10-Q
2015-06-01falseQ20001690585--12-31 0001690585 2021-12-31 0001690585 2022-06-30 0001690585 2021-01-01 2021-06-30 0001690585 2022-01-01 2022-06-30 0001690585 2021-04-01 2021-06-30 0001690585 2022-04-01 2022-06-30 0001690585 2021-01-01 2021-12-31 0001690585 2022-07-31 0001690585 2020-12-31 0001690585 2021-03-31 0001690585 2022-03-31 0001690585 2021-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2022-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2022-06-30 0001690585 mgta:TwoThousandAndEighteenStockOptionAndIncentivePlanMember 2022-06-30 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2022-06-30 0001690585 us-gaap:USTreasurySecuritiesMember mgta:DueWithInOneYearMember 2022-06-30 0001690585 us-gaap:AccountsPayableAndAccruedLiabilitiesMember mgta:MatchBioTherapiesMember 2022-06-30 0001690585 mgta:PerformanceRestrictedStockUnitsMember 2022-06-30 0001690585 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2022-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2022-06-30 0001690585 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001690585 srt:MaximumMember us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember mgta:MatchBioTherapiesMember 2022-06-30 0001690585 us-gaap:AccountingStandardsUpdate201602Member 2022-06-30 0001690585 mgta:OfficeAndLabSubleaseMember us-gaap:LetterOfCreditMember 2022-06-30 0001690585 mgta:SubSubleaseMember 2022-06-30 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2021-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2021-12-31 0001690585 mgta:DueAfterOneYearThroughTwoYearsMember us-gaap:USTreasurySecuritiesMember 2021-12-31 0001690585 us-gaap:USTreasurySecuritiesMember mgta:DueWithInOneYearMember 2021-12-31 0001690585 mgta:MatchBioTherapiesMember us-gaap:AccountsPayableAndAccruedLiabilitiesMember 2021-12-31 0001690585 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2021-12-31 0001690585 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001690585 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001690585 mgta:SubSubleaseMember 2021-12-31 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-06-30 0001690585 mgta:EmployeesAndDirectorsMember 2022-01-01 2022-06-30 0001690585 mgta:MatchBioTherapiesMember 2022-01-01 2022-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-06-30 0001690585 us-gaap:CommonStockMember 2022-01-01 2022-06-30 0001690585 us-gaap:CollaborativeArrangementMember 2022-01-01 2022-06-30 0001690585 mgta:AchievementOfDevelopmentMilestoneMember 2022-01-01 2022-06-30 0001690585 us-gaap:LicenseMember mgta:LicenseAgreementWithThirdPartiesMember 2022-01-01 2022-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-06-30 0001690585 us-gaap:RetainedEarningsMember 2022-01-01 2022-06-30 0001690585 us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001690585 us-gaap:EquityUnitPurchaseAgreementsMember 2022-01-01 2022-06-30 0001690585 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-06-30 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2022-01-01 2022-06-30 0001690585 mgta:EmployeesMember us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-06-30 0001690585 mgta:EmployeesAndDirectorsMember srt:MinimumMember 2022-01-01 2022-06-30 0001690585 mgta:EmployeesAndDirectorsMember srt:MaximumMember 2022-01-01 2022-06-30 0001690585 us-gaap:RestrictedStockUnitsRSUMember mgta:EmployeesMember srt:MinimumMember 2022-01-01 2022-06-30 0001690585 us-gaap:RestrictedStockUnitsRSUMember mgta:EmployeesMember srt:MaximumMember 2022-01-01 2022-06-30 0001690585 mgta:SubSubleaseMember 2022-01-01 2022-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2021-01-01 2021-06-30 0001690585 mgta:MatchBioTherapiesMember 2021-01-01 2021-06-30 0001690585 us-gaap:PrivatePlacementMember 2021-01-01 2021-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember us-gaap:PrivatePlacementMember 2021-01-01 2021-06-30 0001690585 us-gaap:CommonStockMember us-gaap:PrivatePlacementMember 2021-01-01 2021-06-30 0001690585 us-gaap:CommonStockMember 2021-01-01 2021-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-06-30 0001690585 us-gaap:CollaborativeArrangementMember 2021-01-01 2021-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-06-30 0001690585 us-gaap:RetainedEarningsMember 2021-01-01 2021-06-30 0001690585 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-06-30 0001690585 us-gaap:RestrictedStockMember 2021-01-01 2021-06-30 0001690585 us-gaap:EquityUnitPurchaseAgreementsMember 2021-01-01 2021-06-30 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2021-01-01 2021-06-30 0001690585 mgta:SubSubleaseMember 2021-01-01 2021-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2021-04-01 2021-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2021-04-01 2021-06-30 0001690585 mgta:MatchBioTherapiesMember 2021-04-01 2021-06-30 0001690585 us-gaap:PrivatePlacementMember 2021-04-01 2021-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember us-gaap:PrivatePlacementMember 2021-04-01 2021-06-30 0001690585 us-gaap:CommonStockMember us-gaap:PrivatePlacementMember 2021-04-01 2021-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001690585 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001690585 us-gaap:CollaborativeArrangementMember 2021-04-01 2021-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001690585 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001690585 mgta:SubSubleaseMember 2021-04-01 2021-06-30 0001690585 us-gaap:ResearchAndDevelopmentExpenseMember 2022-04-01 2022-06-30 0001690585 us-gaap:GeneralAndAdministrativeExpenseMember 2022-04-01 2022-06-30 0001690585 mgta:MatchBioTherapiesMember 2022-04-01 2022-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001690585 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001690585 us-gaap:LicenseMember mgta:LicenseAgreementWithThirdPartiesMember 2022-04-01 2022-06-30 0001690585 us-gaap:CollaborativeArrangementMember 2022-04-01 2022-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-04-01 2022-06-30 0001690585 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001690585 mgta:SubSubleaseMember 2022-04-01 2022-06-30 0001690585 srt:MaximumMember 2019-08-08 2019-08-08 0001690585 mgta:CowenAndCompanyLlcMember srt:MaximumMember 2019-08-08 2019-08-08 0001690585 us-gaap:AccountingStandardsUpdate201602Member 2022-01-01 0001690585 mgta:SubSubleaseMember 2022-01-01 0001690585 mgta:PaidBySublandlordMember mgta:OfficeAndLabSubleaseMember 2019-01-01 2019-12-31 0001690585 mgta:SubSubleaseMember 2018-12-31 0001690585 us-gaap:CollaborativeArrangementMember mgta:DevelopmentRegulatoryAndCommercialMilestoneMember mgta:PerTargetMember srt:MaximumMember 2018-03-31 0001690585 srt:MaximumMember mgta:AnnualMember us-gaap:MaintenanceMember mgta:LicenseAgreementWithHarvardMember 2016-11-30 0001690585 mgta:LicenseAgreementWithHarvardMember mgta:AchievementOfDevelopmentAndRegulatoryMilestonesMember srt:MaximumMember 2016-11-30 0001690585 mgta:SubSubleaseMember 2018-01-01 2018-12-31 0001690585 mgta:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2021-06-30 0001690585 us-gaap:RetainedEarningsMember 2021-12-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001690585 us-gaap:CommonStockMember 2021-12-31 0001690585 us-gaap:RetainedEarningsMember 2022-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001690585 us-gaap:CommonStockMember 2022-06-30 0001690585 us-gaap:RetainedEarningsMember 2020-12-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001690585 us-gaap:CommonStockMember 2020-12-31 0001690585 us-gaap:RetainedEarningsMember 2021-06-30 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001690585 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001690585 us-gaap:CommonStockMember 2021-06-30 0001690585 us-gaap:RetainedEarningsMember 2021-03-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001690585 us-gaap:CommonStockMember 2021-03-31 0001690585 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001690585 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001690585 us-gaap:CommonStockMember 2022-03-31 0001690585 us-gaap:RetainedEarningsMember 2022-03-31 iso4217:USD xbrli:shares utr:Year xbrli:pure utr:Month utr:sqft iso4217:USD xbrli:shares mgta:Sublease
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
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 July 31, 2022, there were 58,890,486 shares of Common Stock, $0.001 par value per share, outstanding.
 
 
 

Table of Contents
Magenta Therapeutics, Inc.
INDEX
 
 
  
 Page 
 
  
 
 
 
PART I – FINANCIAL INFORMATION
  
 
 
  
 
5
 
  
 
5
 
  
 
6
 
  
 
7
 
  
 
9
 
  
 
10
 
  
 
19
 
  
 
28
 
  
 
28
 
PART II – OTHER INFORMATION
  
  
 
28
 
  
 
29
 
  
 
76
 
  
 
77
 
  
 
78
 
 
2

Table of Contents
RISK FACTOR SUMMARY
The risk factors detailed in Item 1A entitled “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:
 
 
 
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.
 
 
 
We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our product candidates. Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
 
 
 
Although we have initiated clinical trials for certain of our product candidates, we have not yet demonstrated an ability to successfully complete clinical trials of our product candidates, obtain marketing approvals, manufacture a commercial-scale medicine, or arrange for a third party to do so on our behalf; or conduct sales and marketing activities necessary for successful commercialization of our product candidates. We have never generated revenue from product sales and may never be profitable.
 
 
 
We are early in our development efforts for our product candidates. If we are unable to advance our product candidates through development, obtain regulatory approval and commercialize them, or if we experience significant delays in doing so, our business will be materially harmed.
 
 
 
The successful development of biopharmaceuticals and cell-based therapies is highly uncertain. Our ongoing and planned clinical trials or those of our collaborators involving our product candidates may reveal significant adverse events not seen in our preclinical and clinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.
 
 
 
Stem cell transplant is a high-risk procedure with curative potential 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 we are not able to identify a safe and effective dose for any of our product candidates, including our antibody drug conjugates, or ADCs, such as
MGTA-117
utilizing an amanitin toxin not previously tested in humans, we may need to delay, abandon or limit our development of any potential product candidates.
 
 
 
Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates. If we encounter delays or difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
 
 
 
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 our product candidates.
 
 
 
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 may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
 
 
 
We have no experience as a company in obtaining regulatory approval for a drug or biologic. Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize a product candidate we may develop, and any such approval may be for a narrower indication than we seek.
 
 
 
Because we are developing product candidates for the treatment of diseases in which there is little clinical experience using new technologies, there is increased risk that the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or other regulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results, and these results may be difficult to analyze.
 
 
 
Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize a product candidate we may develop, and any such approval may be for a narrower indication than we seek.
 
3

Table of Contents
 
 
We rely on third parties to conduct our preclinical and clinical trials, process and product development and GMP manufacturing, and we will rely on them to perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
 
 
 
We currently 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. This reliance increases the risk that we may not have sufficient quantities of our product candidates or may not be able to produce such quantities at an acceptable cost or quality level, which could delay, prevent or impair our development or commercialization efforts.
 
 
 
Any contamination in our or our third parties’ manufacturing process, shortages of raw materials or reagents or failure of any of our key suppliers to deliver necessary components of our product candidates could result in delays in our clinical development or marketing schedules.
 
 
 
We may never obtain FDA approval for any of our product candidates in the U.S., and even if we do, we may never obtain approval for or commercialize any of our product candidates in any other jurisdiction, which would limit our ability to realize their full market potential.
 
 
 
Even if our product candidates are approved by government regulators, 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. Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell any product candidates or therapies profitably.
 
 
 
We currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.
 
 
 
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 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.
 
 
 
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 our product candidates, or our technologies, we may not be able to compete effectively in our markets and our business may be adversely affected.
 
 
 
We currently depend, and may in the future continue to depend, on collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to capitalize on the market potential of those product candidates and our business may be adversely affected.
 
 
 
We may not be successful in finding strategic collaborators for continuing development of certain of our product candidates or successfully commercializing or competing in the market for certain indications. If we are not able to establish collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans.
 
 
 
The coronavirus, or
COVID-19,
pandemic or any future pandemic, epidemic or outbreak of any other highly infectious disease could have a material adverse effect on our business, financial condition and results of operations.
 
 
 
If we lose key personnel, or if we fail to recruit additional highly skilled personnel, our ability to develop our product candidates will be impaired and our business may be harmed.
 
 
 
The trading price of our common stock has been, and will likely continue to be, highly volatile. As a result of this volatility, investors may not be able to sell common stock at or above the purchase price and may lose some or all of their investment.
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)
 
 
  
       June 30, 2022       
 
 
    December 31, 2021    
 
Assets
  
 
Current assets:
  
 
Cash and cash equivalents
   $ 54,832     $ 131,650  
Marketable securities
     84,593       45,276  
Prepaid expenses and other current assets
     2,617       3,767  
    
 
 
   
 
 
 
Total current assets
     142,042       180,693  
Restricted cash
     1,780       1,780  
Operating lease,
right-of-use
asset
     24,670        
Property and equipment, net
     6,629       7,461  
    
 
 
   
 
 
 
Total assets
   $ 175,121     $ 189,934  
    
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 2,047     $ 3,040  
Accrued expenses and other current liabilities
     5,786       7,823  
Operating lease liability, current portion
     3,423        
    
 
 
   
 
 
 
Total current liabilities
     11,256       10,863  
Operating lease liability, net of current portion
     28,187        
Deferred rent
           6,399  
    
 
 
   
 
 
 
Total liabilities
     39,443       17,262  
    
 
 
   
 
 
 
Commitments and contingencies (Note 7)
                
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; 58,848,861 and 58,799,157 shares
issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
     59       59  
Additional
paid-in
capital
     502,009       498,210  
Accumulated other comprehensive loss
     (602     (30
Accumulated deficit
     (365,788     (325,567
    
 
 
   
 
 
 
Total stockholders’ equity
     135,678       172,672  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 175,121     $ 189,934  
    
 
 
   
 
 
 
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 June 30,
 
    
Six Months Ended June 30,
 
  
 
 
 
    
 
 
 
 
  
2022
 
 
2021
 
    
2022
 
 
2021
 
Operating expenses:
  
 
    
 
Research and development
   $ 11,603     $ 11,129     $ 28,150     $ 22,857  
General and administrative
     6,480       6,481       13,767       13,450  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     18,083       17,610       41,917       36,307  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (18,083     (17,610     (41,917     (36,307
Interest and other income, net
     812       682       1,696       1,890  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
   $ (17,271   $ (16,928   $ (40,221   $ (34,417
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share, basic and diluted
   $ (0.29   $ (0.32   $ (0.68   $ (0.67
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding, basic and diluted
     58,815,543       53,705,289       58,807,395       51,150,391  
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss:
  
 
    
 
Net loss
   $ (17,271   $ (16,928   $ (40,221   $ (34,417
Other comprehensive income (loss):
                                
Unrealized gains (losses) on marketable securities
     (133     (7     (572     25  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     (133     (7     (572     25  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive loss
   $ (17,404   $ (16,935   $ (40,793   $ (34,392
    
 
 
   
 
 
   
 
 
   
 
 
 
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 June 30, 2022
 
  
 
 
 
Balances at March 31,
2022
  
 
58,799,157
 
  
$
59
 
  
$
500,115
 
  
$
(469
 
$
(348,517
 
$
151,188
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
49,704
 
  
 
 
  
 
49
 
  
 
 
 
 
 
 
 
49
 
Stock-based compensation expense
  
 
 
  
 
 
  
 
1,845
 
  
 
 
 
 
 
 
 
1,845
 
Unrealized losses on marketable securities
  
 
 
  
 
 
  
 
 
  
 
(133
 
 
 
 
 
(133
Net loss
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(17,271
 
 
(17,271
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at June 30, 2022
     58,848,861      $ 59      $ 502,009      $ (602   $ (365,788   $ 135,678  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
  
 
Three Months Ended June 30, 2021
 
  
 
 
 
Balances at March 31, 2021
  
 
48,603,205
 
  
$
49
 
  
$
400,921
 
  
$
9
 
 
$
(271,920
 
$
129,059
 
Issuance of common stock upon private investment, net of offering costs
  
 
9,599,998
 
  
 
10
 
  
 
86,087
 
  
 
 
 
 
 
 
 
86,097
 
Issuance of common stock upon exercise of stock options
  
 
291,543
 
  
 
 
  
 
2,451
 
  
 
 
 
 
 
 
 
2,451
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
13,989
 
  
 
 
  
 
86
 
  
 
 
 
 
 
 
 
86
 
Stock-based compensation expense
  
 
 
  
 
 
  
 
2,134
 
  
 
 
 
 
 
 
 
2,134
 
Unrealized losses on marketable securities
  
 
 
  
 
 
  
 
 
  
 
(7
 
 
 
 
 
(7
Net loss
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(16,928
 
 
(16,928
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at June 30, 2021
     58,508,735     
$
59      $ 491,679      $ 2    
$
(288,848
)
 
 
$
202,892  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
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
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
Six Months Ended June 30, 2022
 
  
 
 
 
Balances at December 31, 2021
  
 
58,799,157
 
  
$
59
 
  
$
498,210
 
  
$
(30
 
$
(325,567
 
$
172,672
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
49,704
 
  
 
 
  
 
49
 
  
 
 
 
 
 
 
 
49
 
Stock-based compensation expense
  
 
 
  
 
 
  
 
3,750
 
  
 
 
 
 
 
 
 
3,750
 
Unrealized losses on marketable securities
  
 
 
  
 
 
  
 
 
  
 
(572
 
 
 
 
 
(572
Net loss
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(40,221
 
 
(40,221
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2022
     58,848,861      $ 59      $ 502,009      $ (602   $ (365,788   $ 135,678  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
  
 
Six Months Ended June 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
  
 
8,466
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
—  
 
Issuance of common stock upon exercise of stock options
  
 
353,147
 
  
 
 
  
 
2,869
 
  
 
 
 
 
 
 
 
2,869
 
Issuance of common stock under Employee Stock Purchase Plan
  
 
13,989
 
  
 
 
  
 
86
 
  
 
 
 
 
 
 
 
86
 
Stock-based compensation expense
  
 
 
  
 
 
  
 
4,326
 
  
 
 
 
 
 
 
 
4,326
 
Unrealized gains on marketable securities
  
 
 
  
 
 
  
 
 
  
 
25
 
 
 
 
 
 
25
 
Net loss
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(34,417
 
 
(34,417
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2021
     58,508,735     
$
59     
$
491,679     
$
2    
$
(288,848
 
$
202,892  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
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)
 
 
  
        Six months ended June 30,        
 
 
  
2022
 
 
2021
 
Cash flows from operating activities:
  
 
Net loss
   $ (40,221   $ (34,417
Adjustments to reconcile net loss to net cash used in operating activities:
                
Stock-based compensation expense
     3,750       4,326  
Depreciation and amortization expense
     988       953  
Loss on disposal of property and equipment
           90  
Noncash lease expense
     1,418        
Net amortization of premiums on marketable securities
     228       437  
Changes in operating assets and liabilities:
  
 
Prepaid expenses and other current assets
     1,150       311  
Accounts payable
     (993     (1,996
Accrued expenses and other current liabilities
     (1,482     402  
Operating lease liabilities
     (1,432      
Deferred rent
           120  
    
 
 
   
 
 
 
Net cash used in operating activities
     (36,594     (29,774
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property and equipment
     (156     (118
Purchases of marketable securities
     (40,117      
Maturities of marketable securities
           37,500  
    
 
 
   
 
 
 
Net cash provided by (used in) investing activities
     (40,273     37,382  
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Proceeds from private investment
           86,400  
Payments of offering costs
           (81
Proceeds from exercise of common stock options
           2,869  
Proceeds from issuance of common stock under Employee Stock Purchase Plan
     49       86  
    
 
 
   
 
 
 
Net cash provided by financing activities
     49       89,274  
    
 
 
   
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
     (76,818 )
 
 
 
96,882  
Cash, cash equivalents and restricted cash at beginning of period
     133,430       59,932  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at end of period
   $ 56,612     $ 156,814  
    
 
 
   
 
 
 
Supplemental disclosure of
non-cash
investing and financing activities:
  
 
Purchase of property and equipment included in accounts payable and accrued expenses
   $     $ 1,025  
Offering costs included in accounts payable and accrued expenses
   $     $ 222  
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 ongoing 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.
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 June 30, 2022, there was $281.0 million aggregate value of securities available under the Shelf, including up to $100.0 
million available for sale under the ATM Program.
The Company has incurred recurring losses since inception, including net losses of $40.2 million for the six months ended June 30, 2022 and $71.1 million the year ended December 31, 2021. As of June 30, 2022, the Company had an accumulated deficit of $365.8 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 will need to obtain substantial additional funding in connection with continuing operations, particularly as the Company advances its preclinical activities and clinical trials for its product candidates in development. 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”).
Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
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.

 
10

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
Unaudited Interim Financial Information
The consolidated balance sheet at December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 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, 2021 included in the Company’s Annual Report on Form
10-K,
on file with SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2022 and consolidated results of operations for the three and six months ended June 30, 2022 and 2021 and consolidated cash flows for the six months ended June 30, 2022 and 2021 have been made. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022 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.
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.
 
11

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
Leases
Prior to January 1, 2022, the Company accounted for leases under ASC 840, Leases (“ASC 840”). Effective January 1, 2022, the Company accounts for leases under ASC 842, Leases (“ASC 842”). Therefore, as of December 31, 2021 and for the three and six months ended June 30 2021, the Company’s consolidated financial statements continue to be presented in accordance with ASC 840, the accounting standard originally in effect for such periods. As of and for the three and six months ended June 30, 2022, the Company’s consolidated financial statements are presented in accordance with ASC 842.
In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its
right-of-use
asset and lease liability at the lease commencement date and thereafter if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The Company’s policy is to not record leases with an original term of twelve months or less on its consolidated balance sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease term. The Company’s existing leases are for office and laboratory space.
In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as
non-lease
components. The Company has elected to not separate lease and
non-lease
components. Only the fixed costs for lease components and their associated
non-lease
components are accounted for as a single lease component and recognized as part of a
right-of-use
asset and lease liability. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations and comprehensive loss.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the three and six months ended June 30, 2022 and 2021, 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 effect is anti-dilutive.
The Company reported a net loss for the three and six months ended June 30, 2022 and 2021. 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 June 30,
 
 
  
2022
 
  
2021
 
Stock options to purchase common stock
    
 
 
 
 
 
 
 
 
 
 
 
 
8,334,632
       6,115,903  
Unvested restricted common stock units
     454,122        510,000  
Shares of common stock issuable under Employee Stock Purchase Plan
     81,868        11,238  
    
 
 
    
 
 
 
       8,870,622       
 
 
 
 
 
 
 
 
 
 
 
 
6,637,141
 
    
 
 
    
 
 
 
 
12

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
Recently Issued Accounting Pronouncements
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.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU
No. 2016-02,
Leases (Topic 842)
(“ASU
2016-02”),
which require lessees to recognize most leases on their balance sheet as a
right-of-use
asset and a lease liability. In general, lease arrangements exceeding a twelve-month term must be recognized as assets and liabilities on the balance sheet. Under ASU
2016-02,
a
right-of-use
asset and lease obligation is recorded for all leases, whether operating or financing, while the income statement reflects lease expense for operating leases and amortization and interest expense for financing leases. The FASB also issued ASU
2018-10,
Codification Improvements to Topic 842
Leases
, and ASU
2018-11,
Targeted Improvements to Topic 842 Leases
, which allows the new lease standard to be applied as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings rather than retroactive restatement of all periods presented. The Company adopted the new leasing standards on January 1, 2022 using a modified retrospective approach applied at the beginning of the period of adoption.
The Company elected the “package of practical expedients,” which permits the Company not to reassess under the new standards for prior conclusions about lease identification, lease classification and initial direct costs. The Company did not apply the hindsight practical expedient when determining the lease term for existing leases and assessing impairment of expired or existing leases. The Company elected to utilize its incremental borrowing rate based on the remaining lease term as of the date of adoption. In connection with the adoption of ASU
2016-02,
the Company recognized a
right-of-use
asset of $26.1 million and lease liabilities of $33.0 million on its consolidated balance sheet. The deferred rent balance of $7.0 million as of January 1, 2022 was recorded as an offset to the Company’s
right-of-use
asset. The adoption of the standard did not have a material impact on the Company’s results of operations or cash flows.
 
3.
Fair Value of Financial Assets
As of June 30, 2022, marketable securities by security type consisted of (in thousands):
 
 
  
Amortized

Cost
 
  
Gross

Unrealized

Gains
 
  
Gross

Unrealized

Losses
 
 
Estimated

Fair

Value
 
U.S. treasury notes (due within one year)
   $ 85,195      $      $ (602    $ 84,593  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $
 
 
 
 
 
 
 
 
 
 
 
 
85,195
     $
     $
 
 
 
 
 
 
 
 
 
 
  (602
   $
 
 
 
 
 
 
 
 
 
 
 
 
84,593
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
13

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
As of December 31, 2021, marketable securities by security type consisted of (in thousands):
 
     
                    
     
                    
     
                    
     
                    
 
 
  
Amortized

Cost
 
  
Gross

Unrealized

Gains
 
  
Gross

Unrealized

Losses
 
 
Estimated

Fair

Value
 
U.S. treasury notes (due within one year)
   $ 30,213      $      $ (20    $ 30,193  
U.S. treasury notes (due after one year through two years)
     15,093               (10      15,083  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 45,306      $      $ (30    $ 45,276  
    
 
 
    
 
 
    
 
 
    
 
 
 
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
 
     
                    
     
                    
     
                    
     
                    
 
 
  
          Fair Value Measurements at June 30, 2022 Using:          
 
         
 
  
Level 1
 
  
Level 2
 
  
Level 3
 
  
Total
 
Cash equivalents:
  
     
  
     
  
     
  
     
Money market funds
   $ 54,825      $      $      $ 54,825  
Marketable securities:
                                   
U.S. treasury notes
            84,593               84,593  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 54,825      $ 84,593      $      $ 139,418  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
     
                    
     
                    
     
                    
     
                    
 
 
  
        Fair Value Measurements at December 31, 2021 Using:        
 
         
 
  
Level 1
 
  
Level 2
 
  
Level 3
 
  
Total
 
Cash equivalents:
  
     
  
     
  
     
  
     
Money market funds
   $ 131,542      $      $      $ 131,542  
Marketable securities:
                                   
U.S. treasury notes
            45,276               45,276  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 131,542      $ 45,276      $      $ 176,818  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
4.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
 
  
            June 30, 2022            
 
  
 
 
  
        December 31, 2021        
 
Accrued external research and development expenses
   $ 2,806     
 
 
 
 
$ 2,813  
Accrued payroll and related expenses
     2,209     
 
 
 
 
  3,346  
Deferred rent, current portion
         
 
 
 
 
  555  
Accrued other
     771     
 
 
 
 
  1,109  
    
 
 
    
 
 
 
 
 
 
 
     $ 5,786     
 
 
 
 
$ 7,823  
    
 
 
    
 
 
 
 
 
 
 
 
5.
Stock-Based Awards
2018 Stock Option and Incentive Plan
The Company grants stock-based awards under the Magenta Therapeutics, Inc. 2018 Stock Option and Incentive Plan (the “2018 Plan”). The Company also has outstanding stock options under the Magenta Therapeutics, Inc. 2016 Stock Option and Grant Plan, as amended (the “2016 Plan”), but is no longer granting awards under the 2016 Plan. As of June 30, 2022, 3,293,076 shares of common stock were available for issuance under the 2018 Plan.
 
14

Table of Contents
Magenta Therapeutics,
Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
Grant of Stock Options
During the six months ended June 30, 2022, the Company granted options to certain employees and consultants with service-based vesting conditions for the purchase of 3,086,485 shares of common stock with a weighted average grant date fair value of $1.66 per share. Stock-based compensation expense is being recognized over the requisite service period of 18 months to four years.
Grant of Restricted Stock Units
During the six months ended June 30, 2022, the Company granted 102,276 restricted stock units to certain employees with a weighted average grant date fair value of $2.23 per share. Stock-based compensation expense is being recognized over the requisite service period of 18 months to four years.
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 six months ended June 30, 2022, 49,704 shares of common stock were purchased under the ESPP at a purchase price per share of $0.99. During the six months ended June 30, 2021, 13,989 shares of common stock were purchased under the ESPP at a purchase price per share of $6.15. As of June 30, 2022, 663,548 shares remained available for issuance under the ESPP.
Stock-Based Compensation
Stock-based compensation expense was classified in the statements of operations and comprehensive loss as follows (in thousands):
 
 
  
Three Months Ended June 30,
 
  
Six Months Ended June 30,
 
 
  
2022
 
  
2021
 
  
2022
 
  
2021
 
Research and development expenses
   $ 462      $ 996      $ 989      $ 1,941  
General and administrative expenses
     1,383        1,138        2,761        2,385  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $
 
 
 
 
 
 
 
 
 
 
1,845
     $
 
 
 
 
 
 
 
 
 
 
2,134
     $
 
 
 
 
 
 
 
 
 
 
3,750
     $
 
 
 
 
 
 
 
 
 
 
4,326
 
    
 
 
    
 
 
    
 
 
    
 
 
 
As of June 30, 2022, unrecognized compensation expense related to unvested share-based awards with service-based vesting conditions was $17.5 million, which is expected to be recognized over a weighted average period of 2.6 years. Additionally, the Company had unrecognized compensation cost of $1.9 million related to the unvested performance restricted stock units for which the performance conditions were not considered probable of achievement as of June 30, 2022.
 
6.
Leases
The Company has 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 classified this sublease as an operating lease under ASC 842. 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. To the extent these costs are variable, they were not included in the measurement of the
right-of-use
asset and lease liability. 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 June 30, 2022 and December 31, 2021.
As of December 31, 2021, the Company had long-term deferred rent of $6.4 million related to lease incentives and payment escalations. As of December 31, 2021, the short-term portion of deferred rent of $0.6 million was included in accrued expenses and other current liabilities. In connection with the adoption of ASC 842 on January 1, 2022, these amounts were recorded as a reduction to the operating lease,
right-of-use
asset.
 
15

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
The components of the Company’s lease expense under ASC 842 were as follows (in thousands):
 
 
 
    Three Months Ended    
 
 
    Six Months Ended    
 
 
 
June 30, 2022
 
 
June 30, 2022
 
Operating lease cost
   $ 1,601      $ 3,203  
Short-term lease cost
             
Variable lease cost
     4        510  
    
 
 
    
 
 
 
     $
 
 
 
 
 
 
 
 
1,605
     $
 
 
 
 
 
 
 
 
3,713
 
    
 
 
    
 
 
 
Supplemental disclosure of cash flow information related to the lease was as follows (in thousands):
 
 
 
    Three Months Ended    
 
 
    Six Months Ended    
 
 
 
June 30, 2022
 
 
June 30, 2022
 
Cash paid for amounts included in the measurement of operating
 
lease liabilities
   $ 1,622      $ 3,217  
Operating lease liabilities arising from obtaining
right-of-use
 
asset
   $      $  
The weighted average remaining lease term and discount rate were as follows:
 
 
 
        June 30, 2022        
 
Weighted-average remaining lease term - operating lease (in years)
     5.67  
Weighted-average discount rate - operating lease
     11.00
Because the interest rate implicit in the lease was not readily determinable, the Company’s estimated incremental borrowing rate was used to calculate the present value of the lease.
As of June 30, 2022, the future minimum lease payments due under the noncancelable operating lease was as follows (in thousands):
 
2022 (six months)
   $ 3,350  
2023
     6,936  
2024
     7,313  
2025
     7,679  
2026
     8,062  
Thereafter
     9,904  
    
 
 
 
Total future minimum lease payments
     43,244  
Less: imputed interest
     (11,634
    
 
 
 
Total operating lease liabilities
  
$
                31,610
 
 
  
 
 
 
The following table represents the lease liabilities on the consolidated balance sheet (in thousands):
 
 
  
June 30, 2022
 
Current operating lease liability
   $ 3,423  
Operating lease liability, net of current portion
     28,187  
    
 
 
 
Total operating lease liabilities
   $
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,610
 
    
 
 
 
 
16

Table of Contents
Magenta Therapeutics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
As previously disclosed in the Company’s Annual Report on Form
10-K
and under the previous lease accounting standard,
ASC 840, Leases,
the following table summarizes the future minimum lease payments due under the operating lease as of December 31, 2021 (in thousands):
 
2022
   $ 6,375  
2023
     6,734  
2024
     7,100  
2025
     7,455  
2026
     7,828  
Thereafter
     9,617  
    
 
 
 
 
 
$
                            45,109
 
 
 
 
 
 
In 2018, the Company entered into two
sub-subleases
of approximately 27,000 square feet of office space in Cambridge, Massachusetts. One of the
sub-subleases,
as amended, expired in December 2021. The remaining
sub-sublease,
as amended, was set to expire in April 2022 but was further amended in January 2022 to increase the square footage from 13,643 square feet to 26,114 square feet and to extend the expiration to April 2023. As of June 30, 2022, the remaining base rent payments due to the Company under the amended
sub-sublease
was $2.1 million. The Company recorded other income of $0.6 million and $0.7 million during the three months ended June 30, 2022 and 2021, respectively, related to these
sub-subleases.
The Company recorded other income of $1.4 million and $1.9 million during the six months ended June 30, 2022 and 2021, respectively, related to these
sub-subleases.
 
7.
Commitments and Contingencies
Leases
The Company’s commitments under its leases are described in Note 6.
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 June 30, 2022, the Company did not incur any research and development expenses related to this agreement. During the three months ended June 30, 2021, the Company recorded less than $0.1 million of research and development expense related to this agreement for upfront technology access fees, research exclusivity fees and research support. During each of the six months ended June 30, 2022 and 2021, the Company recorded $0.4 million of research and development expense related to this agreement for upfront technology access fees, research exclusivity fees and research support. During the six months ended June 30, 2022, the Company recorded $2.0 million of research and development expense related to the achievement of a development milestone. During the three and six months ended June 30, 2021, the Company did not incur any expense related to the achievement of these milestones
.
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 June 30, 2022 and 2021, the Company did not incur any expense related to the achievement of these milestones. During the six months ended June 30, 2022, the Company did not incur any expense related to the achievement of these milestones. During the six months ended June 30, 2021, the Company recorded $0.1 million of expense related to the achievement of one of these milestones
.
 
17

The Company has agreements with third parties in the normal course of business, under which it can license certain developed technologies. If the Company exercises its rights to license the respective technologies, it may be subject to additional fees and milestone payments. During the three and six months ended June 30, 2022, the Company recorded research and development expense of $0.1 million related to the license of certain developed technologies under these agreements. During the three and six months ended June 30, 2021, the Company did not incur any expense related to these licenses.
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 June 30, 2022.
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.
 
8.
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 six months ended June 30, 2022, the Company recorded $0.1 million of expense related to this matching contribution.
 
9.
Related Parties
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 June 30, 2022 and 2021, the Company recorded expense of less than $0.1 million and $0.2 million, respectively, related to these agreements. For the six months ended June 30, 2022 and 2021, the Company recorded expense of $0.1 million and $0.3 million, respectively, related to these agreements. As of June 30, 2022 and December 31, 2021, amounts on the consolidated balance sheets related to these agreements were less than $0.1 million and $0.2 million, respectively, which amounts were included in accounts payable and accrued expenses and other current liabilities and less than $0.1 million which amounts were included in prepaid expenses and other current assets.
 
18

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:
 
   
our expectation that our existing capital resources will be sufficient to enable us to fund our currently planned development of
MGTA-117,
MGTA-145
and our other product candidates;
 
   
the anticipated benefits of our revised operating plan and our expectation that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024;
 
   
the initiation, timing and success of clinical trials of
MGTA-117,
MGTA-145
and any other product candidates;
 
   
our ability to commence and enroll patients in our clinical trials at the pace that we project;
 
   
regulatory actions with respect to our product candidates or our competitors’ products and product candidates;
 
   
the outcomes of our preclinical studies;
 
   
our ability to manufacture
MGTA-117,
MGTA-145
or any other product candidate in conformity with the FDA’s requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;
 
   
whether the results of our trials will be sufficient to support domestic or foreign regulatory approvals for
MGTA-117,
MGTA-145
or any other product candidates we may develop;
 
   
our reliance on third parties to conduct our clinical trials;
 
   
our reliance on third-party contract development and manufacturer organizations to manufacture and supply our product candidates for us;
 
   
our ability to establish clinical programs moving forward in multiple indications, with a rapidly advancing portfolio and sustainable platform;
 
   
our ability to obtain, including on an expedited basis, and maintain regulatory approval of
MGTA-117,
MGTA-145
or any other product candidates we may develop;
 
   
the level of expenses related to any of our product candidates or clinical development programs;
 
   
the benefits of the use of
MGTA-117,
MGTA-145
or any other product candidate, if approved;
 
   
our ability to successfully commercialize
MGTA-117,
MGTA-145
or any other product candidates we may identify and pursue, if approved;
 
   
the rate and degree of market acceptance of
MGTA-117,
MGTA-145
or any other product candidates we may identify and pursue;
 
   
our expectations regarding government and third-party payor coverage and reimbursement;
 
   
our ability to obtain and maintain intellectual property protection for
MGTA-117,
MGTA-145
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 ability to successfully build a specialty sales force and commercial infrastructure;
 
19

Table of Contents
   
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 ability to successfully find collaborators for any of our current and future programs and product candidates;
 
   
our ability to retain and recruit key personnel;
 
   
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 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, Inc. is a clinical-stage biotechnology company developing novel medicines designed to bring the curative power of stem cell transplant to more patients with blood cancers, genetic diseases and autoimmune diseases.
Magenta’s drug development pipeline includes multiple clinical and preclinical product candidates designed to improve stem cell transplant. We are 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 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. Our first targeted conditioning program,
MGTA-117,
has entered clinical development in a Phase 1/2 trial, and our second program, a CD45-antibody drug conjugate, or
CD45-ADC,
is advancing in preclinical development. In addition to our conditioning programs, we are also developing a product candidate,
MGTA-145,
to improve the process by which stem cells are stimulated out of the bone marrow and into the bloodstream so they are available for collection for future reinfusion, known as mobilization, which is required for all transplants and gene therapy applications.
MGTA-145
is a Phase 2 clinical stage program intended to enable rapid, reliable, predictable and safe mobilization and collection of high numbers of functional stem cells for transplant.
In addition to our product candidates, Magenta’s research efforts are evaluating several early-stage targets that include targeted lymphodepletion prior to therapies such as chimeric antigen receptor
T-cells
or
CAR-T.
We also have a cell therapy program, E478, which is a small molecule aryl hydrocarbon receptor, or AHR, antagonist designed to increase the numbers of 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 or together with other therapies. 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.
COVID-19
continues to present operational and other challenges 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.
 
20

Table of Contents
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 clinical trials, including
MGTA-117
and
MGTA-145.
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 $40.2 million for the six months ended June 30, 2022 and $71.1 million for the year ended December 31, 2021. As of June 30, 2022, we had an accumulated deficit of $365.8 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 a Phase 1/2 clinical trial for
MGTA-117
and Phase 2 clinical trial for
MGTA-145;
 
   
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. Additionally, 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. Accordingly, if we fail to raise capital or enter into necessary strategic agreements, or fail to ever become profitable, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates, and we may also be forced to reduce or terminate our operations.
As of June 30, 2022, we had cash, cash equivalents and marketable securities of $139.4 million. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”
Recent Developments
On April 14, 2022, we announced our plan to more narrowly focus our capital allocation on the
MGTA-117
targeted conditioning program, the
CD45-ADC
(antibody-drug conjugate)
IND-enabling
activities and the
MGTA-145
stem cell mobilization efforts in sickle cell disease while also
de-prioritizing
other portfolio investments. We made certain reductions in our planned spending related to research platform-related investments in new disease targets, paused certain
MGTA-145
investments, including the program’s planned
MGTA-145
dosing and administration optimization clinical trial in healthy subjects and reduced planned general and administrative expenses. In connection with these reductions to our planned spending, we also reduced our workforce by 14%. Our revised operating plan allows us to extend our cash runway into the second quarter of 2024.
 
21

Table of Contents
Impact of the
COVID-19
Pandemic
The
COVID-19
pandemic, including the emergence of various variants, has caused and could continue to cause 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 hybrid 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 depend on future developments, which are highly uncertain and cannot be predicted with confidence. These developments may include, without limitation, changes in the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available
COVID-19
vaccines, 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. 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 third-party contract development and manufacturing organizations, or CDMOs, that manufacture drug products for use in our preclinical studies and clinical trials;
 
   
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, CDMOs 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:
 
   
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;
 
22

Table of Contents
   
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;
 
   
maintaining a continued acceptable safety profile of the products following approval; and
 
   
the continuing impact of the
COVID-19
pandemic on our industry, the healthcare system, and our current and future operations.
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.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. While we do not believe that inflation had a material effect on our financial condition and results of operations during the periods presented, it may result in increased costs in the foreseeable future.
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.
Interest and Other Income, Net
Interest and other income, net, consists of interest income and miscellaneous income and expense unrelated to our core operations.
 
23

Table of Contents
Results of Operations
Comparison of the Three Months Ended June 30, 2022 and 2021
The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:
 
    
Three Months Ended June 30,
       
    
2022
   
2021
   
Change
 
                    
    
(in thousands)
 
Operating expenses:
      
Research and development
   $ 11,603     $             11,129     $ 474  
General and administrative
     6,480       6,481       (1
  
 
 
   
 
 
   
 
 
 
Total operating expenses
             18,083       17,610                       473  
  
 
 
   
 
 
   
 
 
 
Loss from operations
     (18,083     (17,610     (473
Interest and other income, net
     812       682       130  
  
 
 
   
 
 
   
 
 
 
Net loss
   $ (17,271   $ (16,928   $ (343
  
 
 
   
 
 
   
 
 
 
Research and Development Expenses
 
    
Three Months Ended June 30,
        
    
2022
    
2021
    
Change