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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 September 30, 2021
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 No.)
   
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 October 31, 2021, there were 58,777,271 shares of Common Stock, $0.001 par value per share, outstanding.
 
 
 

Table of Contents
Magenta Therapeutics, Inc.
INDEX
 
 
  
Page
 
  
  
 
5
 
  
 
5
 
  
 
6
 
  
 
7
 
  
 
9
 
  
 
10
 
  
 
18
 
  
 
28
 
  
 
29
 
  
  
 
29
 
  
 
30
 
  
 
81
 
  
 
82
 
  
 
83
 
 
2

Table of Contents
RISK FACTOR SUMMARY
The risk factors detailed in “Item 1A. Risk Factors” in this Quarterly Report on Form
10-Q
are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:
 
 
 
The novel coronavirus, or
COVID-19,
pandemic has caused, and could continue to cause, severe disruption in the U.S., regional and global economies and could seriously harm our development efforts, increase our costs and expenses and have a material adverse effect on our employees, business, financial condition and results of operations.
 
 
 
We are a clinical stage company with a limited operating history, have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future.
 
 
 
We have no products approved for commercial sale and have not generated any revenue from product sales. If we are unable to raise additional capital when needed or on terms acceptable to us, we could be forced to significantly delay, scale back or discontinue our development or commercialization efforts.
 
 
 
Although we have initiated and conducted clinical trials for some of our product candidates, including
MGTA-145,
we have not yet demonstrated the ability to successfully advance our clinical trials for our product candidates through the final regulatory processes and obtain marketing approvals for such products or conduct sales and marketing activities necessary for successful commercialization.
 
 
 
If we are unable to obtain regulatory approval for
MGTA-145,
MGTA-117
or any other product candidates that we may identify or develop, our business will be substantially harmed.
 
 
 
We have not yet demonstrated an ability to manufacture or process drug product on a commercial-scale and may not be able to do so for any of our product candidates.
 
 
 
The results of earlier studies and interim data from our ongoing studies may not be predictive of future clinical trial results, and we may fail to establish an adequate safety or efficacy profile to conduct advanced clinical trials or obtain regulatory approval for
MGTA-145,
MGTA-117
or any other product candidates that we may pursue.
 
 
 
Stem cell transplant is a high-risk procedure that may result in complications or adverse events for patients in our clinical trials or for patients that use any of our product candidates, if approved. If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the development of any of our product candidates, we may need to limit, delay or abandon our further clinical development of those product candidates, even if such events, effects or characteristics were the result of stem cell transplant or related procedures generally, and not directly or specifically caused or exacerbated by our product candidates.
 
 
 
If we are not able to identify a safe and effective dose for any of our antibody-drug conjugates, or ADCs, we may need to delay, abandon or limit our development of any potential product candidates.
 
 
 
We rely, and expect to continue to rely, on third parties to manufacture our clinical product supplies, and we intend to rely on third parties to produce and process our product candidates, if approved.
 
 
 
If we are unable to successfully develop our current programs into a comprehensive portfolio of product candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our current and future product candidates.
 
 
 
We are developing E478 specifically to partner with gene therapy and genome editing companies, and if we are unable to find willing collaborators, this may adversely affect the development of E478 and our business.
 
 
 
The commercial success of any of our product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.
 
 
 
We face substantial competition, including from companies with greater financial, technical, research, manufacturing, marketing, distribution and other resources than us, which may result in others discovering, developing or commercializing products before or more successfully than we do.
 
 
 
We have entered into collaborations and may enter into additional collaborations, strategic alliances or additional licensing arrangements in the future, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.
 
 
 
We are highly dependent on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.
 
3

Table of Contents
 
 
It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection. If we are unable to obtain and maintain sufficient intellectual property protection for
MGTA-145,
MGTA-117
or any of our other current or any future product candidates, or our technologies, we may not be able to compete effectively in our markets.
 
 
 
Our future success depends in part upon our ability to attract and retain highly skilled personnel, including the members of our executive team and key scientific and medical personnel employees.
 
 
 
Changes in tax law could adversely affect our business and financial condition.
This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements in this Quarterly Report on Form
10-Q.
 
4

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)
 
 
  
September 30,
2021
 
 
December 31,
2020
 
Assets
  
 
Current assets:
  
 
Cash and cash equivalents
   $ 157,539     $ 58,152  
Marketable securities
     35,077       90,683  
Prepaid expenses and other current assets
     3,859       2,692  
    
 
 
   
 
 
 
Total current assets
     196,475       151,527  
Restricted cash
     1,780       1,780  
Property and equipment, net
     7,981       8,312  
    
 
 
   
 
 
 
Total assets
   $ 206,236     $ 161,619  
    
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 1,886     $ 3,760  
Accrued expenses and other current liabilities
     8,261       7,670  
    
 
 
   
 
 
 
Total current liabilities
     10,147       11,430  
Deferred rent
     6,401       6,283  
    
 
 
   
 
 
 
Total liabilities
     16,548       17,713  
    
 
 
   
 
 
 
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; 58,777,271 shares issued and outstanding as of September 30, 2021 and 48,541,601 shares issued and 48,533,135 shares outstanding as of December 31, 2020
     59       49  
Additional
paid-in
capital
     495,903       398,311  
Accumulated other comprehensive income (loss)
     1       (23
Accumulated deficit
     (306,275     (254,431
    
 
 
   
 
 
 
Total stockholders’ equity
     189,688       143,906  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 206,236     $ 161,619  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
5

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

September 30,
   
Nine Months Ended

September 30,
 
              
    
2021
   
2020
   
2021
   
2020
 
Operating expenses:
                                
Research and development
   $ 10,795     $ 11,786     $ 33,652       38,359  
General and administrative
     7,450       6,595       20,900       21,278  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     18,245       18,381       54,552       59,637  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (18,245     (18,381     (54,552     (59,637
Interest and other income, net
     818       703       2,708       2,869  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
   $ (17,427   $ (17,678   $ (51,844   $ (56,768
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share, basic and diluted
   $ (0.30   $ (0.37   $ (0.97   $ (1.34
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding, basic and diluted
     58,583,476       48,255,353       53,655,314       42,431,874  
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss:
                                
Net loss
   $ (17,427   $ (17,678   $ (51,844   $ (56,768
Other comprehensive income (loss):
                                
Unrealized gains (losses) on marketable securities
     (1     (114     24       31  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     (1     (114     24       31  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive loss
   $ (17,428   $ (17,792   $ (51,820   $ (56,737
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
Additional
 
  
Other
 
 
 
 
 
Total
 
 
  
Common Stock
 
  
Paid-in
 
  
Comprehensive
 
 
Accumulated
 
 
Stockholders’
 
 
  
Shares
 
  
Amount
 
  
Capital
 
  
Income (Loss)
 
 
Deficit
 
 
Equity
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
Three Months Ended September 30, 2021
 
                                                                                                                                                       
Balances at June 30, 2021
  
 
58,508,735
 
  
$
59
 
  
$
491,679
 
  
$
2
 
 
$
(288,848
 
$
202,892
 
Vesting of restricted stock
  
 
209,998
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
Issuance of common stock upon exercise of stock options
  
 
58,538
 
  
 
—  
 
  
 
425
 
  
 
—  
 
 
 
—  
 
 
 
425
 
Stock-based compensation expense
  
 
—  
 
  
 
—  
 
  
 
3,799
 
  
 
—  
 
 
 
—  
 
 
 
3,799
 
Unrealized losses on marketable securities
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(1
 
 
—  
 
 
 
(1
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(17,427
 
 
(17,427
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at September 30, 2021
  
 
58,777,271
 
  
$
59
 
  
$
495,903
 
  
$
1
 
 
$
(306,275
 
$
189,688
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
  
 
  
Three Months Ended September 30, 2020
 
                                                                                                                                                       
Balances at June 30, 2020
  
 
48,241,212
 
  
$
48
 
  
$
392,298
 
  
$
153
 
 
$
(218,585
 
$
173,914
 
Vesting of restricted stock
  
 
36,522
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
Issuance of common stock upon exercise of stock options
  
 
15,735
 
  
 
—  
 
  
 
78
 
  
 
—  
 
 
 
—  
 
 
 
78
 
Stock-based compensation expense
  
 
—  
 
  
 
—  
 
  
 
2,366
 
  
 
—  
 
 
 
—  
 
 
 
2,366
 
Unrealized losses on marketable securities
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(114
 
 
—  
 
 
 
(114
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(17,678
 
 
(17,678
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at September 30, 2020
  
 
48,293,469
 
  
$
48
 
  
$
394,742
 
  
$
39
 
 
$
(236,263
 
$
158,566
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
7

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity (Continued)
(In thousands, except share data)
(Unaudited)
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
Additional
 
  
Other
 
 
 
 
 
Total
 
 
  
Common Stock
 
  
Paid-in
 
  
Comprehensive
 
 
Accumulated
 
 
Stockholders’
 
 
  
Shares
 
  
Amount
 
  
Capital
 
  
Income (Loss)
 
 
Deficit
 
 
Equity
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
Nine Months Ended September 30, 2021
 
                                                                                                                                                       
Balances at December 31, 2020
  
 
48,533,135
 
  
$
49
 
  
$
398,311
 
  
$
(23
 
$
(254,431
 
$
143,906
 
Issuance of common stock upon private investment, net of offering costs
  
 
9,599,998
 
  
 
10
 
  
 
86,087
 
  
 
—  
 
 
 
—  
 
 
 
86,097
 
Vesting of restricted stock
  
 
218,464
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
Issuance of common stock upon exercise of stock options
  
 
411,685
 
  
 
—  
 
  
 
3,294
 
  
 
—  
 
 
 
—  
 
 
 
3,294
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
13,989
 
  
 
—  
 
  
 
86
 
  
 
—  
 
 
 
—  
 
 
 
86
 
Stock-based compensation expense
  
 
—  
 
  
 
—  
 
  
 
8,125
 
  
 
—  
 
 
 
—  
 
 
 
8,125
 
Unrealized gains on marketable securities
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
24
 
 
 
—  
 
 
 
24
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(51,844
 
 
(51,844
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at September 30, 2021
  
 
58,777,271
 
  
$
59
 
  
$
495,903
 
  
$
1
 
 
$
(306,275
 
$
189,688
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
  
Nine Months Ended September 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
  
 
162,195
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Issuance of common stock upon exercise of stock options
  
 
240,089
 
  
 
—  
 
  
 
1,895
 
  
 
—  
 
  
 
—  
 
 
 
1,895
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
5,653
 
  
 
—  
 
  
 
42
 
  
 
—  
 
  
 
—  
 
 
 
42
 
Stock-based compensation expense
  
 
—  
 
  
 
—  
 
  
 
7,610
 
  
 
—  
 
  
 
—  
 
 
 
7,610
 
Unrealized gains on marketable securities
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
31
 
  
 
—  
 
 
 
31
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(56,768
 
 
(56,768
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balances at September 30, 2020
  
 
48,293,469
 
  
$
48
 
  
$
394,742
 
  
$
39
 
  
$
(236,263
 
$
158,566
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
8

Table of Contents
Magenta Therapeutics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
  
Nine months ended
September 30,
 
 
  
2021
 
 
2020
 
Cash flows from operating activities:
  
 
Net loss
   $ (51,844   $ (56,768
Adjustments to reconcile net loss to net cash used in operating activities:
                
Stock-based compensation expense
     8,125       7,610  
Depreciation and amortization expense
     1,485       1,483  
Loss on disposal of property and equipment
     95       1  
Net amortization of premiums on marketable securities
     630       111  
Changes in operating assets and liabilities:
                
Prepaid expenses and other current assets
     (1,167     1,579  
Accounts payable
     (1,874     (423
Accrued expenses and other current liabilities
     591       (3,888
Deferred rent
     118       5  
    
 
 
   
 
 
 
Net cash used in operating activities
     (43,841     (50,290
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property and equipment
     (1,249     (187
Purchases of marketable securities
     —         (4,974
Maturities of marketable securities
     55,000       65,500  
    
 
 
   
 
 
 
Net cash provided by investing activities
     53,751       60,339  
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Proceeds from private investment
     86,400       —    
Proceeds from public offerings, net of underwriting discounts and commissions
     —         64,860  
Payments of offering costs
     (303     (237
Proceeds from exercise of common stock options
     3,294       1,895  
Proceeds from issuance of common stock under Employee Stock Purchase Plan
     86       42  
    
 
 
   
 
 
 
Net cash provided by financing activities
     89,477       66,560  
    
 
 
   
 
 
 
Net increase in cash, cash equivalents and restricted cash
     99,387       76,609  
Cash, cash equivalents and restricted cash at beginning of period
     59,932       66,851  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at end of period
   $ 159,319     $ 143,460  
    
 
 
   
 
 
 
Supplemental disclosure of
non-cash
investing and financing activities:
                
Offering costs included in accounts payable and accrued expenses
   $ —       $ 60  
The accompanying notes are an integral part of these consolidated financial statements.
 
9

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
 designed
to bring the curative power of stem cell transplants to more patients with blood cancers, genetic diseases and autoimmune 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 novel coronavirus
(“COVID-19”)
pandemic 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 May 2021, the Company issued and sold 9,599,998 shares of its common stock in a private placement at a purchase price of $9.00 per share, resulting in net proceeds of $86.1 million, after deducting offering expenses. In connection with the private placement, the Company filed a resale registration statement with the Securities and Exchange Commission (the “SEC”) in June 2021 to register the resale of these shares by the purchasers in the private placement.
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 deducting underwriting discounts and commissions and other offering expenses.
The Company has a shelf registration statement on Form
S-3
(the “Shelf”) on file with 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 September 30, 2021, no sales have been made pursuant to the ATM Program.
The Company has incurred recurring losses since inception, including net losses of $51.8 million and $74.9 million for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. As of September 30, 2021, the Company had an accumulated deficit of $306.3 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”).
 
10

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, 2020 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 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, 2020 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 September 30, 2021 and consolidated results of operations for the three and nine months ended September 30, 2021 and 2020 and consolidated cash flows for the nine months ended September 30, 2021 and 2020 have been made. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021 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.
 
11

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 nine months ended September 30, 2021 and 2020, 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 nine months ended September 30, 2021 and 2020. 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:
 
    
As of September 30,
 
        
    
2021
    
2020
 
Stock options to purchase common stock
     6,091,220        5,782,911  
Unvested restricted common stock and units
     497,418        251,723  
Shares of common stock issuable under Employee Stock Purchase Plan
     8,843        8,213  
    
 
 
    
 
 
 
       6,597,481        6,042,847  
    
 
 
    
 
 
 
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 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.
 
12

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
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 September 30, 2021, marketable securities by security type consisted of (in thousands):
 
           
Gross
    
Gross
    
Estimated
 
    
Amortized
    
Unrealized
    
Unrealized
    
Fair
 
    
Cost
    
Gains
    
Losses
    
Value
 
                             
U.S. treasury notes (due within one year)
   $ 35,076      $ 1      $ —        $ 35,077  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 35,076      $ 1      $ —        $ 35,077  
    
 
 
    
 
 
    
 
 
    
 
 
 
As of December 31, 2020, marketable securities by security type consisted of (in thousands):
 
 
  
 
 
  
Gross
 
  
Gross
 
  
Estimated
 
 
  
Amortized
 
  
Unrealized
 
  
Unrealized
 
  
Fair
 
 
  
Cost
 
  
Gains
 
  
Losses
 
  
Value
 
 
  
 
 
  
 
 
  
 
 
  
 
 
U.S. treasury notes (due within one year)
  
$
90,706
 
  
$
—  
 
  
$
(23
  
$
90,683
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
90,706
 
  
$
—  
 
  
$
(23
  
$
90,683
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
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 September 30, 2021 Using:
 
 
  
Level 1
 
  
Level 2
 
  
Level 3
 
  
Total
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Cash equivalents:
  
  
  
  
Money market funds
  
$
157,781
 
  
$
—  
 
  
$
—  
 
  
$
157,781
 
Marketable securities:
  
  
  
  
U.S. treasury notes
  
 
—  
 
  
 
35,077
 
  
 
—  
 
  
 
35,077
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
157,781
 
  
$
35,077
 
  
$
—  
 
  
$
192,858
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
13

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
    
Fair Value Measurements at December 31, 2020 Using:
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
                             
Cash equivalents:
                                   
Money market funds
   $ 43,182      $ —        $ —        $ 43,182  
U.S. treasury notes
     —          14,999        —          14,999  
Marketable securities:
                                   
U.S. treasury notes
     —          90,683        —          90,683  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 43,182      $ 105,682      $ —        $ 148,864  
    
 
 
    
 
 
    
 
 
    
 
 
 
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
    
September 30, 2021
    
December 31, 2020
 
               
Accrued external research and development expenses
   $ 3,294      $ 2,662  
Accrued payroll and related expenses
     2,983        3,107  
Accrued professional fees
     932        693  
Deferred rent, current portion
     555        555  
Accrued other
     497        653  
    
 
 
    
 
 
 
     $ 8,261      $ 7,670  
    
 
 
    
 
 
 
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 September 30, 2021, 3,151,538 shares of common stock were available for issuance under the 2018 Plan.
2019 Employee Stock Purchase Plan
Employees may elect to participate in The Magenta Therapeutics, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”). 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. The
six-month offering
periods begin in December and June of each year. During the nine months ended September 30, 2021, 13,989 shares of common stock were purchased under the ESPP at a purchase price per share of $6.15. During the nine months ended September 30, 2020, 5,653 shares of common stock were purchased under the ESPP at a purchase price per share of $7.51. As of September 30, 2021, 136,835 shares remained available for issuance under the ESPP.
Grant of Stock Options
During the nine months ended September 30, 2021, the Company granted options to certain employees and directors with service-based vesting conditions for the purchase of 2,526,457 shares of common stock with a weighted average grant date fair value of $6.68 per share. Stock-based compensation expense is being recognized over the requisite service period of four years.
Grant of Restricted Stock Units
During the nine months ended September 30, 2021, the Company granted 275,625 restricted stock units to certain employees with a weighted average grant date fair value of $8.07 per share. Stock-based compensation expense is being recognized over the requisite service period of three years.
 
14

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
Grant of Performance Restricted Stock Units
During the nine months ended September 30, 2021, the Company granted 300,000 performance-based restricted stock units to certain employees with a weighted average grant date fair value of $10.65 per share. These performance-based restricted stock units vest upon the occurrence of certain operational and financial events. At the achievement of the performance-based vesting criteria, each performance-based restricted stock unit entitles the holder to a specified number of shares of common stock.
During the three and nine months ended September 30, 2021, the Company recorded stock compensation expense of $1.7 million related to the vesting of 170,000 performance-based restricted stock units.
Stock-Based Compensation
Stock-based compensation expense was classified in the statements of operations and comprehensive loss as follows (in thousands):
 
    
Three Months Ended September 30,
    
Nine Months Ended September 30,
 
               
    
2021
    
2020
    
2021
    
2020
 
                             
Research and development expenses
   $ 1,335      $ 878      $ 3,276      $ 2,680  
General and administrative expenses
     2,464        1,488        4,849        4,930  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 3,799      $ 2,366      $ 8,125      $ 7,610  
    
 
 
    
 
 
    
 
 
    
 
 
 
As of September 30, 2021, unrecognized compensation expense related to unvested share-based awards with service-based vesting conditions was $21.8 million, which is expected to be recognized over a weighted average period of 2.9 years. Additionally, the Company had unrecognized compensation cost of $1.7 million related to the unvested performance restricted stock units for which the performance conditions were not considered probable of achievement as of September 30, 2021.
6. Commitments and Contingencies
Leases
In May 2018, the Company entered into a sublease, as amended, for up to approximately 69,000 square feet of office and laboratory space in Cambridge, Massachusetts. 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 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 funded $5.2 million in tenant improvements to the leased facility during 2019. 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 September 30, 2021 and December 31, 2020.
As of September 30, 2021 and December 31, 2020, the Company had long-term deferred rent of $6.4 million and $6.3 million, respectively, related to lease incentives and payment escalations. As of September 30, 2021 and December 31, 2020, 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 $1.5 million during each of the three months ended September 30, 2021 and 2020. The Company recorded rent expense of $4.6 million during each of the nine months ended September 30, 2021 and 2020.
As of September 30, 2021, the future minimum lease payments due under the noncancelable operating lease was as follows (in thousands):
 
Remainder of 2021 (three months)
   $ 1,549  
2022
     6,375  
2023
     6,734  
2024
     7,100  
2025
     7,455  
Thereafter
     17,444  
    
 
 
 
     $ 46,657  
    
 
 
 
 
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Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
In 2018, the Company entered into two
two-year
sub-subleases
of approximately 27,000 square feet of office space in Cambridge, Massachusetts which were both set to expire in the fourth quarter of 2020. In the third quarter of 2020, the Company amended each of the
sub-subleases
to extend their expirations to July 2021 and April 2022, respectively. In the second quarter of 2021, the
sub-sublease
expiring in July 2021 was further amended to extend the expiration to December 2021. As of September 30, 2021, the remaining base rent payments due to the Company under the amended
sub-subleases
was $1.0 million. The Company recorded other income of $0.8 million and $0.6 million during the three months ended September 30, 2021 and 2020, respectively, related to these
sub-subleases.
 
The Company recorded other income of $2.7 million and $2.0 million during the nine months ended September 30, 2021 and 2020, respectively, 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 the three months ended September 30, 2021 and 2020, the Company recorded less than $0.1 million and $0.3 million, respectively, of research and development expense related to this agreement for upfront technology access fees, research exclusivity fees and research support. During the nine months ended September 30, 2021 and 2020, the Company recorded $0.4 million and $0.6 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 and 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 three months ended September 30, 2021 and 2020, the Company did not incur any expense related to the achievement of these milestones. During the nine months ended September 30, 2021, the Company recorded $0.1 million of expense related to the achievement of one of these milestones. During the nine months ended September 30, 2020, the Company did not incur any expense related to the achievement 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 September 30, 2021, 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 nine months ended September 30, 2021 and 2020, the Company did not incur any expense related to these licenses.
 
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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 in its consolidated financial statements as of September 30, 2021.
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. Effective August 2021, the Company began making matching contributions of up to 2% of eligible wages. During the three and nine months ended September 30, 2021, the Company recorded less than $0.1 million of expense related to this matching contribution.
8. Related Parties
National Marrow Donor Program (as successor in interest to Be The Match BioTherapies Collection Services, LLC (formerly known as Be The Match BioTherapies, LLC))
Effective March 2018, Amy Lynn Ronneberg, the then serving 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 National Marrow Donor Program/Be The Match, or NMDP/Be The Match, organization in June 2020. The Company has collaboration agreements with the National Marrow Donor Program (as successor in interest to Be The Match BioTherapies Collection Services, LLC (formerly known as Be The Match BioTherapies, LLC)) and a research agreement with an affiliated organization, Center for International Blood and Marrow Transplant Research. In addition, in June 2020, the Company entered into a clinical collaboration agreement with NMDP/Be The Match to evaluate the potential utility of
MGTA-145
for mobilizing and collecting hematopoietic stem cells from donors in a single day and then using them for allogeneic transplants in patients. Under the terms of this agreement, the Company shall fund up to fifty percent of NMDP/Be The Match clinical trial costs and provide the trial drugs which will be included in research and development expense.
For the three months ended September 30, 2021 and 2020, the Company recorded expense of $0.2 million and $0.1 million, respectively, related to these agreements. For the nine months ended September 30, 2021 and 2020, the Company recorded expense of $0.5 million and $0.3 million, respectively, related to these agreements. As of September 30, 2021 and December 31, 2020,
 amounts on the consolidated balance sheets related to these agreements were less than $
0.1 million, which amounts were included in accounts payable and accrued expenses and other current liabilities and less than $0.1 million, which amounts were included in prepaid expenses and other current assets.
 
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD LOOKING STATEMENTS
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 initiation, timing and success of clinical trials of
MGTA-145,
MGTA-117
and any other product candidates;
 
   
the outcomes of our preclinical studies;
 
   
our ability to commence and 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-117
or any other product candidates we may develop;
 
   
our ability to establish clinical programs moving forward in multiple indications, with a rapidly 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-117
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-117
and any other product candidates we may identify and pursue;
 
   
the benefits of the use of
MGTA-145,
MGTA-117
or any other product candidate, if approved;
 
   
our ability to successfully commercialize
MGTA-145,
MGTA-117
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-117
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-117
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-117
or any other product candidates we may identify and pursue;
 
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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 novel coronavirus, or
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
Magenta Therapeutics is a clinical-stage biotechnology company developing novel medicines designed to bring the curative power of stem cell transplants to more patients with blood cancers, genetic diseases and autoimmune diseases.
Magenta’s drug development pipeline includes multiple product candidates designed to improve stem cell transplants. Our lead clinical program is designed to more efficiently and reliably mobilize and collect sufficient functional stem cells for use in stem cell transplantation, a process known as mobilization. We are also developing product candidates that are designed to deplete targeted cells in the bone marrow to make space for the bone marrow to receive newly transplanted stem cells, a process known as conditioning. Our mobilization program is intended to enable rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells for transplant. Magenta’s targeted conditioning programs are intended to enhance the efficacy of and/or reduce the dosing levels, intensity or, in some cases, even the need for chemotoxic agents.
Stem cell transplant is an established and, for certain patients, can be a curative medical procedure that can reset a patient’s blood and immune system after the patient has received treatment for certain blood cancers, genetic diseases or autoimmune diseases. Stem cell transplants involve a three-step process: (i) stem cells are mobilized out of the patient’s or donor’s bone marrow and collected from the blood (or, in rare cases, surgically extracted from their bone marrow); (ii) the patient’s bone marrow is cleared of any remaining stem cells in order to make space to receive new transplanted stem cells; and (iii) the stem cells are transplanted into the patient via infusion where they fasten to, or engraft in, the bone marrow and grow into the blood cells and platelets that form the basis of a reset and rebuilt blood and immune system. All transplants are categorized as either autologous or allogeneic depending on the source of the new stem cells for the transplant. In an autologous transplant, the patient’s own stem cells are used. In an allogeneic transplant, patients receive cells from a stem cell donor.
Stem cell transplant, whether autologous or allogeneic, has broad applicability across disease settings, including blood cancers, gene therapies for genetic diseases and autoimmune diseases. It is the current standard of care for certain blood cancers such as acute myeloid leukemia, or AML, myelodysplastic syndromes, or MDS, multiple myeloma and
non-Hodgkin’s
lymphoma. Hematopoietic stem cell, or HSC, -based gene therapies also rely on the same steps of the stem cell transplant process with an additional step where collected stem cells are gene-corrected or modified to address the underlying disease prior to transplant. Such gene therapy approaches that leverage the stem cell transplant procedure are being investigated by numerous companies in a variety of diseases, including sickle cell disease, beta-thalassemia and lysosomal storage disorders. Autoimmune diseases such as multiple sclerosis and systemic sclerosis may also benefit from resetting the immune system through stem cell transplant.
Currently, the number of days required to mobilize and collect a patient’s or donor’s stem cells is a minimum of five days in blood cancer patients and healthy donors and as many as 30 days or more in patients with sickle cell disease. When planning for a patient’s transplant, transplanting physicians cannot reliably predict at the outset how long it will take for patients to mobilize the
 
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number of cells required. Many patients require multiple collections, including approximately 40% of blood cancer patients and 75% of sickle cell disease patients. In addition, each day scheduled for attempted mobilization and collection can cause an accumulation of both the direct costs associated with the repeated use of mobilization agents and other healthcare resources, including personnel time, and the indirect costs associated with the need to block time in the limited number of chairs in transplant centers that are used to collect stem cells. Similarly,
HSC-based
gene therapies could benefit from more efficient collection of stem cells which could potentially reduce gene therapy manufacturing timelines and costs. Additionally, there are no approved mobilization options for patients with sickle cell disease and autoimmune diseases, and the
off-label
use of currently available medicines is associated with significant safety risks including vaso-occlusive events in sickle cell disease patients.
Magenta is
developing MGTA-145 as
a new first-line standard of care for stem cell mobilization in a broad range of diseases, for both autologous and allogeneic
transplants. MGTA-145, a
CXCR2 agonist, works in combination with plerixafor, a CXCR4 antagonist, to harness a complementary physiological mechanism for stem cell mobilization. The goal
of MGTA-145 is
to be the preferred first-line mobilization option for all patients and donors through rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells. In 2020, we completed a Phase 1 clinical trial in healthy volunteers to evaluate the ability of
MGTA-145,
in combination with plerixafor, to mobilize stem cells. Based on the results of the study, we have advanced the program into three ongoing and planned Phase 2 clinical trials, including an autologous transplant trial in multiple myeloma patients; an allogeneic transplant trial with healthy donor cells collected for transplant in patients with AML, MDS, or acute lymphocytic leukemia, or ALL; and lastly, a planned trial in partnership with bluebird bio, Inc. to mobilize and collect the stem cells of sickle cell disease patients.
In addition to the opportunity to address the challenges in mobilization and collection of stem cells, Magenta also seeks to improve patient conditioning prior to transplant. Conditioning is the process by which patients are treated with chemotherapy prior to transplant to ensure that the bone marrow has sufficient space to receive newly transplanted stem cells. Currently, only approximately 50% of eligible patients receive a stem cell transplant, in part because of the risks and toxicities of the chemotherapeutic agents available today.
Magenta is developing a suite of novel antibody drug conjugates, or ADCs, for conditioning, a step in the transplant process that currently relies on the use of systemic chemotherapy agents and radiation. We are seeking to replace these
toxic, non-targeted conditioning
agents with targeted ADCs.
Magenta’s lead conditioning program,
MGTA-117,
is designed to selectively deplete stem cells and reduce the need for high-dose or high-intensity chemotherapeutic agents in oncology applications and potentially eliminate the use of busulfan in gene therapy applications.
MGTA-117 targets
CD117, which is highly expressed on the cell surface of HSCs and leukemia cells, making it an ideal target for conditioning across broad sets of diseases, including certain blood cancers, hemoglobinopathies (sickle cell disease and beta-thalassemia) and inherited metabolic disorders. We anticipate opening a Phase 1/2 dose escalation study in the fourth quarter of 2021 and evaluating the safety, tolerability, pharmacokinetics, or PK, and pharmacodynamics, of PD, of
MGTA-117
as a single agent with possible anti-tumor therapeutic benefit in a relapsed/refractory AML and MDS patient population.
Our additional research-stage conditioning programs target stem and/or immune cells and are being designed to eliminate toxic chemotherapy conditioning regimens across multiple disease settings. Our C100 program focuses on addressing opportunities in immune reset for autoimmune diseases. Our C300 program is being designed to provide for lymphodepletion prior to cell therapies such as chimeric antigen receptor T cells, or
CAR-T.
Magenta is also evaluating two programs with potential in cell therapy. Each is a small molecule used to manufacture a high number of functional stem cells, from either a donor or gene-modified stem cells from a patient.
MGTA-456
is a cell therapy designed to generate higher cell doses that are well matched to the patient, which has been shown to improve the speed and success of engraftment in stem cell transplant and improve disease outcomes. In June 2020, we announced that we discontinued enrollment in our Phase 2 trial of
MGTA-456
in inherited metabolic diseases. Enrollment in an investigator-initiated trial in patients with blood cancers has been completed, and we plan to use these data, when available, to inform a decision regarding future program development in blood cancers. Our second cell therapy program, E478, is a small molecule aryl hydrocarbon receptor, or AHR, antagonist which
uses the same mechanism used to manufacture
MGTA-456
to expand gene-modified HSCs for stem cell-based gene therapy and genome editing.
Magenta intends to become a fully integrated discovery, development and commercial company in the field of stem cell transplant. We are developing our product candidates to be used individually or, in some cases, in combination with each other. As a result, our portfolio could be tailored to the patient’s disease, such that a patient may receive more than one Magenta therapy as part of his or her individual stem cell transplant.
 
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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 “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-145
and
MGTA-456,
clinical trials. We do not have any products approved for sale and have not generated any revenue from product sales.
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. Net losses were $51.8 million and $74.9 million for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. As of September 30, 2021, we had an accumulated deficit of $306.3 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, enroll and conduct Phase 2 clinical trials for
MGTA-145
and Phase 1/2 clinical trial for
MGTA-117;
 
   
initiate and conduct preclinical studies and clinical trials of our other product candidates;
 
   
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.
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 September 30, 2021, we had cash, cash equivalents and marketable securities of $192.6 million. Based on our 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 third quarter of 2023. See “—Liquidity and Capital Resources.”
 
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Recent Developments
MGTA-117 Updates
On September 15, 2021, we announced that our Investigational New Drug application, or IND, filed in June 2021 to initiate a Phase 1/2 clinical trial of
MGTA-117
in patients with AML and MDS, became active with the U.S. Food and Drug Administration, or FDA. This successfully resolved the previously-announced clinical hold placed on our IND in July 2021 by the FDA. The FDA required that we develop an additional bioassay to be used in conjunction with the PK and PD model to inform dose escalation decisions in addition to safety monitoring. This was the only clinical hold item identified by the FDA and did not relate to the toxicology or manufacturing of
MGTA-117.
We anticipate opening the Phase 1/2 dose escalation study in the fourth quarter of 2021 and evaluating the safety, tolerability, PK and PD of
MGTA-117
as a single agent with possible anti-tumor therapeutic benefit in a relapsed/refractory AML and MDS patient population. We expect to work with the FDA on an ongoing basis to transition the study to targeted conditioning in the primary target population of HSC transplant-eligible AML and MDS patients after adequate data related to the safety, tolerability, PK and PD of
MGTA-117
have been collected in the relapsed/refractory AML and MDS patient population. As the program progresses, we also plan to explore
MGTA-117
as a targeted conditioning agent prior to the delivery of gene-corrected cells associated with
ex vivo
gene therapy.
Impact of the
COVID-19
Pandemic
In March 2020,
COVID-19
was declared a pandemic by the World Health Organization. as a result, more than 40 states and certain U.S. territories, including the Commonwealth of Massachusetts where our operations are located, 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 our 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, as well as safety measures for those using our offices and laboratory facilities that are designed to comply with applicable federal, state and local guidelines instituted in response to the
COVID-19
pandemic. We will continue to assess those measures as
COVID-19-related
guidelines evolve. We have also maintained efficient communication with our partners and clinical sites as the
COVID-19
pandemic 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, including the adoption of available
COVID-19
vaccines, 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
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;
 
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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.
 
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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, 2020, we had net operating loss carryforwards for federal income tax purposes of $182.3 million, of which $17.5 million begin to expire in 2035 and $164.8 million can be carried forward indefinitely. As of December 31, 2020, we had net operating loss carryforwards for state income tax purposes of $184.6 million which begin to expire in 2035. As of December 31, 2020, we also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $8.4 million and $2.0 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, 2020, 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 September 30, 2021 and 2020
The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:
 
    
Three Months Ended

September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Operating expenses:
        
Research and development
   $ 10,795      $ 11,786      $ (991
General and administrative
     7,450        6,595        855  
  
 
 
    
 
 
    
 
 
 
Total operating expenses
     18,245        18,381        (136
  
 
 
    
 
 
    
 
 
 
Loss from operations
     (18,245      (18,381      136  
Interest and other income, net
     818        703        115  
  
 
 
    
 
 
    
 
 
 
Net loss
   $ (17,427    $ (17,678    $ 251  
  
 
 
    
 
 
    
 
 
 
 
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Research and Development Expenses
 
    
Three Months Ended
September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Direct research and development expenses by program:
        
Conditioning
   $ 1,510      $ 3,926      $ (2,416
Mobilization
     973        1,029        (56
Cell Therapy
     42        417        (375
Unallocated expenses:
        
Personnel related (including stock-based compensation)
     4,886        3,704        1,182  
Consultant (including stock-based compensation)
     544        320        224  
Facility related and other
     2,840        2,390        450  
  
 
 
    
 
 
    
 
 
 
Total research and development expenses
   $ 10,795      $ 11,786      $ (991
  
 
 
    
 
 
    
 
 
 
Expenses related to our conditioning program decreased primarily due to a decrease in manufacturing costs as we completed our GMP manufacturing activities to support the submission of an IND and future clinical trials. Expenses related to our cell therapy program decreased primarily due to the discontinuance of enrollment in our Phase 2 trial in inherited metabolic diseases in June 2020.
The increase in personnel related costs was due primarily to an increase in headcount in our research and development function and an increase in stock-based compensation. Personnel related costs for the three months ended September 30, 2021 and 2020 included stock-based compensation expense of $1.3 million and $0.7 million, respectively. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility.
General and Administrative Expenses
 
    
Three Months Ended

September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Personnel related (including stock-based compensation)
   $ 4,213      $ 3,539      $ 674  
Professional and consultant
     1,317        1,524        (207
Facility related and other
     1,920        1,532        388  
  
 
 
    
 
 
    
 
 
 
Total general and administrative expenses
   $ 7,450      $ 6,595      $ 855  
  
 
 
    
 
 
    
 
 
 
The increase in personnel related costs was primarily due to an increase in stock-based compensation. Personnel related costs for the three months ended September 30, 2021 and 2020 included stock-based compensation expense of $2.5 million and $1.5 million, respectively. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility.
Interest and Other Income, Net
Interest income and other income, net for the three months ended September 30, 2021 consisted primarily of sublease income of $0.8 million and interest income of less than $0.1 million. Interest income and other income, net for the three months ended September 30, 2020 consisted primarily of sublease income of $0.6 million and interest income of $0.2 million.
 
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Comparison of the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:
 
    
Nine Months Ended
September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Operating expenses:
        
Research and development
   $ 33,652      $ 38,359      $ (4,707
General and administrative
     20,900        21,278        (378
  
 
 
    
 
 
    
 
 
 
Total operating expenses
     54,552        59,637        (5,085
  
 
 
    
 
 
    
 
 
 
Loss from operations
     (54,552      (59,637      5,085  
Interest and other income, net
     2,708        2,869        (161
  
 
 
    
 
 
    
 
 
 
Net loss
   $ (51,844    $ (56,768    $ 4,924  
  
 
 
    
 
 
    
 
 
 
Research and Development Expenses
 
    
Nine Months Ended
September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Direct research and development expenses by program:
        
Conditioning
   $ 6,028      $ 11,876      $ (5,848
Mobilization
     3,265        3,049        216  
Cell Therapy
     676        4,016        (3,340
Unallocated expenses:
        
Personnel related (including stock-based compensation)
     14,193        11,120        3,073  
Consultant (including stock-based compensation)
     1,001        960        41  
Facility related and other
     8,489        7,338        1,151  
  
 
 
    
 
 
    
 
 
 
Total research and development expenses
   $ 33,652      $ 38,359      $ (4,707
  
 
 
    
 
 
    
 
 
 
Expenses related to our conditioning program decreased primarily due to a decrease in manufacturing costs as we completed our GMP manufacturing activities to support the submission of an IND and future clinical trials. Expenses related to our cell therapy program decreased primarily due to the discontinuance of enrollment in our Phase 2 trial in inherited metabolic diseases in June 2020.
The increase in personnel related costs was due primarily to an increase in headcount in our research and development function and an increase in stock-based compensation. Personnel related costs for the nine months ended September 30, 2021 and 2020 included stock-based compensation expense of $3.2 million and $2.2 million, respectively. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility.
General and Administrative Expenses
 
    
Nine Months Ended
September 30,
        
    
2021
    
2020
    
Change
 
                      
    
(in thousands)
 
Personnel related (including stock-based compensation)
   $ 10,508      $ 11,097      $ (589
Professional and consultant
     4,785        5,412        (627
Facility related and other
     5,607        4,769        838  
  
 
 
    
 
 
    
 
 
 
Total general and administrative expenses
   $ 20,900      $ 21,278      $ (378
  
 
 
    
 
 
    
 
 
 
The decrease in professional and consultant costs was primarily due to lower patent related costs. The increase in facility related and other was primarily due to higher operating costs related to our Cambridge, Massachusetts facility and higher directors and officers’ insurance.
 
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Table of Contents
Interest and Other Income, Net
Interest income and other income, net for the nine months ended September 30, 2021 consisted primarily of sublease income of $2.7 million and interest income $0.1 million. Interest income and other income, net for the nine months ended September 30, 2020 consisted primarily of sublease income of $2.0 million and interest income of $0.9 million. The increase in sublease income of $0.7 million was due to higher sublessor operating expenses. The decrease in interest income was primarily due to lower interest rates on invested balances.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. In June 2018, we completed an initial public offering of our common stock resulting in net proceeds of $89.9 million after deducting underwriting discounts and commissions and other offering expenses. In May 2019, we completed a
follow-on
public offering resulting in net proceeds of $60.3 million after deducting 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 deducting underwriting discounts and commission and other offering expenses. In May 2021, we issued and sold 9,599,998 shares of our common stock in a private placement at a purchase price of $9.00 per share, resulting in net proceeds of $86.1 million, after deducting offering expenses.
On August 8, 2019, we filed a shelf registration statement on Form
S-3,
or Shelf, with the Securities and Exchange Commission, or SEC, which covers the offering, issuance and sale by us of up to an aggregate of $350.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. We 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 our common stock from time to time in
“at-the-market”
offerings under the Shelf, which we refer to as the ATM Program. The Shelf was declared effective by the SEC on August 19, 2019. As of September 30, 2021, no sales have been made pursuant to the ATM Program.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
 
    
Nine Months Ended
September 30,
 
    
2021
    
2020
 
               
    
(in thousands)
 
Cash used in operating activities
   $ (43,841    $ (50,290
Cash provided by investing activities
     53,751        60,339  
Cash provided by financing activities
     89,477        66,560