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 , and should also take into account our recently announced Strategic Plan described below. 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, including risks associated with our Strategic Plan. 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 biopharmaceutical company that is developing an entirely new class of cellular medicines called RCTs, for the treatment of cancer and autoimmune diseases.
OnNovember 2, 2022 , we announced that, in light of our financial condition, including the repayment and termination of our$75.0 million credit facility with SLR Investment Corp., and the early stage of our programs, our Board of Directors approved a plan to review strategic alternatives, including a sale or merger of the Company or one or more sales of our assets, and to significantly and immediately reduce our operations (the "Strategic Plan"). In connection with the Strategic Plan, we have terminated 42 of our employees (representing 82% of our current employee base), leaving a core team of individuals to lead the strategic review process. Our ability to pursue the research and clinical development activities and other initiatives discussed in this report will require significant funding, which is unlikely to be available, or may only be pursued if we are able to successfully complete a strategic alternative. Although we have ceased enrolling patients, with more than 80 patients dosed across three clinical trials to date, we demonstrated that engineered red blood cells, or RBCs, can be manufactured at scale and observed initial evidence of tolerability clinical activity in certain cancer patients, including evidence of tumor shrinkage and prolonged stable disease in PD-(L)-1 refractory solid tumors. Based on these early findings, we firmly believe in the potential of RCTs for the treatment of cancer and autoimmune diseases. Following careful review of recent technical progress in an alternative format for making RCTs, we believe that this alternative process has the potential for substantive improvements over our existing RED PLATFORM, and, therefore, continued investment in our two current clinical candidates is no longer justified. InSeptember 2022 , we announced a new strategic reorganization plan focused on advancing a next generation RBC-based cell conjugation platform and related cost-saving measures. This next generation platform has the potential to improve upon the benefits of our existing RED PLATFORM, with the potential for greater efficacy and enhanced versatility, while maintaining a favorable tolerability profile. As a result, we have discontinued our ongoing Phase 1 clinical trials of RTX-240 and RTX-224 for the treatment of advanced solid tumors and restructured the organization to support advancing drug candidates based on the next generation platform.
Next Generation Red Blood Cell-Based Cell Conjugation Platform Overview
The next generation platform leverages chemical conjugation to produce RCTs.
Cell conjugation creates a covalent link between the cell surface and the
molecule of interest. Compared to our existing RED PLATFORM, this new approach
is intended to:
•deliver a higher effective dose by enabling a longer circulation time and/or
administering a higher cell dose;
•be more versatile, enabling the conjugation of different payloads,
immunomodulatory agents, small molecules and proteins on the cell for enhanced
potency; and
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•reduce the cost of goods manufacturing by utilizing blood-banked RBCs versus biologically engineering and differentiating early progenitor cells into reticulocytes that express proteins.
These attributes have the potential to result in greater efficacy, a similar safety profile given the restricted biodistribution of RBCs to the spleen and vasculature, and a significant reduction in overall cost structure.
Business & Strategy Update
To enable continued investment in the new platform, we had restructured our business and implemented a series of cost-saving measures. These measures include:
•implementing an approximately 75% reduction in workforce, primarily focused on clinical development, manufacturing and general and administrative personnel; •discontinuing our ongoing Phase 1 clinical trials of RTX-240 and RTX-224 for the treatment of advanced solid tumors; and •exploring the sale of our manufacturing facility inSmithfield, Rhode Island . With these cost-saving measures, together with the implementation of the Strategic Plan, our operations are significantly reduced and will be focused on maintaining the new platform and related preclinical programs for purposes of exploring strategic alternatives.
Overview of Discontinued Clinical Programs
Phase 1/2 Clinical Trial of Monotherapy RTX-240
36 patients were dosed in the monotherapy arm of the Phase 1/2 clinical trial of RTX-240 in advanced solid tumors. One patient with renal cell carcinoma remained on study with stable disease for more than one year after developing progressive disease on prior treatment with nivolumab. This patient was dose-escalated from the 3e10 x 3 + 1e10 Q3W dose level to the 5e10 Q3W dose level after Cycle 12. To date, RTX-240 has been well tolerated with no treatment-related Grade 3/4 adverse events (AEs) and no dose-limiting toxicities.
Phase 1 Clinical Trial of RTX-240 + Pembrolizumab in Advanced Solid Tumors
Sixteen patients were dosed in the dose-escalation/expansion portion of the Phase 1 clinical trial evaluating RTX-240 in combination with pembrolizumab in advanced solid tumors. One colorectal cancer patient remained on study with stable disease of greater than 4 months. To date, the combination of RTX-240 with pembrolizumab has been well tolerated with no treatment or investigator-identified immune-related Grade 3/4 AEs and no dose-limiting toxicities.
Phase 1 Clinical Trial of RTX-224 in Select Advanced Solid Tumors
Seven patients were dosed across two dose cohorts in the Phase 1 clinical trial evaluating RTX-224 in select 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. To date, there have been no treatment-related Grade 3/4 AEs and no dose-limiting toxicities.
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 were able to 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 . No shares of common stock were issued and sold pursuant to the Distribution Agreement, which expired in accordance with its 18
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terms onAugust 21, 2022 , and the applicable registration statement is no longer effective. 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. InOctober 2022 , pursuant to a payoff letter, we voluntarily prepaid approximately$75.7 million , in full satisfaction of all obligations, including all outstanding principal, accrued interest, fees, costs, expenses and other amounts chargeable, under our loan agreement. 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$159.5 million for the nine months endedSeptember 30, 2022 and$196.5 million for the year endedDecember 31, 2021 . As ofSeptember 30, 2022 , we had an accumulated deficit of$836.5 million . Further, our cash resources have been significantly depleted due to the$75.7 million used to extinguish our long-term debt and satisfy our obligations under the loan and security agreement with SLR Investment Corp. As noted elsewhere in this report, there is substantial doubt as to our ability to fund our planned operations for the next twelve months and to continue to operate as a going concern. Further, our recently announced Strategic Plan will significantly reduce our operations. We expect to continue to incur significant expenses and operating losses for at least the next several years. If we were able to continue our operations long-term, we would expect that our expenses and capital requirements would increase in connection with our ongoing activities, particularly if, and as, we:
•continue to discover and develop additional product candidates;
•conduct preclinical studies and clinical trials for any product candidates we may develop and to the extent we continue to experience delays, setbacks or disruptions to our preclinical studies or supply chain due to the ongoing COVID-19 pandemic;
•further develop our next generation red blood cell-based conjugation platform;
•maintain, expand and protect our intellectual property portfolio;
•hire additional clinical, scientific, manufacturing and commercial personnel;
•establish a clinical and 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. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any product candidates we may develop. If we obtain regulatory approval for any such 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. As a result of the Reorganization and Strategic Plans, our current financial resources and currently forecasted operating plan would allow us to operate into the first quarter of 2023. We expect our Strategic Plan will reduce our operating expenses with the goal of allowing us to pursue any viable strategic alternatives. There is no guarantee that this plan will be successful. We may not be able to successfully pursue any strategic alternatives and, even if certain strategic alternatives may be available, we cannot provide any assurance that the strategic alternatives review process will result in any particular alternative, transaction or value. As ofSeptember 30, 2022 , we had an accumulated deficit of$836.5 million , and cash and cash equivalents of$103.9 million . For the nine months endedSeptember 30, 2022 , we incurred a loss of$159.5 million and used$117.6 million of cash in operations. We expect that our operating losses and negative cash flows will continue for the foreseeable future. We 19
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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 ofNovember 9, 2022 , the issuance date of the interim condensed consolidated financial statements for the three and nine month periods endedSeptember 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 , or the Staff, ofThe Nasdaq Stock Market LLC , or 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) (which we refer to as 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), or the Compliance Period Rule, we have been provided a period of 180 calendar days, or untilJanuary 23, 2023 (which we refer to as 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. 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, or even pursue, 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
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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 potential 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 pipeline products and discontinued 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 future product candidates and wind-down of our discontinued 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 future product candidates and discontinued product candidates for use in our preclinical studies and clinical trials, including those produced in our manufacturing facility as well as components that 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.
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Our direct research, manufacturing and development expenses are tracked on a program-by-program basis. 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.
The successful development and commercialization of our potential 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 any product candidates we may develop for use in future clinical trials;
•our ability to secure manufacturing supply through relationships with third parties;
•our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in
•our ability to protect our rights in our intellectual property portfolio;
•our ability to successfully commercialize any product candidates we may develop, if and when approved;
•our ability to obtain and maintain third-party insurance coverage and adequate reimbursement;
•the acceptance of any product candidates we may develop, 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 product candidates we may develop 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.
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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.
Restructuring and Impairment Charges
InSeptember 2022 , the Company undertook certain operational and organizational steps in connection with our new strategic Reorganization Plan and related cost-saving measures. These measures included discontinuing the ongoing clinical trials of RTX-240 and RTX-224 for the treatment of advanced solid tumors and reducing the Company's overall workforce by approximately 75%.
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.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
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Three Months Ended September 30,
2022 2021 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 24,229 38,014 (13,785)
General and administrative 7,301 12,035 (4,734)
Restructuring and impairment charges 30,052 - 30,052
Total operating expenses 61,582 50,049 11,533
Loss from operations (61,582) (50,049) (11,533)
Other income (expense):
Interest income 392 23 369
Interest expense (1,736) (1,711) (25)
Other income, net 53 2,721 (2,668)
Total other income (expense), net (1,291) 1,033 (2,324)
Net loss $ (62,873) $ (49,016) $ (13,857) Research and Development Expenses
Three Months Ended September 30,
2022 2021 Change
(in thousands)
Research and development program expenses:
Cancer $ 11,061 $ 20,181 $ (9,120)
Platform development, early-stage research and
unallocated expenses:
Personnel-related 3,824 7,111 (3,287)
Stock-based compensation expense 2,266 3,408 (1,142)
Contract research and development 2,297 2,242 55
Laboratory supplies and research materials 1,096 1,226 (130)
Facility-related and other 3,685 3,846 (161)
Total research and development expenses $ 24,229 $ 38,014 $ (13,785)
Research and development expenses were $24.2 million for the three months ended
September 30, 2022 , compared to $38.0 million for the three months ended
September 30, 2021 . The decrease in research and development program expenses of
$9.1 million relates to the deprioritization of RTX-321 and RTX-240 AML and
monotherapy studies. This decrease was partially offset by an increase in
clinical costs related to RTX-224 that were incurred prior to the
discontinuation of the ongoing clinical trials of RTX-240 and RTX-224 for the
treatment of advanced solid tumors. We expect these costs to continue to
decrease in future periods due to the discontinuation of these clinical trials.
Platform development, early-stage research and unallocated expenses decreased by
$4.7 million primarily due to a decrease of $3.3 million in personnel-related
expenses due to headcount reductions in research and development functions
during 2022 and a $1.1 million reduction in stock-based compensation expense
related to the decrease in the market price of our common stock, resulting in a
lower valuation of stock options granted in 2022. Additionally, facility-related
and other expenses decreased by $0.2 million related to lower spend on
non-capitalized software costs and a reduction in building operating costs in
the current year.
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General and Administrative Expenses
Three Months Ended September 30,
2022 2021 Change
(in thousands)
Personnel-related $ 1,859 $ 3,408 $ (1,549)
Stock-based compensation expense 1,532 4,781 (3,249)
Professional and consultant fees 2,228 2,230 (2)
Facility-related and other 1,682 1,616 66
Total general and administrative expenses $ 7,301 $ 12,035 $ (4,734)
General and administrative expenses were $7.3 million for the three months ended
September 30, 2022 , compared to $12.0 million for the three months ended
September 30, 2021 . The decrease in general and administrative expenses of $4.7
million was primarily due to a decrease in stock-based compensation expense of
$3.2 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. Additionally, personnel-related expenses decreased by
$1.5 million due to headcount reductions in general and administrative functions
during 2022.
Restructuring and Impairment Charges
Three Months Ended September 30,
2022 2021 Change
(in thousands)
Employee termination benefits $ 5,667 $ - $ 5,667
Impairment of property, plant and equipment 17,787 - 17,787
Contract termination costs 6,598 - 6,598
Total restructuring and impairment charges $ 30,052 $
- $ 30,052
During the three months ended September 30, 2022 , we recorded charges of $5.7
million , $17.8 million and $6.6 million related to employee termination
benefits, impairment of property, plant and equipment and contract termination
costs, respectively, due to the strategic Reorganization Plan we initiated in
the third quarter of 2022. We paid or otherwise settled $2.8 million of employee
termination benefits and contract termination costs during the three months
ended September 30, 2022 and expect to pay or otherwise settle approximately
$12.9 million in total to implement the strategic Reorganization Plan.
Interest Income
Interest income was
Interest Expense
Interest expense was
Other Income, Net
Other income, net was$0.1 million for the three months endedSeptember 30, 2022 , compared to$2.7 million for the three months endedSeptember 30, 2021 . The decrease in other income, net was due to the monetization of certain tax credits during the prior period. 25
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Comparison of the Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 95,526 101,763 (6,237)
General and administrative 29,772 39,126 (9,354)
Restructuring and impairment charges 30,052 - 30,052
Total operating expenses 155,350 140,889 14,461
Loss from operations (155,350) (140,889) (14,461)
Other income (expense):
Interest income 695 75 620
Interest expense (4,995) (4,771) (224)
Other income, net 124 4,059 (3,935)
Total other income (expense), net (4,176) (637) (3,539)
Net loss $ (159,526) $ (141,526) $ (18,000) Research and Development Expenses
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Research and development program expenses:
Rare disease $ - $ 197 $ (197)
Cancer 44,990 51,778 (6,788)
Platform development, early-stage research and
unallocated expenses:
Personnel-related 20,057 20,437 (380)
Stock-based compensation expense 7,959 8,995 (1,036)
Contract research and development 7,052 5,278 1,774
Laboratory supplies and research materials 4,707 3,791 916
Facility-related and other 10,761 11,287 (526)
Total research and development expenses $ 95,526 $ 101,763 $ (6,237)
Research and development expenses were $95.5 million for the nine months ended
September 30, 2022 , compared to $101.8 million for the nine months ended
September 30, 2021 . The decrease in research and development program expenses of
$7.0 million related to the deprioritization of RTX-321 and RTX-240 AML and
monotherapy studies. This decrease was partially offset by an increase in
clinical costs related to RTX-224 that were incurred prior to the
discontinuation of the ongoing clinical trials of RTX-240 and RTX-224 for the
treatment of advanced solid tumors. We expect these costs to continue to
decrease in future periods due to the discontinuation of these clinical trials.
Platform development, early-stage research and unallocated expenses increased by
$0.7 million principally due to an increase of $1.8 million in contract research
and development and $0.9 million in laboratory supplies and research materials
for drug discovery activities and platform development. These increases were
offset by a decrease of $1.0 million in stock-based compensation expenses
related to the decrease in the market price of our common stock, resulting in a
lower valuation of stock options granted in 2022, and a reduction in
facility-related and other expenses of $0.5 million due to lower spend on
non-capitalized software costs and a reduction in building operating costs in
the current year.
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General and Administrative Expenses
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Personnel-related $ 8,741 $ 9,961 $ (1,220)
Stock-based compensation expense 9,141 17,433 (8,292)
Professional and consultant fees 6,910 6,745 165
Facility-related and other 4,980 4,987 (7)
Total general and administrative expenses $ 29,772 $ 39,126 $ (9,354)
General and administrative expenses were $29.8 million for the nine months ended
September 30, 2022 , compared to $39.1 million for the nine months ended
September 30, 2021 . The decrease in general and administrative expenses of $9.4
million was primarily due to a decrease in stock-based compensation expense of
$8.3 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. Additionally, personnel-related expenses decreased by
$1.2 million driven by headcount reductions in general and administrative
functions during 2022.
Restructuring and Impairment Charges
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Employee termination benefits $ 5,667 $ - $ 5,667
Impairment of property, plant and equipment 17,787 - 17,787
Contract termination costs 6,598 - 6,598
Total restructuring and impairment charges $ 30,052 $
- $ 30,052
During the nine months ended September 30, 2022 , we recorded charges of $5.7
million , $17.8 million and $6.6 million related to employee termination
benefits, impairment of property, plant and equipment and contract termination
costs, respectively, due to the strategic Reorganization Plan we initiated in
the third quarter of 2022. We paid or otherwise settled $2.8 million of employee
termination benefits and contract termination costs during the three months
ended September 30, 2022 and expect to pay or otherwise settle approximately
$12.9 million in total to implement the strategic Reorganization Plan.
Interest Income
Interest income was$0.7 million for the nine months endedSeptember 30, 2022 , compared to$0.1 million for the nine months endedSeptember 30, 2021 . Interest income increased due to higher prevailing interest rates.
Interest Expense
Interest expense was$5.0 million for the nine months endedSeptember 30, 2022 , compared to$4.8 million for the nine months endedSeptember 30, 2021 . Interest expense increased due to higher prevailing interest rates.
Other Income, Net
Other income, net was$0.1 million for the nine months endedSeptember 30, 2022 , compared to$4.1 million for the nine months endedSeptember 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 product candidates and we do not expect to generate
revenue from sales of any product candidates we may develop for several years,
if at all.
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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. 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 , and provides for aggregate borrowings of up to$75.0 million . As ofSeptember 30, 2022 ,$75.0 million was outstanding under the agreement. 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. As ofSeptember 30, 2022 , we had cash and cash equivalents of$103.9 million . InOctober 2022 , pursuant to a payoff letter, we voluntarily prepaid approximately$75.7 million , in full satisfaction of all obligations, including all outstanding principal, accrued interest, fees, costs, expenses and other amounts chargeable, under the Loan Agreement, considerably depleting our cash resources. As noted elsewhere in this report, there is substantial doubt as to our ability to fund our planned operations for the next twelve months and to continue to operate as a going concern, and we have recently announced our Strategic Plan which significantly reduced our operations, which will be focused on pursuing strategic alternatives.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Nine Months Ended September 30,
2022 2021
(in thousands)
Cash used in operating activities $ (117,625) $ (107,905)
Cash provided by (used in) investing activities (4,733) 82,720
Cash provided by financing activities 232 198,037
Net increase (decrease) in cash, cash equivalents and
restricted cash $ (122,126) $ 172,852
Operating Activities
During the nine months ended September 30, 2022 , operating activities used
$117.6 million of cash, primarily resulting from our net loss of $159.5 million ,
offset by net non-cash charges of $41.0 million , predominantly consisting of
impairment charges and stock-based compensation expense. Net cash used in our
operating assets and liabilities for the nine months ended September 30, 2022
consisted of a net increase in prepaid expenses and other current assets,
operating lease, and right-of-use assets of $5.0 million , offset by an $4.1
million decrease in accounts payable, accrued expenses and other current
liabilities, other long-term liabilities and operating lease liabilities.
During the nine months ended September 30, 2021 , operating activities used
$107.9 million of cash, primarily resulting from our net loss of $141.5 million ,
offset by net non-cash charges of $31.9 million , predominantly consisting of
stock-based compensation expense. Net cash used in our operating assets and
liabilities for the nine months ended September 30, 2021 consisted of a $1.2
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 $2.9 million .
Investing Activities
During the nine months endedSeptember 30, 2022 , net cash used in investing activities was$4.7 million , consisting of purchases of investments of$78.4 million and purchases of property, plant and equipment of$5.0 million , offset by sales and maturities of investments of$78.8 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 nine months endedSeptember 30, 2021 , net cash provided by investing activities was$82.7 million , consisting of sales and maturities of investments of$85.0 million , offset by purchases of property, plant and equipment of$2.3 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 . 28
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Financing Activities
During the nine months ended
During the nine months endedSeptember 30, 2021 , net cash provided by financing activities of$198.0 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$10.5 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 our Loan Agreement inJune 2021 .
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as ofSeptember 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) $ 40,735 $ 9,212 $ 15,311 $ 7,985 $ 8,227 Debt obligations (2) 96,005 6,100 56,851 33,054 - Total$ 136,740 $ 15,312 $ 72,162 $ 41,039 $ 8,227
(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 9.39% per annum, which was the interest rate in effect as ofSeptember 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., or SLR, (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 . OnOctober 13, 2022 , we entered into a payoff letter with SLR, under which we voluntarily prepaid SLR approximately$75.7 million , in full satisfaction of all obligations, including all outstanding principal, accrued interest, fees, costs, expenses and other amounts chargeable, under the Loan Agreement. The payoff letter also provided for the termination of all commitments and obligations under the Loan Agreement and release of all liens held by SLR on our assets.
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 was able to 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 . No shares of the Company's common stock were sold under the Distribution Agreement, which expired in accordance with its terms onAugust 21, 2022 , and the applicable registration statement is no longer effective. Funding Requirements If we conduct the activities necessary to advance potential product candidates through development our expenses, to the extent we are able to support such operations, will increase substantially. 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 any future clinical trials we may conduct, or changes in the development status of any future product candidates;
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•the timing and outcome of regulatory review of any product candidates we may develop;
•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 any product candidates we may develop, 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 manufacturing clinical supply of any product candidates we may develop;
•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;
•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, liquidation of assets no longer in use, strategic alliances and marketing, distribution and licensing arrangements, and our ability to do so is highly speculative. To the extent that we are able to raise additional capital through the sale of equity or convertible debt securities (which is unlikely given our current financial position), 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 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 inSeptember 2022 , which are intended to focus our capital on advancing our next generation red blood cell technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that will 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 are likely to adversely affect our business prospects. As ofSeptember 30, 2022 , we had an accumulated deficit of$836.5 million , and cash and cash equivalents of$103.9 million . For the nine months endedSeptember 30, 2022 , we incurred a loss of$159.5 million and used$117.6 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, the early payoff of our SLR Loan Agreement, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance our future operations (which will be challenging if not impossible given our financial position), as ofNovember 9, 2022 , the issuance date of the interim condensed consolidated financial statements for the three and nine month periods endedSeptember 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. 30
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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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