We believe these findings are potentially translatable to other autoimmune diseases such as celiac disease and multiple sclerosis. We plan to select a clinical candidate for our type 1 diabetes program later in 2022.
Manufacturing
Using our RED PLATFORM, we are utilizing our universal manufacturing processes to advance a broad pipeline of allogeneic, ready-to-use RCT product candidates into clinical trials in cancer and autoimmune diseases. Common design and manufacturing elements of our RCTs should enable us to achieve significant advantages in product development. We have industrialized the production of RCTs by developing and scaling up a manufacturing process in which hematopoietic progenitor cells are expanded, then biologically engineered and subsequently differentiated into erythroid cells, RCTs that express biotherapeutic proteins within the cell or on the cell surface. By modifying one of our initial manufacturing steps in which we add a gene or genes of interest that encode biotherapeutic proteins within the cell or on the cell surface, we are able to efficiently develop RCTs to potentially treat different diseases. Using this approach, we have expressed more than 1,000 different therapeutic proteins since platform inception. This programmable process allows for the repeated generation of product candidates and enables us to leverage common CMC and toxicology data packages across our therapies. Recognizing the importance of controlling our own manufacturing capabilities to produce consistent and reproducible product at greater scale, inJuly 2018 we acquired, renovated and operationalized a manufacturing facility inSmithfield, Rhode Island , which is currently providing cGMP supply for our ongoing Phase 1 clinical trials: RTX-240 in advanced solid tumors, RTX-240 in combination with pembrolizumab and RTX-224 in advanced solid tumors. As ofApril 2022 , we successfully scaled our manufacturing to 200L bioreactors in support of a potential future pivotal trial for RTX-240 and potential commercialization. This results in a process at a scale four times our previous 50L bioreactor process. We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization. 15
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Funding Overview
Since our inception, we have focused substantially all of our resources on building our proprietary RED PLATFORM, establishing and protecting our intellectual property portfolio, conducting research and development activities, developing our manufacturing process and manufacturing product candidate material, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations with proceeds from the sale of preferred stock and issuance of debt and with proceeds from our public offerings. OnJuly 20, 2018 , we completed our IPO pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters' option to purchase additional shares. We received proceeds of$254.3 million after deducting underwriting discounts and commissions and other offering costs. InAugust 2019 , we entered into a Distribution Agreement withJ.P. Morgan Securities LLC ,Jefferies LLC andSVB Leerink LLC with respect to an at-the-market, or ATM, offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having aggregate gross proceeds of up to$100.0 million . Our registration statement on Form S-3 filed onAugust 1, 2019 was declared effective onAugust 21, 2019 and ceased to be effective onJune 21, 2022 . As ofJune 30, 2022 , no shares of common stock have been issued and sold pursuant to the Distribution Agreement and none are expected to be sold because the applicable registration statement is no longer effective. The Distribution Agreement will expire in accordance with its terms onAugust 21, 2022 . InMarch 2021 , we completed an underwritten public offering, or theMarch 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We received proceeds of$187.2 million , after deducting underwriting discounts and commissions and other offering costs. Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. We reported net losses of$96.7 million for the six months endedJune 30, 2022 and$196.5 million for the year endedDecember 31, 2021 . As ofJune 30, 2022 , we had an accumulated deficit of$773.7 million . We expect to continue to incur significant expenses and operating losses for at least the next several years. We expect that our expenses and capital requirements will increase in connection with our ongoing activities, particularly if, and as, we:
•conduct clinical trials for our product candidates and to the extent we continue to experience delays, setbacks or disruptions to our preclinical studies, clinical trials or clinical supply chain due to the ongoing COVID-19 pandemic;
•further develop our RED PLATFORM;
•continue to discover and develop additional product candidates;
•maintain, expand and protect our intellectual property portfolio;
•hire additional clinical, scientific, manufacturing and commercial personnel;
•expand in-house manufacturing capabilities, including through the operation and any future renovation or expansion of our manufacturing facility;
•establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
•acquire or in-license other product candidates and technologies;
•seek regulatory approvals for any product candidates that successfully complete clinical trials;
•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
•add operational, financial and management information systems and personnel,
including personnel to support our product development and planned future
commercialization efforts, as well as to continue to support the requirements of
a public company.
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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 continue to incur costs associated with operating as a public company. Our current financial resources and currently forecasted operating plan would allow us to operate into the second half of 2023. We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, and/or potentially new collaborations and reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of the Company's research and development programs and technology platform activities which could adversely affect our business prospects, or we may be unable to continue operations. As ofJune 30, 2022 , we had an accumulated deficit of$773.7 million , and cash, cash equivalents and investments of$140.7 million . For the six months endedJune 30, 2022 , we incurred a loss of$96.7 million and used$81.4 million of cash in operations. We expect that our operating losses and negative cash flows will continue for the foreseeable future. We have assessed our ability to continue as a going concern, and, based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance our future operations, as ofAugust 9, 2022 , the issuance date of the interim condensed consolidated financial statements for the three and six month periods endedJune 30, 2022 , we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these condensed consolidated financial statements are issued. 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. Even if we are able to continue operations beyond the next twelve months, 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.
See "-Liquidity and Capital Resources."
Nasdaq Delisting Notification
OnJuly 27, 2022 , we received a deficiency letter from theListing Qualifications Department (the "Staff") ofThe Nasdaq Stock Market LLC ("Nasdaq") notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below the$1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the "Minimum Bid Price Requirement"). The Nasdaq deficiency letter has no immediate effect on the listing of our common stock, and our common stock will continue to trade on the Nasdaq Global Select Market under the symbol "RUBY" at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the "Compliance Period Rule"), we have been provided a period of 180 calendar days, or untilJanuary 23, 2023 (the "Compliance Date"), to regain compliance with the Minimum Bid Price Requirement. If, at any time endingJanuary 23, 2023 , the bid price for our common stock closes at$1.00 or more for a minimum of ten consecutive business days, as required under the Compliance Period Rule, the Staff will provide written notification to us that we have regained compliance with the Minimum Bid Price Requirement and our common stock will continue to be eligible for listing on the Nasdaq Global Select Market, unless the Staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). If we do not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to transfer the listing of our common stock to The Nasdaq Capital Market, provided that we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice to Nasdaq of our intention to cure the deficiency during the additional compliance period. To effect such a transfer, we would also need to pay an application fee to Nasdaq and provide written notice to the Staff of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split if necessary. As part of its review process, the Staff will make a determination of whether it believes we will be able to cure the deficiency. Should the Staff conclude that we will not be able to cure the deficiency, the Staff will provide written notification to us that our common stock will be subject to delisting. At that time, we may appeal the Staff's delisting determination to aNasdaq Listing and Hearing Review Panel . However, there can be no assurance that, if we receive a delisting notice and appeal the delisting determination by the Staff to the panel, such appeal would be successful. 17
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We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, which could include seeking to effect a reverse stock split. However, there can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement, secure a second period of 180 days to regain compliance, or maintain compliance with any of the other Nasdaq continued listing requirements.
Impact of the Ongoing COVID-19 Pandemic
Since March of 2020 and throughout the ongoing COVID-19 pandemic, we have implemented various precautionary measures to protect the health and safety of our employees, partners and prospective clinical trial participants, to comply with applicable national, state and local governmental orders, proclamations and/or directives in effect at any time aimed at minimizing the spread of COVID-19 and to minimize disruption to our operations. Such measures have included, at certain times, the elimination of business travel, shifting to remote work wherever possible and implementing rotating laboratory work schedules to reduce the number of people onsite at our facilities, advance ordering of certain raw materials impacted by delays in the global supply chain, as well as working with our external partners and clinical sites to utilize virtual clinical trial site training and monitoring, minimizing patient visits and instituting telemedicine to minimize patient exposure. We will continue to use these, and other precautionary measures, as required until such time as the ongoing COVID-19 pandemic, including any subsequent outbreak whether or not due to emerging variants thereof, is contained. While the ongoing COVID-19 pandemic has impacted manufacturing, supply chain and clinical trial activities worldwide, including those of our suppliers, vendors and clinical trial sites, these disruptions have not significantly impacted our results of operations to date. The ultimate impact on our operations, however, is unknown and will depend on future developments, such as the duration, spread and intensity of the pandemic, among others, which are highly uncertain and cannot be predicted with confidence. In particular, global developments concerning COVID-19, including the identification of new strains of coronavirus, and the magnitude of interventions to contain the spread of viruses, such as government-mandated quarantines, shelter-in-place mandates, restrictions on travel, shutdowns for non-essential businesses, requirements regarding social distancing, impact of government-imposed restrictions on the global supply chain, including through use of the Defense Production Act, distribution of vaccines and other public health safety measures, will determine the impact of the pandemic on our business. We are continuing to monitor the latest developments regarding the ongoing COVID-19 pandemic and its impact on our business, financial condition, results of operations and prospects. However, any resulting financial impact cannot be reasonably estimated at this time and may have a material adverse impact on our business, financial condition and results of operations.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license agreements that we may enter into with third parties, or any combination thereof. Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred for our research activities, including our drug discovery efforts, and the development and manufacturing of our product candidates, which include:
•employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;
•expenses incurred in connection with the preclinical and clinical development
of our product candidates and research programs, including under agreements with
third parties, such as consultants, contractors and contract research
organizations, or CROs;
•the cost of developing and scaling our manufacturing process and manufacturing
product candidates for use in our preclinical studies and clinical trials,
including those produced in our manufacturing facility as well as components
that
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are produced under agreements with third parties, such as consultants, contractors and any contract manufacturing organizations, or CMOs, that we may engage;
•laboratory supplies and research materials;
•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and
•payments made under third-party licensing agreements.
We expense research and development costs as incurred. Advance payments that we make 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, manufacturing and development expenses are tracked on a program-by-program basis for clinical candidates. These consist mostly of fees, reimbursed materials, testing and other costs paid to consultants, contractors, CMOs and CROs, as well as the cost of materials incurred for internal manufacturing. In addition, we allocate the cost of operating our manufacturing facility to research and development program costs, consisting of associated personnel costs, other than stock-based compensation expense, and manufacturing facility costs, including depreciation. We do not allocate costs associated with our platform development, early-stage research and shared research and development, including associated personnel costs, laboratory supplies, non-manufacturing facilities expenses and other indirect costs, to research and development programs, because these costs are deployed across multiple programs and our technology platform and, as such, are not separately classified. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, due to the increased size and duration of later stage clinical trials. Therefore, we have reduced preclinical and other development activities to advance our current clinical programs. As a result, we expect research and development expenses related to those preclinical and other development activities to decrease while we focus on achieving clinical endpoints. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:
•the timing and progress of preclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•our ability to raise the additional funds necessary to complete preclinical and clinical development of and commercialize our drug candidates;
•the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
•our ability to maintain our current research and development programs and to establish new ones;
•our ability to establish new licensing or collaboration arrangements;
•the successful initiation and completion of clinical trials with safety,
tolerability and efficacy profiles that are satisfactory to the
•the continued impact of the ongoing COVID-19 pandemic on our operations;
•the receipt and related terms of regulatory approvals from applicable regulatory authorities;
•the availability of specialty raw materials for use in production of our product candidates;
•our ability to consistently manufacture our product candidates for use in clinical trials;
•our ability to operate a manufacturing facility, or secure manufacturing supply through relationships with third parties;
•our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in
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•our ability to protect our rights in our intellectual property portfolio;
•our ability to successfully commercialize our product candidates, if and when approved;
•our ability to obtain and maintain third-party insurance coverage and adequate reimbursement;
•the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
•competition with other products; and
•a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could 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.
General and Administrative Expenses
General and administrative expenses include salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. Other Income (Expense) Interest Income
Interest income consists of interest earned on our invested cash balances.
Interest Expense
Interest expense consists of interest owed on outstanding borrowings under our Loan Agreement (as defined below), as well as amortization of debt discount.
Other Income, Net
Other income, net consists of miscellaneous income and expense unrelated to our core operations.
Income Taxes Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credits will not be realized. As ofDecember 31, 2021 , we hadU.S. federal and state net operating loss carryforwards of$534.2 million and$534.8 million , respectively, which may be available to offset future taxable income. The federal NOLs include$37.2 million , which expire at various dates through 2037, and$497.0 million , which carryforward indefinitely. The state NOLs expire at various dates through 2041. As ofDecember 31, 2021 , we also hadU.S. federal and state research and development tax credit carryforwards of$22.7 million and$15.6 million , respectively, which may be available to offset future tax liabilities and begin to expire in 2034 and 2026, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date. 20
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30,
2022 2021 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 32,998 36,072 (3,074)
General and administrative 9,908 13,851 (3,943)
Total operating expenses 42,906 49,923 (7,017)
Loss from operations (42,906) (49,923) 7,017
Other income (expense):
Interest income 255 26 229
Interest expense (1,630) (1,312) (318)
Other income, net 40 1,029 (989)
Total other income (expense), net (1,335) (257) (1,078)
Net loss $ (44,241) $ (50,180) $ 5,939 Research and Development Expenses
Three Months Ended June 30,
2022 2021 Change
(in thousands)
Research and development program expenses:
Cancer $ 16,918 $ 19,855 $ (2,937)
Platform development, early-stage research and
unallocated expenses:
Personnel-related 7,401 6,937 464
Stock-based compensation expense 2,215 3,056 (841)
Contract research and development 2,151 1,707 444
Laboratory supplies and research materials 885 805 80
Facility-related and other 3,428 3,712 (284)
Total research and development expenses $ 32,998 $ 36,072 $ (3,074)
Research and development expenses were $33.0 million for the three months ended
June 30, 2022 , compared to $36.1 million for the three months ended June 30,
2021 . The decrease in research and development program expenses of $2.9 million
relates to the deprioritization of RTX-321 and RTX-240 AML and monotherapy
studies and, therefore, we expect these costs to continue to decrease in future
periods. This decrease was partially offset by an increase in clinical costs
related to RTX-224. Platform development, early-stage research and unallocated
expenses decreased by $0.1 million primarily due to a decrease of $0.8 million
in stock-based compensation expense related to a reduction in the market price
of our common stock, resulting in a lower valuation of stock options granted in
2022, and a decrease of $0.3 million in facility-related and other expenses
related to lower spend on non-capitalized software costs in the current year.
These decreases were partially offset by an increase of $0.4 million in contract
research and development related to drug discovery activities and platform
development. Additionally, personnel-related costs increased by $0.5 million to
support our prioritization of clinical programs.
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General and Administrative Expenses
Three Months Ended June 30,
2022 2021 Change
(in thousands)
Personnel-related $ 3,395 $ 3,429 $ (34)
Stock-based compensation expense 2,826 6,541 (3,715)
Professional and consultant fees 2,050 2,240 (190)
Facility-related and other 1,637 1,641 (4)
Total general and administrative expenses $ 9,908 $ 13,851 $ (3,943)
General and administrative expenses were $9.9 million for the three months ended
June 30, 2022 , compared to $13.9 million for the three months ended June 30,
2021 . The decrease in general and administrative expenses of $3.9 million was
primarily due to a decrease in stock-based compensation expense of $3.7 million ,
which was driven by stock option awards that fully vested during the second half
of 2021 and first half of 2022, as well as a reduction in the market price of
our common stock, resulting in a lower valuation of stock options granted in
2022.
Interest Income
Interest income was
Interest Expense
Interest expense was
Other Income, Net
Other income, net was less than$0.1 million for the three months endedJune 30, 2022 , compared to$1.0 million for the three months endedJune 30, 2021 . The decrease in other income, net was due to the monetization of certain tax credits during the prior period.
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30,
2022 2021 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 71,297 63,749 7,548
General and administrative 22,471 27,091 (4,620)
Total operating expenses 93,768 90,840 2,928
Loss from operations (93,768) (90,840) (2,928)
Other income (expense):
Interest income 303 52 251
Interest expense (3,259) (3,060) (199)
Other income, net 71 1,338 (1,267)
Total other income (expense), net (2,885) (1,670) (1,215)
Net loss $ (96,653) $ (92,510) $ (4,143)
22
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Research and Development Expenses
Six Months Ended June 30,
2022 2021 Change
(in thousands)
Research and development program expenses:
Rare disease $ - $ 217 $ (217)
Cancer 33,931 31,578 2,353
Platform development, early-stage research and
unallocated expenses:
Personnel-related 16,233 13,326 2,907
Stock-based compensation expense 5,692 5,587 105
Contract research and development 4,756 3,035 1,721
Laboratory supplies and research materials 3,610 2,565 1,045
Facility-related and other 7,075 7,441 (366)
Total research and development expenses $ 71,297 $ 63,749 $ 7,548
Research and development expenses were $71.3 million for the six months ended
June 30, 2022 , compared to $63.7 million for the six months ended June 30, 2021 .
The increase in research and development program expenses of $2.1 million was
primarily due to an increase in preclinical and clinical costs associated with
RTX-224 and RTX-240, principally related to clinical research organization, or
CRO, costs and internal manufacturing costs. This increase was partially offset
by a decrease in clinical costs related to RTX-321 due to start-up activities in
the prior period and current period deprioritization of clinical development. We
expect these costs to decrease in future periods. Platform development,
early-stage research and unallocated expenses increased by $5.4 million
principally due to an increase of $2.9 million in personnel-related costs
related to headcount increases through the second half of 2021 to support
operations. Additionally, increases of $1.7 million in contract research and
development and $1.0 million in laboratory supplies and research materials were
related to drug discovery activities and platform development. These increases
were partially offset by a decrease of $0.4 million in facility-related and
other expenses due to lower spend on non-capitalized software costs and a
reduction in building operating costs in the current year.
General and Administrative Expenses
Six Months Ended June 30,
2022 2021 Change
(in thousands)
Personnel-related $ 6,881 $ 6,553 $ 328
Stock-based compensation expense 7,609 12,652 (5,043)
Professional and consultant fees 4,682 4,516 166
Facility-related and other 3,299 3,370 (71)
Total general and administrative expenses $ 22,471 $ 27,091 $ (4,620)
General and administrative expenses were $22.5 million for the six months ended
June 30, 2022 , compared to $27.1 million for the six months ended June 30, 2021 .
The decrease in general and administrative expenses of $4.6 million was
primarily due to a decrease in stock-based compensation expense of $5.0 million ,
which was driven by stock option awards that fully vested during the second half
of 2021 and first half of 2022, as well as a reduction in the market price of
our common stock, resulting in a lower valuation of stock options granted in
2022. This decrease was partially offset by an increase in personnel-related
expenses of $0.3 million driven by additions to headcount in our general and
administrative function and an increase in professional and consultant fees of
$0.2 million resulting primarily from additional costs to support operations as
a public company.
Interest Income
Interest income was
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Interest Expense
Interest expense was
Other Income, Net
Other income, net was$0.1 million for the six months endedJune 30, 2022 , compared to$1.3 million for the six months endedJune 30, 2021 . The decrease in other income, net was principally due to the monetization of certain tax credits during the prior period.
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. To date, we have funded our operations with proceeds from the sale of preferred stock, with the issuance of debt, with proceeds from our IPO and, most recently, with proceeds from ourMarch 2021 Offering, described and defined further below. As ofJune 30, 2022 , we had cash, cash equivalents and investments of$140.7 million . InJuly 2018 , we completed our IPO, pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters' option to purchase additional shares. We received proceeds of$254.3 million , after deducting underwriting discounts and commissions and other offering costs. InDecember 2018 , we entered into a loan and security agreement, which was amended inJune 2021 , which provides for aggregate borrowings of up to$75.0 million . As ofJune 30, 2022 ,$75.0 million is outstanding under the agreement and principal payments commence inJuly 2024 . InMarch 2021 , we completed theMarch 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We received proceeds of$187.2 million , after deducting underwriting discounts and commissions and other offering costs.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Six months ended June 30,
2022 2021
(in thousands)
Cash used in operating activities $ (81,421) $ (73,459)
Cash provided by (used in) investing activities (82,610) 68,409
Cash provided by financing activities 232 197,118
Net increase (decrease) in cash, cash equivalents and
restricted cash $ (163,799) $ 192,068
Operating Activities
During the six months ended June 30, 2022 , operating activities used $81.4
million of cash, primarily resulting from our net loss of $96.7 million , offset
by net non-cash charges of $16.7 million , predominantly consisting of
stock-based compensation expense. Net cash used in our operating assets and
liabilities for the six months ended June 30, 2022 consisted of a net $5.0
million decrease in accounts payable, accrued expenses and other current
liabilities, other long-term liabilities and operating lease liabilities, offset
by an increase in prepaid expenses and other current assets and operating lease,
right-of-use asset of $3.6 million .
During the six months ended June 30, 2021 , operating activities used $73.5
million of cash, primarily resulting from our net loss of $92.5 million , offset
by net non-cash charges of $22.2 million , predominantly consisting of
stock-based compensation expense. Net cash used in our operating assets and
liabilities for the six months ended June 30, 2021 consisted of a $5.0 million
decrease in accounts payable, accrued expenses and other current liabilities,
other long-term liabilities and operating lease liabilities, offset by a
decrease in prepaid expenses and other current assets and operating lease,
right-of-use asset of $1.9 million .
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Investing Activities
During the six months endedJune 30, 2022 , net cash used in investing activities was$82.6 million , consisting of purchases of investments of$78.4 million and purchases of property, plant and equipment of$4.2 million . Our cash purchases of property, plant and equipment primarily relate to the purchase of computer and laboratory equipment installed in our manufacturing facility inSmithfield, Rhode Island and our laboratory space inCambridge, Massachusetts . During the six months endedJune 30, 2021 , net cash provided by investing activities was$68.4 million , consisting of sales and maturities of investments of$70.0 million , offset by purchases of property, plant and equipment of$1.6 million . Our cash purchases of property, plant and equipment relate to the purchase of computer and laboratory equipment installed in our manufacturing facility inSmithfield, Rhode Island and our laboratory space inCambridge, Massachusetts .
Financing Activities
During the six months ended
During the six months endedJune 30, 2021 , net cash provided by financing activities of$197.1 million consisted primarily of proceeds of$187.2 million , after deducting underwriting discounts and commissions and other offering costs, from theMarch 2021 Offering, as well as proceeds received from issuance of common stock upon exercise of stock options of$9.6 million . Net cash used in financing activities includes$0.4 million of offering cost payments in connection with theMarch 2021 Offering and$0.2 million of debt issuance cost payments related to the Amended 2018 Credit Facility inJune 2021 .
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as ofJune 30, 2022 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: Payments Due by Period Total Less Than 1 Year 1 to 3 Years 4 to 5 Years More Than 5 Years (in thousands) Operating lease commitments (1) $ 42,523 $ 9,149 $ 15,204 $ 7,929 $ 10,241 Debt obligations (2) 96,314 5,700 47,594 43,020 - Total$ 138,837 $ 14,849 $ 62,798 $ 50,949 $ 10,241
(1) Amounts in table reflect payments due for our leases of office and
laboratory space in
(2) Amounts in table reflect the contractually required principal and interest payments payable under the Loan Agreement. For purposes of this table, the interest due under the Loan Agreement was calculated using an assumed interest rate of 8.86% per annum, which was the interest rate in effect as ofJune 30, 2022 . Loan and Security Agreement InDecember 2018 , or the Closing Date, we entered into a loan and security agreement (the Original Loan Agreement, or, as amended, the Loan Agreement) with SLR Investment Corp. (formerly Solar Capital Ltd.) as collateral agent for the lenders party thereto for an aggregate principal amount of$75.0 million . The aggregate principal amount was funded in three tranches of term loans of$25.0 million each, on the Closing Date, inJune 2019 and inJune 2020 . OnJune 22, 2021 , or the Amendment Closing Date, we entered into an amendment, or the Amendment, to the Original Loan Agreement. Pursuant to the Amendment, we and our lenders agreed to extend the interest-only period in respect of our borrowings under the Loan Agreement fromDecember 21, 2021 untilJuly 1, 2024 . The parties also agreed to extend the final maturity date on which all of our outstanding obligations under the Loan Agreement become due toJune 1, 2026 (fromDecember 21, 2023 originally). An additional tranche in the amount of$35.0 million is available to us prior to the final maturity date, to be provided at the sole discretion of the lenders. Interest on the outstanding loan balance will accrue at a rate of 5.50%, plus the greater of 2.10% or the one-monthU.S. LIBOR rate. Monthly principal payments will commence onJuly 1, 2024 and will be amortized over the following 24 months. Certain back-end fees are due to the lender at the time of final repayment based on the total funded term loans. The term loans are subject to a prepayment fee of 25
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1.00% if prepayment occurs within the first year subsequent to the Amendment Closing Date, 0.50% in the second year and 0.25% in the third year through final maturity date. The Loan Agreement contains financial covenants that require us to maintain either a certain minimum cash balance or a minimum market capitalization threshold. We were in compliance with all such financial covenants as ofJune 30, 2022 . The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of our assets, other than our intellectual property.
Common Stock Sales Agreement
OnAugust 1, 2019 , we entered into a Distribution Agreement, or the Distribution Agreement, with multiple sales agents, pursuant to which the Company may offer and sell to or through the agents, from time to time, shares of the Company's common stock, par value$0.001 per share, having an aggregate gross sales price of up to$100.0 million . Our registration statement on Form S-3 filed onAugust 1, 2019 was declared effective onAugust 21, 2019 and ceased to be effective onJune 21, 2022 . There have been no shares of the Company's common stock sold under the Distribution Agreement as ofJune 30, 2022 and none are expected to be sold because the applicable registration statement is no longer effective. The Distribution Agreement will expire in accordance with its terms onAugust 21, 2022 . Funding Requirements We expect our expenses to increase substantially in the future as we conduct the activities necessary to advance our product candidates through development. The timing and amount of our operating and capital expenditures will depend largely on:
•the timing and progress of preclinical and clinical development activities;
•the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;
•the timing and outcome of regulatory review of our product candidates;
•the continued impact of the ongoing COVID-19 pandemic, including from any subsequent outbreak whether or not due to emerging variants thereof, on our operations;
•our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
•changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;
•developments concerning our key vendors;
•our ability to obtain materials to produce adequate product supply for any approved product or inability to do so at acceptable prices;
•the costs associated with the operation of our multi-suite manufacturing facility and the costs and timing of any future renovation or expansion of the facility;
•our ability to establish collaborations if needed;
•the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;
•the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
•additions or departures of key scientific or management personnel;
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•unanticipated serious safety concerns related to the use of our product candidates; and
•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder.
Until such time, if ever, as we can generate substantial product revenue, we would need to finance our operations through a combination of public and private equity financings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. To the extent that we are able to raise additional capital through the sale of equity or convertible debt securities, investors' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect investors' 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 or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. We implemented certain cost reduction actions inApril 2022 , which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to preserve cash. These actions could adversely affect our business prospects. As ofJune 30, 2022 , we had an accumulated deficit of$773.7 million , and cash, cash equivalents and investments of$140.7 million . For the six months endedJune 30, 2022 , we incurred a loss of$96.7 million and used$81.4 million of cash in operations. We expect that our operating losses and negative cash flows will continue for the foreseeable future. We have assessed our ability to continue as a going concern and, based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance our future operations, as ofAugust 9, 2022 , the issuance date of the interim condensed consolidated financial statements for the three and six month periods endedJune 30, 2022 , we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these condensed consolidated financial statements are issued.
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 theSEC .
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe United States , or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onFebruary 25, 2022 . If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
There have been no significant changes to our critical accounting policies from
those described in our Annual Report on Form 10-K for the year ended
Recently Issued 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 condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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