10-Q
2015-06-30P2Yfalse2020Q20001690585--12-31 0001690585 2020-06-30 0001690585 2019-12-31 0001690585 2020-04-01 2020-06-30 0001690585 2019-04-01 2019-06-30 0001690585 2020-01-01 2020-06-30 0001690585 2019-01-01 2019-06-30 0001690585 2019-06-30 0001690585 2019-01-01 2019-12-31 0001690585 2019-05-01 2019-05-31 0001690585 2020-07-31 0001690585 2019-03-31 0001690585 2018-12-31 0001690585 2020-03-31 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2020-06-30 0001690585 mgta:TwoThousandAndEighteenStockOptionAndIncentivePlanMember 2020-06-30 0001690585 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001690585 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001690585 us-gaap:USTreasurySecuritiesMember 2020-06-30 0001690585 us-gaap:AccountsPayableAndAccruedLiabilitiesMember mgta:MatchBioTherapiesMember 2020-06-30 0001690585 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember mgta:MatchBioTherapiesMember 2020-06-30 0001690585 us-gaap:CommonStockMember 2020-06-30 0001690585 mgta:LongTermDeferredRentMember 2020-06-30 0001690585 mgta:ShortTermDeferredRentMember 2020-06-30 0001690585 us-gaap:CollaborativeArrangementMember mgta:DevelopmentRegulatoryAndCommercialMilestoneMember mgta:PerTargetMember srt:MaximumMember 2020-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2020-06-30 0001690585 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001690585 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001690585 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001690585 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001690585 us-gaap:USTreasurySecuritiesMember 2019-12-31 0001690585 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-31 0001690585 us-gaap:AccountsPayableAndAccruedLiabilitiesMember mgta:MatchBioTherapiesMember 2019-12-31 0001690585 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember mgta:MatchBioTherapiesMember 2019-12-31 0001690585 mgta:LongTermDeferredRentMember 2019-12-31 0001690585 mgta:ShortTermDeferredRentMember 2019-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-31 0001690585 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001690585 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2019-04-01 2019-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0001690585 mgta:MatchBioTherapiesMember 2019-04-01 2019-06-30 0001690585 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001690585 srt:MaximumMember us-gaap:CollaborativeArrangementMember 2019-04-01 2019-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001690585 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001690585 mgta:SubSubleaseMember 2019-04-01 2019-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-06-30 0001690585 mgta:EmployeesMember 2020-01-01 2020-06-30 0001690585 mgta:MatchBioTherapiesMember 2020-01-01 2020-06-30 0001690585 mgta:OfficeAndLabSubleaseMember 2020-01-01 2020-06-30 0001690585 us-gaap:CommonStockMember 2020-01-01 2020-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-06-30 0001690585 us-gaap:CollaborativeArrangementMember srt:MaximumMember 2020-01-01 2020-06-30 0001690585 mgta:LicenseAgreementWithThirdPartiesMember us-gaap:LicenseMember 2020-01-01 2020-06-30 0001690585 mgta:LicenseAgreementWithNovartisMember 2020-01-01 2020-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-06-30 0001690585 us-gaap:RetainedEarningsMember 2020-01-01 2020-06-30 0001690585 mgta:SubSubleaseMember 2020-01-01 2020-06-30 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2020-01-01 2020-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0001690585 mgta:MatchBioTherapiesMember 2019-01-01 2019-06-30 0001690585 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001690585 us-gaap:CollaborativeArrangementMember srt:MaximumMember 2019-01-01 2019-06-30 0001690585 us-gaap:LicenseMember mgta:LicenseAgreementWithThirdPartiesMember 2019-01-01 2019-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001690585 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0001690585 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001690585 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0001690585 mgta:SubSubleaseMember 2019-01-01 2019-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2020-04-01 2020-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2020-04-01 2020-06-30 0001690585 mgta:MatchBioTherapiesMember 2020-04-01 2020-06-30 0001690585 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001690585 srt:MaximumMember us-gaap:CollaborativeArrangementMember 2020-04-01 2020-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001690585 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001690585 us-gaap:EmployeeStockOptionMember 2020-04-01 2020-06-30 0001690585 us-gaap:RestrictedStockMember 2020-04-01 2020-06-30 0001690585 mgta:EmployeeStockPurchasePlanMember 2020-04-01 2020-06-30 0001690585 mgta:SubSubleaseMember 2020-04-01 2020-06-30 0001690585 us-gaap:CommonStockMember 2019-05-01 2019-05-31 0001690585 us-gaap:CommonStockMember 2019-05-31 0001690585 srt:MaximumMember 2019-08-08 2019-08-08 0001690585 srt:MaximumMember mgta:CowenAndCompanyLlcMember 2019-08-08 2019-08-08 0001690585 mgta:OfficeAndLabSubleaseMember srt:MaximumMember 2018-05-31 0001690585 us-gaap:LetterOfCreditMember mgta:OfficeAndLabSubleaseMember 2018-05-31 0001690585 mgta:SubSubleaseMember 2018-12-31 0001690585 mgta:LicenseAgreementWithHarvardMember us-gaap:MaintenanceMember mgta:AnnuallyThrough2019Member srt:MaximumMember 2016-11-30 0001690585 mgta:LicenseAgreementWithHarvardMember mgta:AchievementOfDevelopmentAndRegulatoryMilestonesMember srt:MaximumMember 2016-11-30 0001690585 mgta:LicenseAgreementWithNovartisMember srt:MaximumMember 2017-04-01 2017-04-30 0001690585 mgta:LicenseAgreementWithNovartisMember mgta:AchievementOfClinicalAndRegulatoryMilestonesMember srt:MaximumMember 2017-04-30 0001690585 mgta:LicenseAgreementWithNovartisMember mgta:DevelopmentAndRegulatoryMilestonesMember srt:MaximumMember 2017-04-30 0001690585 us-gaap:CommonStockMember 2020-06-30 2020-06-30 0001690585 mgta:SubSubleaseMember 2018-10-01 2018-12-31 0001690585 us-gaap:CommonStockMember 2019-03-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001690585 us-gaap:RetainedEarningsMember 2019-03-31 0001690585 us-gaap:CommonStockMember 2019-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001690585 us-gaap:RetainedEarningsMember 2019-06-30 0001690585 us-gaap:CommonStockMember 2019-12-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001690585 us-gaap:RetainedEarningsMember 2019-12-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001690585 us-gaap:RetainedEarningsMember 2020-06-30 0001690585 us-gaap:CommonStockMember 2018-12-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001690585 us-gaap:RetainedEarningsMember 2018-12-31 0001690585 us-gaap:CommonStockMember 2020-03-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001690585 us-gaap:RetainedEarningsMember 2020-03-31 iso4217:USD utr:sqft xbrli:shares xbrli:pure iso4217:USD xbrli:shares mgta:Sublease mgta:Milestone
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File Number:
001-38541
 
Magenta Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
81-0724163
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification N
o.
)
     
100 Technology Square
Cambridge, Massachusetts
 
02139
(Address of principal executive offices)
 
(Zip Code)
(857)
242-0170
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $0.001 Par Value
 
MGTA
 
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company
,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
             
Non-accelerated filer
 
 
Smaller reporting company
 
             
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
As of July 31, 2020 there were 48,252,724 shares of Common Stock, $0.001 par value per share, outstanding.
 
 

Table of Contents
Magenta Therapeutics, Inc.
INDEX
 
 
  
Page
 
PART I – FINANCIAL INFORMATION
  
     
  
 
3
 
  
 
3
 
  
 
4
 
  
 
5
 
  
 
7
 
  
 
8
 
  
 
16
 
  
 
27
 
  
 
27
 
PART II – OTHER INFORMATION
  
     
  
 
28
 
  
 
28
 
  
 
76
 
  
 
77
 
  
 
78
 
 
2

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Magenta Therapeutics, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
 
June 30, 2020
 
 
December 31, 2019
 
Assets
 
 
 
 
 
 
Current assets:
   
     
 
Cash and cash equivalents
  $
136,287
    $
65,071
 
Marketable securities
   
40,214
     
80,658
 
Prepaid expenses and other current assets
   
3,376
     
4,114
 
                 
Total current assets
   
179,877
     
149,843
 
Restricted cash
   
1,780
     
1,780
 
Property and equipment, net
   
9,070
     
9,891
 
                 
Total assets
  $
190,727
    $
161,514
 
                 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
Current liabilities:
   
     
 
Accounts payable
  $
2,650
    $
2,812
 
Accrued expenses and other current liabilities
   
7,719
     
11,303
 
                 
Total current liabilities
   
10,369
     
14,115
 
Deferred rent
   
6,444
     
6,206
 
                 
Total liabilities
   
16,813
     
20,321
 
                 
Commitments and contingencies (Note 6)
 
   
 
Stockholders’ Equity:
   
     
 
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding
   
—  
     
—  
 
Common stock, $0.001 par value; 150,000,000 shares authorized; 48,309,457 shares and 39,466,254 shares issued and 48,241,212 shares and 39,260,532 shares outstanding as of June 30, 2020 and December 31, 2019, respectively
   
48
     
39
 
Additional
paid-in
capital
   
392,298
     
320,641
 
Accumulated other comprehensive income
   
153
     
8
 
Accumulated deficit
   
(218,585
)    
(179,495
)
                 
Total stockholders’ equity
   
173,914
     
141,193
 
                 
Total liabilities and stockholders’ equity
  $
190,727
    $
161,514
 
                 
The accompanying notes are an integral part of these consolidated financial statements.
3

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Revenue
  $
  
    $
  
    $
  
    $
  
 
                                 
Operating expenses:
   
     
     
     
 
Research and development
   
12,610
     
13,433
     
26,573
     
23,970
 
General and administrative
   
7,402
     
5,905
     
14,683
     
11,718
 
                                 
Total operating expenses
   
20,012
     
19,338
     
41,256
     
35,688
 
                                 
Loss from operations
   
(20,012
)    
(19,338
)    
(41,256
)    
(35,688
)
Interest and other income, net
   
933
     
1,630
     
2,166
     
3,146
 
                                 
Net loss
  $
(19,079
)   $
(17,708
)   $
(39,090
)   $
(32,542
)
                                 
Net loss per share, basic and diluted
  $
(0.48
)   $
(0.48
)   $
(0.99
)   $
(0.93
)
                                 
Weighted average common shares outstanding, basic and diluted
   
39,611,837
     
36,662,562
     
39,488,137
     
35,051,371
 
                                 
Comprehensive loss:
   
     
     
     
 
Net loss
  $
(19,079
)   $
(17,708
)   $
(39,090
)   $
(32,542
)
Other comprehensive income (loss):
   
     
     
     
 
Unrealized gains (losses) on marketable securities
   
(210
)    
98
     
145
     
147
 
                                 
Total other comprehensive income (loss)
   
(210
)    
98
     
145
     
147
 
                                 
Total comprehensive loss
  $
(19,289
)   $
(17,610
)   $
(38,945
)   $
(32,395
)
                                 
The accompanying notes are an integral part of these consolidated financial statements.
4

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
 
Common Stock
   
Additional
Paid-in
 
 
Accumulated
Other
Comprehensive
 
 
Accumulated
 
 
Total
Stockholders’
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income (Loss)
 
 
Deficit
 
 
Equity
 
 
Three Months Ended June 30, 2020
 
Balances at March 31, 2020
   
39,454,635
    $
39
    $
324,505
    $
363
    $
(199,506
)   $
125,401
 
Issuance of common stock upon public offering net of underwriting discounts, commissions and offering costs
   
8,625,000
     
9
     
64,554
     
—  
     
—  
     
64,563
 
Vesting of restricted stock
   
61,047
     
—  
     
—  
     
—  
     
—  
     
—  
 
Issuance of common stock upon exercise of stock options
   
94,877
     
—  
     
693
     
—  
     
—  
     
693
 
Issuance of common stock under Employee Stock Purchase Plan
   
5,653
     
—  
     
42
     
—  
     
—  
     
42
 
Stock-based compensation expense
   
—  
     
—  
     
2,504
     
—  
     
—  
     
2,504
 
Unrealized losses on marketable securities
   
—  
     
—  
     
—  
     
(210
)    
—  
     
(210
)
 
Net loss
   
—  
     
—  
     
—  
     
—  
     
(19,079
)    
(19,079
)
                                                 
Balances at June 30, 2020
   
48,241,212
    $
48
    $
392,298
    $
153
    $
(218,585
)   $
173,914
 
                                                 
       
 
Three Months Ended June 30, 2019
 
Balances at March 31, 2019
   
33,581,975
    $
34
    $
251,488
    $
41
    $
(117,560
)   $
134,003
 
Issuance of common stock upon public offering net of underwriting discounts, commissions and offering costs
   
4,887,500
     
5
     
60,271
     
—  
     
—  
     
60,276
 
Vesting of restricted stock
   
197,564
     
—  
     
—  
     
—  
     
—  
     
—  
 
Issuance of common stock upon exercise of stock options
   
43,819
     
—  
     
287
     
—  
     
—  
     
287
 
Stock-based compensation expense
   
—  
     
—  
     
2,600
     
—  
     
—  
     
2,600
 
Unrealized gains on marketable securities
   
—  
     
—  
     
—  
     
98
     
—  
     
98
 
Net loss
   
—  
     
—  
     
—  
     
—  
     
(17,708
)    
(17,708
)
                                                 
Balances at June 30, 2019
   
38,710,858
    $
39
    $
314,646
    $
139
    $
(135,268
)   $
179,556
 
                                                 
The accompanying notes are an integral part of these consolidated financial statements.
5

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity (Continued)
(In thousands, except share data)
(Unaudited)
 
Common Stock
   
Additional
Paid-in
 
 
Accumulated
Other
Comprehensive
 
 
Accumulated
 
 
Total
Stockholders’
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income (Loss)
 
 
Deficit
 
 
Equity
 
 
Six Months Ended June 30, 2020
 
Balances at December 31, 2019
   
39,260,532
    $
39
    $
320,641
    $
8
    $
(179,495
)   $
141,193
 
Issuance of common stock upon public offering net of underwriting discounts, commissions and offering costs
   
8,625,000
     
9
     
64,554
     
—  
     
—  
     
64,563
 
Vesting of restricted stock
   
125,673
     
—  
     
—  
     
—  
     
—  
     
—  
 
Issuance of common stock upon exercise of stock options
   
224,354
     
—  
     
1,817
     
—  
     
—  
     
1,817
 
Issuance of common stock under Employee Stock Purchase Plan
   
5,653
     
—  
     
42
     
—  
     
—  
     
42
 
Stock-based compensation expense
   
—  
     
—  
     
5,244
     
—  
     
—  
     
5,244
 
Unrealized gains on marketable securities
   
—  
     
—  
     
—  
     
145
     
—  
     
145
 
Net loss
   
—  
     
—  
     
—  
     
—  
     
(39,090
)    
(39,090
)
 
                                                 
Balances at June 30, 2020
   
48,241,212
    $
48
    $
392,298
    $
153
    $
(218,585
)   $
173,914
 
                                                 
       
 
Six Months Ended June 30, 2019
 
Balances at December 31, 2018
   
33,305,033
    $
33
    $
248,349
    $
(8
)   $
(102,726
)   $
145,648
 
Issuance of common stock upon public offering net of underwriting discounts, commissions and offering costs
   
4,887,500
     
5
     
60,271
     
—  
     
—  
     
60,276
 
Vesting of restricted stock
   
395,279
     
1
     
(1
)    
—  
     
—  
     
—  
 
Issuance of common stock upon exercise of stock options
   
123,046
     
—  
     
850
     
—  
     
—  
     
850
 
Stock-based compensation expense
   
—  
     
—  
     
5,177
     
—  
     
—  
     
5,177
 
Unrealized gains on marketable securities
   
—  
     
—  
     
—  
     
147
     
—  
     
147
 
Net loss
   
—  
     
—  
     
—  
     
—  
     
(32,542
)    
(32,542
)
                                                 
Balances at June 30, 2019
   
38,710,858
    $
39
    $
314,646
    $
139
    $
(135,268
)   $
179,556
 
                                                 
The accompanying notes are an integral part of these consolidated financial statements.
6
 

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six months ended June 30,
 
 
2020
 
 
2019
 
Cash flows from operating activities:
   
     
 
Net loss
  $
(39,090
)   $
(32,542
)
Adjustments to reconcile net loss to net cash used in operating activities:
   
     
 
Stock-based compensation expense
   
5,244
     
5,177
 
Depreciation and amortization expense
   
988
     
875
 
Net amortization (accretion) of premiums (discounts) on marketable securities
   
63
     
(614
)
Changes in operating assets and liabilities:
   
     
 
Prepaid expenses and other current assets
   
738
     
(7,989
)
Accounts payable
   
(238
)    
(430
)
Accrued expenses and other current liabilities
   
(3,805
)    
855
 
Deferred rent
   
238
     
4,699
 
                 
Net cash used in operating activities
   
(35,862
)    
(29,969
)
                 
Cash flows from investing activities:
 
 
 
 
 
 
Purchases of property and equipment
   
(167
)    
(2,377
)
Purchases of marketable securities
   
(4,974
)    
(94,176
)
Maturities of marketable securities
   
45,500
     
40,000
 
                 
Net cash provided by (used in) investing activities
   
40,359
     
(56,553
)
                 
Cash flows from financing activities:
 
 
 
 
 
 
Proceeds from public offerings, net of underwriting discounts and commissions
   
64,860
     
60,874
 
Payments of public offering costs
   
  
     
(436
)
Proceeds from exercise of common stock options
   
1,817
     
850
 
Proceeds from issuance of common stock under Employee Stock Purchase Plan
   
42
     
  
 
                 
Net cash provided by financing activities
   
66,719
     
61,288
 
                 
Net increase (decrease) in cash, cash equivalents and restricted cash
   
71,216
     
(25,234
)
Cash, cash equivalents and restricted cash at beginning of period
   
66,851
     
60,125
 
                 
Cash, cash equivalents and restricted cash at end of period
  $
138,067
    $
34,891
 
                 
 
Supplemental disclosure of
non-cash
investing and financing activities:
 
 
 
 
 
 
Purchase of property and equipment included in accounts payable and accrued expenses
  $
  
    $
472
 
Offering costs included in accounts payable and accrued expenses
  $
297
    $
162
 
The accompanying notes are an integral part of these consolidated financial statements.
7

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of the Business and Basis of Presentation
Magenta Therapeutics, Inc. (the “Company”) is a clinical-stage biotechnology company developing novel medicines to bring the curative power of immune reset to more patients with autoimmune diseases, blood cancers and genetic diseases. The Company was incorporated under the laws of the State of Delaware in June 2015 as HSCTCo Therapeutics, Inc. In February 2016, the Company changed its name to Magenta Therapeutics, Inc. and in June 2018 the Company completed its initial public offering.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations
, the continuing impact of the COVID-19 coronavirus
and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
In June 2020, the Company issued and sold 8,625,000 shares of its common stock, including the underwriters’ exercise in full of their option to purchase additional shares of common stock, in a
follow-on
public offering at a public offering price of $8.00 per share, resulting in net proceeds of $64.6 million after underwriting discounts and commission
s
and other offering expenses.
In May 2019, the Company issued and sold 4,887,500 shares of its common stock, including the underwriters’ exercise in full of their option to purchase additional shares of common stock, in a
follow-on
public offering at a public offering price of $13.25 per share, resulting in net proceeds of $60.3 million after underwriting discounts and commission
s
and other offering expenses.
The Company has a shelf registration statement on Form
S-3
(the “Shelf”) on file with the Securities and Exchange
Commission (the “SEC”), which covers the offering, issuance and sale of up to an aggregate of $
350.0
 million of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The Company simultaneously entered into a sales agreement with Cowen and Company, LLC, as sales agent, to provide for the issuance and sale by the Company of up to $
100.0
 million of common stock from time to time in
“at-the-market”
offerings under the Shelf (the “ATM Program”). The Shelf was declared effective by the SEC on August 
19
,
2019
. As of June 
30
,
2020
, no sales have been made pursuant to the ATM Program.
The Company has incurred recurring losses since inception, including net losses of $39.1 million and $76.8 million for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively. As of June 30, 2020, the Company had an accumulated deficit of $218.6 million. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance date of these consolidated financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to fund its operations.
 
The Company expects its expenses to increase substantially in connection with ongoing activities, particularly as the Company advances its preclinical activities and clinical trials for its product candidates in development. Accordingly, the Company will need to obtain substantial additional funding in connection with continuing operations. If the Company is unable to raise capital when needed, or on attractive terms, it could be forced to delay, reduce or eliminate its research or drug development programs or any future commercialization efforts. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
8

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
2.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual for research and development expenses and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Unaudited Interim Financial Information
The consolidated balance sheet at December 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 have been prepared by the Company pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form
10-K,
on file with SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2020 and consolidated results of operations for the three and six months ended June 30, 2020 and 2019 and consolidated cash flows for the six months ended June 30, 2020 and 2019 have been made. The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020 or any other interim period.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
 
 
 
Level 1—Quoted prices in active markets for identical assets or liabilities.
 
 
 
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
 
 
 
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
 
9

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
The Company accounts for uncertainty in income taxes recognized in its consolidated financial statements by applying a
two-step
process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-
than-not
to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the three and six months ended June 30, 2020 and 2019, the Company’s only element of other comprehensive income
 
(loss)
was unrealized gains
(losses)
on marketable securities.
Net Loss per Share
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options. For periods in which the Company has reported net losses, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their affect is anti-dilutive.
The Company reported a net loss for the three and six months ended June 30, 2020 and 2019. The following potential dilutive securities, presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:
 
 
June 30,
 
 
2020
 
 
2019
 
Stock options to purchase common stock
   
5,809,118
     
4,913,620
 
Unvested restricted common stock
   
68,245
     
627,242
 
Shares of common stock issuable under Employee Stock Purchase Plan
   
8,213
     
—  
 
                 
   
5,885,576
     
5,540,862
 
                 
Recently Adopted Accounting Pronouncements
In December 2019, the Financing Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.
 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
(“ASU
2019-12”).
ASU
2019-12
includes several
 
provisions to simplify the accounting for income taxes and removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years. For nonpublic entities and emerging growth companies that choose to take advantage of the extended transition period, the guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for all entities. The Company early adopted ASU
2019-12
prospectively effective January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No.
2016-02,
 Leases
 (“ASU
2016-02”).
ASU
2016-02
will require lessees to recognize most leases on their balance sheet as a
right-of-use
asset and a lease liability. Leases will be classified as either operating or finance, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. For public entities, the
10

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
guidance was effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years. For nonpublic entities and emerging growth companies that choose to take advantage of the extended transition period, the guidance was effective for annual reporting periods beginning after December 15, 2019. In June 2020, the FASB issued ASU No.
 2020-05,
which further deferred the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for all entities. ASU
2016-02
initially required adoption using a modified retrospective approach, under which all years presented in the financial statements would be prepared under the revised guidance. In July 2018, the FASB issued ASU No.
2018-11,
 Leases (Topic 842) Targeted Improvements
, which added an optional transition method to the existing requirements whereby an entity could adopt the provisions of ASU
2016-02
by recognizing a cumulative-effective adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company expects that the adoption of the new leasing standards will result in the recognition of material
right-of-use
assets and lease liabilities on the consolidated balance sheets but does not expect it to have a material impact on its results of operations or cash flows.
In June 2016, the FASB issued ASU
No. 2016-13,
Financial
Instruments – Credit Losses (Topic 326)
. The new standard adjusts the accounting for assets held at amortized costs basis, including marketable securities accounted for as available for sale. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For public entities, the guidance was effective for annual reporting periods beginning after December 15, 2019 and for interim periods within those fiscal years. For nonpublic entities and emerging growth companies that choose to take advantage of the extended transition period, the guidance is effective for annual reporting periods beginning after December 15, 2020. Early adoption is permitted for all entities. In November 2019, the FASB issued ASU
No. 2019-10,
which deferred the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe the guidance will have a material impact on its consolidated financial statements.
3. Fair Value of Financial Assets
As of June 30, 2020, marketable securities by security type consisted of (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized
Cost
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Estimated
Fair
Value
 
United States Treasury Notes (due within one year)
  $
40,061
    $
153
    $
   
    $
40,214
 
                                 
Total
  $
40,061
    $
153
    $
  
    $
40,214
 
                                 
As of December 31, 2019, marketable securities by security type consisted of (in thousands):
 
 
  
Amortized
Cost
 
  
Gross
Unrealized
Gains
 
  
Gross
Unrealized
Losses
 
  
Estimated
Fair
Value
 
United States Treasury Notes (due within one year)
  
$
78,656
 
  
$
25
 
  
$
(21
  
$
78,660
 
Agency Bonds (due within one year)
  
 
1,994
 
  
 
4
 
  
 
  
 
  
 
1,998
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
80,650
 
  
$
29
 
  
$
(21
  
$
80,658
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
11

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
 
    
Fair Value Measurements at June 30, 2020 Using:
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
  $
136,357
    $
—  
    $
—  
    $
136,357
 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
United States Treasury Notes
   
—  
     
40,214
     
—  
     
40,214
 
                                 
Total
  $
136,357
    $
40,214
    $
—  
    $
176,571
 
                                 
    
Fair Value Measurements at December 31, 2019 Using:
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
  $
64,796
    $
—  
    $
—  
    $
64,796
 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
United States Treasury Notes
   
—  
     
78,660
     
—  
     
78,660
 
Agency Bonds
   
—  
     
1,998
     
—  
     
1,998
 
                                 
Total
  $
64,796
    $
80,658
    $
—  
    $
145,454
 
                                 
During the three and six months ended June 30, 2020 and 2019, there were no transfers between Level 1, Level 2 and Level 3.
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
    
June 30, 2020
    
December 31, 2019
 
Accrued external research and development expenses
  $
4,052
    $
6,516
 
Accrued payroll and related expenses
   
1,938
     
3,247
 
Deferred rent, current portion
   
601
     
601
 
Accrued professional fees
   
819
     
660
 
Accrued other
   
309
     
279
 
                 
  $
7,719
    $
11,303
 
                 
5. Stock-Based Awards
2018 Stock Option and Incentive Plan
The Company grants stock-based awards under the Magenta Therapeutics, Inc. 2018 Stock Option and Incentive Plan (the “2018 Plan”). The Company also has outstanding stock options under the Magenta Therapeutics, Inc. 2016 Stock Option and Grant Plan, as amended (the “2016 Plan”)
,
but is no longer granting awards under the 2016 Plan. As of June 30, 2020, 2,833,512 shares of common stock were available for issuance under the 2018 Plan.
2019 Employee Stock Purchase Plan
The Magenta Therapeutics, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) became effective in June 2019. The offering periods begin in December and June of each year. The initial offering period commenced on December 1, 2019 and ended on May 29, 2020. The purchase price of common stock under the ESPP is equal to 85% of the lower of the fair market value of the common stock on the offering date or the exercise date. During the six months ended June 30, 2020, 5,653 shares of common stock were purchased under the ESPP at a purchase price per share of $7.51. As of June 30, 2020, 160,872 shares remained available for issuance under the ESPP.
 
12

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Grant of Stock Options
During the six months ended June 30, 2020, the Company granted options to certain employees, directors and consultants with service-based vesting conditions for the purchase of 1,759,596 shares of common stock with a weighted average grant date fair value of $8.04 per share.
Stock-Based Compensation
Stock-based compensation expense was classified in the statements of operations and comprehensive loss as follows (in thousands):
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Research and development expenses
  $
780
    $
1,268
    $
1,802
    $
2,524
 
General and administrative expenses
   
1,724
     
1,332
     
3,442
     
2,653
 
                                 
  $
2,504
    $
2,600
    $
5,244
    $
5,177
 
                                 
As of June 30, 2020, total unrecognized compensation cost related to unvested share-based awards was $22.0 million, which is expected to be recognized over a weighted average period of 2.5 years.
6. Commitments and Contingencies
Leases
In May 2018, the Company entered into a sublease for up to approximately 69,000 square feet of office and laboratory space in Cambridge, Massachusetts. The sublease was amended effective March 2019 to increase the lease payments over the lease term and to increase the sublandlord-funded tenant improvements. The sublease is subject and subordinate to a prime lease between the sublandlord and the prime landlord. The term of the sublease commenced in June 2018 and expires in February 2028. The sublandlord has the right to terminate the sublease after five years. The Company is also obligated to pay real estate taxes and other costs related to the premises, including costs of operations and management of the leased premises. In connection with the sublease, as amended, the sublandlord agreed to fund up to $5.5 million in tenant improvements to the leased facility, of which $5.2 million has been paid as of June 30, 2020. The Company is required to maintain a cash balance of $1.8 million to secure a letter of credit associated with the sublease. This amount was classified as noncurrent restricted cash in the consolidated balance sheets at June 30, 2020 and December 31, 2019.
As of June 30, 2020 and December 31, 2019, the Company had long-term deferred rent of $6.4 million and $6.2 million, respectively, related to lease incentives and payment escalations. As of June 30, 2020 and December 31, 2019, the short-term portion of deferred rent of $0.6 million for each period was included in accrued expenses and other current liabilities. The Company recorded rent expense of $1.6 million during each of the three months ended June 30, 2020 and 2019 and $3.1 million during each of the six months ended June 30, 2020 and 2019.
13

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
As of June 30, 2020, the future minimum lease payments due under the noncancelable operating lease is as follows (in thousands):
Remainder of 2020 (six months)
  $
2,950
 
2021
   
6,072
 
2022
   
6,375
 
2023
   
6,734
 
2024
   
7,100
 
Thereafter
   
24,899
 
         
  $
54,130
 
         
In the fourth quarter of 2018, the Company entered into two
two-year
sub-subleases
of approximately 27,000 square feet of office space in Cambridge, Massachusetts which expire in the fourth quarter of 2020. As of June 30, 2020, the remaining rent payments due to the Company under the
sub-subleases
was $0.8 million. The Company recorded other income of $0.7 million during each of the three months ended June 30, 2020 and 2019 and $1.4 million during each of the six months ended June 30, 2020 and 2019 related to these
sub-subleases.
Collaboration Agreement
In March 2018, the Company entered into a collaboration agreement with Heidelberg Pharma Research GmbH (“HDPR”) whereby the parties agreed to combine the Company’s stem cell platform with proprietary antibodies across up to four exclusive targets with HDPR’s proprietary Antibody Targeted Amanitin Conjugates platform. Under the agreement, the Company may pay upfront technology access fees, research exclusivity fees and payment for research support. Additionally, upon the exercise of certain license rights, the Company may be obligated to pay HDPR development, regulatory and commercial milestone payments of up to $83.5 million per target as well as royalties on net sales of products licensed under the agreement. During each of the three months ended June 30, 2020 and 2019, the Company recorded less than $0.1 million of research and development expense related to this agreement for upfront technology access fees, research exclusivity fees and research support. During the six months ended June 30, 2020 and 2019, the Company recorded less than $0.1 million and $0.4 million, respectively, of research and development expense related to this agreement for upfront technology access fees, research exclusivity fees and research support.
Intellectual Property Licenses
The Company has a license agreement with the President and Fellows of Harvard College (“Harvard”), entered into in November 2016, for an exclusive, worldwide, royalty-bearing license for certain technologies related to conditioning and mobilization. The Company is obligated to pay Harvard maintenance fees of $0.1 million annually to reimburse qualified expenses related to the patents. The Company is also obligated to pay milestone payments of up to $7.4 million for the first two licensed products upon the achievement of certain development and regulatory milestones and to pay royalties on a
product-by-product
and
country-by-country
basis on net sales of products licensed under the agreement. During the six months ended June 30, 2020, the Company did not incur any expense related to the achievement of these milestones. During the six months ended June 30, 2019, the Company recorded $0.1 million of expense related to the achievement of one of these milestones.
The Company has a license agreement with Novartis International Pharmaceutical Ltd. (“Novartis”), entered into in April 2017, to use and develop certain patent rights (the “Novartis License”). Under the Novartis License, the Company was granted an exclusive, worldwide, sublicensable license to research, develop and commercialize certain licensed products that contain Novartis compounds for the expansion of cord blood derived
non-gene-edited/-modified
hematopoietic stem cells. The Company is obligated to make payments of up to $177.0 million upon the achievement of specified clinical and regulatory milestones and up to $125.0 million upon the achievement of specified commercial milestones and to pay tiered royalties, on a
product-by-product
and
country-by-country
basis, up to a maximum of 20% on net sales of products licensed under the agreement. As of June 30, 2020, no milestones related to the Novartis License have been met.
The Company has agreements with third parties in the normal course of business, under which it can license certain developed technologies. If the Company exercises its rights to license the respective technologies, it may be subject to additional fees and milestone payments. During the three and six months ended June 30, 2020 and 2019, the Company did not exercise its rights to the license of certain developed technologies under these agreements.
14

Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and senior management that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations as of June 30, 2020.
Legal
Proceedings
The Company is not currently a party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses the costs related to its legal proceedings as they are incurred.
7. 401(k) Savings Plan
The Company has a 401(k) available for participating employees who meet certain eligibility
requirements
. Eligible employees may defer a portion of their salary as defined by the plan. Company contributions to the plan may be made at the discretion of the board of directors of the Company. To date, the Company has not made any contributions to the plan.
 
8.
Related Parties
National Marrow Donor Program (as successor in interest to Be The Match BioTherapies, LLC)
Effective March 2018, the President of Be The Match BioTherapies, LLC became a member of the Company’s board of directors and subsequently was appointed Chief Executive Officer of the Be The Match/National Marrow Donor Program organization in
June
2020. The Company has collaboration agreements with the National Marrow Donor Program (as successor in interest to Be The Match BioTherapies, LLC) and a research agreement with an affiliated organization, Center for International Blood and Marrow Transplant Research. For each of the three months ended June 30, 2020 and 2019, the Company recorded expense of less than $0.1 million related to these agreements. For the six months ended June 30, 2020 and 2019, the Company recorded expense of $0.2 million and $0.1 million, respectively, related to these agreements. As of June 30, 2020 and December 31, 2019, amounts on the balance sheet related to these agreements were less than $0.1 million and $0.2 million, respectively, which amounts were included in accounts payable and accrued expenses and other current liabilities and less than $0.1 million as of June 30, 2020 and December 31, 2019, which amounts were included in prepaid expenses and other current assets.
15

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form
10-Q
of Magenta Therapeutics, Inc. (the “Company”) contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any express or implied statements that do not relate to historical or current facts or matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “seeks,” “endeavor,” “potential,” “continue” or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this Quarterly Report on Form
10-Q
and include, but are not limited to, statements about:
 
   
the timing and the success of clinical trials of
MGTA-145,
MGTA-456
and any other product candidates;
 
   
the outcomes of our preclinical studies, including of
MGTA-117;
 
   
our ability to enroll patients in our clinical trials at the pace that we project;
 
   
whether the results of our trials will be sufficient to support domestic or foreign regulatory approvals for
MGTA-145,
MGTA-456
or any other product candidates we may develop;
 
   
our ability to establish clinical programs moving forward in multiple indications, with an advancing portfolio and sustainable platform;
 
   
regulatory actions with respect to our product candidates or our competitors’ products and product candidates;
 
   
our ability to obtain, including on an expedited basis, and maintain regulatory approval of
MGTA-145,
MGTA-456
or any other product candidates we may develop;
 
   
the level of expenses related to any of our product candidates or clinical development programs;
 
   
our expectation that our existing capital resources will be sufficient to enable us to fund our planned development of
MGTA-145,
MGTA-456
and any other product candidates we may identify and pursue for a given period;
 
   
our ability to obtain funding for our operations, including funding necessary to develop and commercialize our product candidates;
 
   
the benefits of the use of
MGTA-145,
MGTA-456
or any other product candidate, if approved;
 
   
our ability to successfully commercialize
MGTA-145,
MGTA-456
or any other product candidates we may identify and pursue, if approved;
 
   
our ability to successfully find collaborators for E478 or any of our current and future programs and product candidates;
 
   
the rate and degree of market acceptance of
MGTA-145,
MGTA-456
or any other product candidates we may identify and pursue;
 
   
our ability to obtain orphan drug designation for any of our product candidates we may identify and pursue;
 
   
our expectations regarding government and third-party payor coverage and reimbursement;
 
   
our ability to manufacture
MGTA-145,
MGTA-456
or any other product candidate in conformity with the U.S. Food and Drug Administration’s requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;
 
   
our ability to successfully build a specialty sales force and commercial infrastructure;
 
   
our ability to compete with companies currently producing or engaged in the clinical development of treatments for the disease indications that we pursue and treatment modalities that we develop;
 
   
our reliance on third parties to conduct our clinical trials;
 
   
our reliance on third-party contract manufacturers to manufacture and supply our product candidates for us;
 
   
our ability to retain and recruit key personnel;
 
   
our ability to obtain and maintain intellectual property protection for
MGTA-145,
MGTA-456
or any other product candidates we may identify and pursue;
 
16

Table of Contents
   
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;
 
   
our expectations regarding the time during which we will continue to be an emerging growth company or smaller reporting company as defined in federal securities regulations;
 
   
our financial performance; and
 
   
developments and projections relating to our competitors or our industry.
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including without limitation, risks, uncertainties and assumptions regarding the continuing impact of
the COVID-19 pandemic
on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results under “Item 1A. Risk Factors” in this Quarterly Report on Form
10-Q,
as well as our other reports filed with the Securities and Exchange Commission, or the SEC, which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.
Overview
We are a clinical-stage biotechnology company developing novel medicines to bring the curative power of immune reset to more patients with autoimmune diseases, blood cancers and genetic diseases.
Resetting the immune system through stem cell transplant is a well-established and often curative medical procedure involving a
two-step
process: (i) removing the disease-causing cells and (ii) replacing them with healthy cells to rebuild the immune system. As it exists today, stem cell transplant is a large market opportunity, but currently only approximately 40 percent of eligible patients receive a stem cell transplant because of the risks and toxicities associated with the transplant procedure. New approaches are needed to extend immune reset to more patients, including drugs to: collect sufficient stem cells to rebuild a healthy immune system, remove disease-causing cells and prevent complications in rebuilding the new immune system.
At Magenta, we believe we are uniquely positioned to address these opportunities and to lead a new era in immune reset. Our portfolio of product candidates includes biologics, small molecules and a cell therapy designed as new approaches to extend the curative power of immune reset through transplant to more patients across many diseases. Currently, only a fraction of eligible patients with these diseases receive a transplant because the risks and challenges outweigh the potential for a cure. These include diseases where transplant is a standard of care (e.g., blood cancers such as acute myelogenous leukemia, myelodysplastic syndromes, multiple myeloma, and
non-Hodgkin
lymphoma), diseases where transplant is performed but limited in use (e.g., hemoglobinopathies such as sickle cell disease and beta-thalassemia) and autoimmune diseases (e.g., multiple sclerosis and systemic sclerosis). Emerging clinical data suggest that immune reset through stem cell transplant may represent a breakthrough approach with curative potential for patients with severe autoimmune diseases. For example, recent results from multiple clinical trials show that patients with autoimmune diseases, including multiple sclerosis and systemic sclerosis, can be cured with a transplant. However, based on our epidemiology analyses, currently only approximately 1 to 2% of eligible patients with these autoimmune diseases in the U.S. and Europe receive a stem cell transplant.
We intend to become a fully integrated discovery, development and commercial company in the field of immune reset. We believe that our product portfolio will offer significant commercial synergies. We are developing our products so that they can be used individually or in combination with each other. As a result, our portfolio could be utilized in a manner tailored to the patient’s disease, such that a patient may receive more than one Magenta therapy as part of their individual immune reset journey.
To harness the curative power of immune reset through stem cell transplant for more patients, we have created a new stem cell biology discovery platform and are developing a comprehensive portfolio of novel therapeutics. We believe our conditioning, mobilization and cell therapy programs will allow more patients to benefit through a more precise stem cell transplant process. Our conditioning programs, including
MGTA-117,
our most advanced conditioning program, are designed to selectively remove disease-
 
17

Table of Contents
causing stem and/or immune cells from a patient prior to transplant, and to be far less toxic than the
decades-old
radiation and chemotherapy-based approaches, which are still the only available options. Within our mobilization program,
MGTA-145
is our first-line stem cell mobilization product candidate, and it is designed to enable physicians to more easily collect a greater number of functional blood stem cells, known as hematopoietic stem cells or HSCs, from patients and donors to improve patient outcomes and scale the capacity of transplant and apheresis centers.
MGTA-456
is a cell therapy designed to provide a high dose of stem cells that are well-matched to the patient, and it has the potential to allow more patients to have a better chance for a successful stem cell transplant. Our post-transplant complications program is designed to target the donor immune cells within the patient that cause Graft vs. Host Disease, or GvHD, in order to allow safe rebuilding of a healthy immune system.
Our goal is to advance our medicines through registration trials and commercialize them. We expect to continue to advance our portfolio and innovate through our sustainable platform.
We are experiencing operational and other challenges as a result of the novel coronavirus, or
COVID-19,
global pandemic, which could delay or halt the development of our product candidates. See “—Recent Developments” and “Item 1A. Risk Factors” for further discussion of the current and expected impact on our business and product candidates.
Since our inception in 2015, we have focused substantially all of our efforts and financial resources on organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates, and undertaking preclinical studies, and in the case of
MGTA-456
and
MGTA-145,
clinical trials. We do not have any products approved for sale and have not generated any revenue from product sales.
In June 2018, we completed an initial public offering, or IPO, of our common stock, pursuant to which we issued and sold 6,666,667 shares of common stock at a public offering price of $15.00 per share, resulting in net proceeds of $89.9 million after deducting underwriting discounts and commissions and other offering expenses. In May 2019, we issued and sold 4,887,500 shares of our common stock, including the underwriters’ exercise in full of their option to purchase additional shares of common stock, in a
follow-on
public offering at a public offering price of $13.25 per share, resulting in net proceeds of $60.3 million after underwriting discounts and commissions and other offering expenses. In June 2020, we issued and sold 8,625,000 shares of our common stock, including the underwriters’ exercise in full of their option to purchase additional shares of common stock, in a
follow-on
public offering at a public offering price of $8.00 per share, resulting in net proceeds of $64.6 million after underwriting discounts and commissions and other offering expenses. Prior to our common stock offerings, we funded our operations primarily with proceeds from the sales of redeemable convertible preferred stock and issuance of convertible notes.
Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Our net loss was $39.1 million and $76.8 million, respectively, for the six months ended June 30, 2020 and the year ended December 31, 2019. As of June 30, 2020, we had an accumulated deficit of $218.6 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect our expenses and capital requirements will increase in connection with our ongoing activities, particularly as we:
 
   
initiate and enroll new Phase 2 clinical trials for
MGTA-145;
 
   
initiate and conduct preclinical studies and clinical trials of our product candidates, including
MGTA-117;
 
   
develop any other future product candidates we may choose to pursue;
 
   
seek marketing approval for any of our product candidates that successfully complete clinical development, if any;
 
   
maintain compliance with applicable regulatory requirements;
 
   
develop and scale up our capabilities to support our ongoing preclinical activities and clinical trials for our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, if any;
 
   
maintain, expand, protect and enforce our intellectual property portfolio;
 
   
develop and expand our sales, marketing and distribution capabilities for our product candidates for which we obtain marketing approval, if any; and
 
   
expand our operational, financial and management systems and increase personnel, including to support our clinical development and commercialization efforts and our operations as a public company.
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 incur additional costs associated with operating as a public company.
 
18

Table of Contents
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing and distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.
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. 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.
As of June 30, 2020, we had cash, cash equivalents and marketable securities of $176.5 million. Based on our updated operating plan, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2022. See “—Liquidity and Capital Resources.”
Recent Developments
MGTA-145
Updates
We recently completed a Phase 1 trial in healthy donors that showed that
MGTA-145,
in combination with plerixafor, was well tolerated and enabled
same-day
dosing, mobilization and collection of sufficient functional HSCs for transplant.
Based on the results of the Phase 1 trial and subsequent meetings with the U.S. Food and Drug Administration, or FDA, we intend to initiate multiple Phase 2 trials of
MGTA-145
to include both allogeneic and autologous transplant settings. There is potential to generate initial Phase 2 data on
MGTA-145
in 2020.
On May 18, 2020, the FDA’s Office of Orphan Products and Development granted Orphan Drug Designation to
MGTA-145
for the mobilization of HSCs to the peripheral blood for collection and subsequent transplant.
On June 11, 2020, we announced a clinical collaboration agreement with the National Marrow Donor Program/Be The Match, or NMDP/Be The Match, to evaluate the potential utility of
MGTA-145
for mobilizing and collecting HSCs from donors in a single day and then using them for allogeneic transplants in patients.
MGTA-117 Updates
On May 6, 2020, we announced a research and clinical collaboration agreement with AVROBIO, Inc., or AVROBIO, to evaluate the potential utility of
MGTA-117
for conditioning patients before they receive one of AVROBIO’s investigational lentiviral gene therapies.
Further, on June 15, 2020, we announced a
non-exclusive
research and clinical collaboration agreement with Beam Therapeutics Inc., or Beam, to evaluate the potential utility of
MGTA-117
for conditioning of patients with sickle cell disease and beta-thalassemia receiving Beam’s base editing therapies.
MGTA-456
Updates
On June 11, 2020, we announced that we would discontinue enrollment in our Phase 2 trial in inherited metabolic diseases. This decision was the result of several factors, including enrollment challenges common to rare disease populations, which were heightened as a result of the
COVID-19
pandemic; a growing understanding in the transplant field of the current challenges of allogeneic stem cell transplant in patients with
non-malignant
diseases, including inherited metabolic diseases; and feedback from the FDA on endpoints and clinical trial design for registration.
Enrollment in our Phase 2 investigator-initiated trial in patients with blood cancers has been completed. We plan to use these data, when available, to inform a decision regarding future program development in blood cancers.
 
19

Table of Contents
CD45-ADC
Updates
We have identified a lead antibody for this program, and IND enabling work on
CD45-ADC
is progressing in 2020.
Impact of the
COVID-19
Pandemic
On March 11, 2020, the World Health Organization, or WHO, declared
COVID-19
a global pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to
COVID-19.
The U.S. federal government subsequently issued initial
15-day
social distancing guidelines which were in effect through April 30, 2020 as a measure to reduce the escalation of the spread of
COVID-19
in the U.S. More than 40 states and certain U.S. territories, including the Commonwealth of Massachusetts where our operations are located, followed suit and instituted quarantines, restrictions on travel, “stay at home” rules, restrictions on types of businesses that may continue to operate and restrictions on the types of construction projects that may continue. As a result, the
COVID-19
pandemic has caused significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets.
We have been carefully monitoring the
COVID-19
pandemic and its potential impact on our business and have taken important steps to help ensure the safety of employees and their families and to reduce the spread of
COVID-19
in the Cambridge community. We have established a work-from-home policy for all employees, other than those who are performing or supporting business-critical research and development operations, such as certain members of our laboratory and facilities staff. For those employees, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the
COVID-19
pandemic. We have also maintained efficient communication with our partners and clinical sites as the
COVID-19
situation has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs.
The future impact of the
COVID-19
pandemic on our industry, the healthcare system and our current and future operations and financial condition will, however, depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the effect of any relaxation of current restrictions within the Cambridge community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A. Risk Factors” for a discussion of the potential adverse impact of
COVID-19
on our business, results of operations and financial condition.
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 foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
 
   
employee-related expenses, including salaries and related costs, 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, including under agreements with contract research organizations, or CROs;
 
   
the cost of consultants and contract manufacturing organizations, or CMOs, that manufacture drug products for use in our preclinical studies and clinical trials;
 
20

Table of Contents
   
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and
 
   
payments made under third-party licensing agreements.
We expense research and development costs to operations as incurred. Advance payments 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 and development expenses are tracked on a
program-by-program
basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. We do not allocate employee costs, costs associated with our platform technology or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following:
 
   
the continuing impact of the
COVID-19
pandemic on our industry, the healthcare system, and our current and future operations;
 
   
successful completion of preclinical studies and clinical trials;
 
   
receipt and related terms of marketing approvals from applicable regulatory authorities;
 
   
raising additional funds necessary to complete clinical development of and commercialize our product candidates;
 
   
obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates;
 
   
making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;
 
   
developing and implementing marketing and reimbursement strategies;
 
   
establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
 
   
acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
 
   
effectively competing with other therapies;
 
   
obtaining and maintaining third-party coverage and adequate reimbursement;
 
   
protecting and enforcing our rights in our intellectual property portfolio; and
 
   
maintaining a continued acceptable safety profile of the products following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates would 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.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
 
21

Table of Contents
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, and stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs and insurance costs, as well as professional fees for legal, patent, consulting, accounting and audit services.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased costs associated with continuing to operate as a growing public company.
Interest and Other Income, Net
Interest and other income, net, consists of interest income and miscellaneous income and expense unrelated to our core operations.
Income Taxes
Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and orphan drug tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2019, we had net operating loss carryforwards for federal income tax purposes of $75.7 million, of which $17.5 million begin to expire in 2035 and $58.2 million can be carried forward indefinitely. As of December 31, 2019, we had net operating loss carryforwards for state income tax purposes of $78.1 million which begin to expire in 2035. As of December 31, 2019, we also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $6.2 million and $1.6 million, respectively, which begin to expire in 2035 and 2030, respectively.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that of our critical accounting policies 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 ended December 31, 2019, on file with the SEC, the following involve the most judgment and complexity:
 
   
accrued research and development expenses; and
 
   
stock-based compensation.
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. 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.
Results of Operations
Comparison of the Three Months Ended June 30, 2020 and 2019
The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:
 
    
Three Months Ended June 30,
        
    
2020
    
2019
    
Change
 
    
(in thousands)
 
Revenue
   $ —        $ —        $ —    
  
 
 
    
 
 
    
 
 
 
Operating expenses:
        
Research and development
     12,610        13,433        (823
General and administrative
     7,402        5,905        1,497  
  
 
 
    
 
 
    
 
 
 
Total operating expenses
     20,012        19,338        674  
  
 
 
    
 
 
    
 
 
 
Loss from operations
     (20,012      (19,338      (674
Interest and other income, net
     933        1,630