RUBIUS THERAPEUTICS Objective
The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our financial condition and results of operations from management's perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are reasonably likely to impact our future performance. As such, the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSecurities and Exchange Commission , orSEC , onFebruary 25, 2022 . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company that is biologically engineering red blood cells or RBCs, to develop an entirely new class of cellular medicines called Red Cell Therapeutics, or RCTs, for the treatment of cancer and autoimmune diseases. Based on our vision that human red blood cells are the foundation of the next significant innovation in medicine, we have developed a programmable and highly versatile platform, which we call the RED PLATFORM, to biologically engineer and culture allogeneic cellular therapies that enable multiple applications, or modalities. We believe that the advantage of the platform is that once a modality is validated, as we have demonstrated with our lead product candidate RTX-240 for the treatment of advanced cancers, we increase the likelihood that all the programs within that modality will work, underscoring the broad potential of the RED PLATFORM to help patients. As part of theAmerican Association for Cancer Research Annual Meeting inApril 2022 , we presented updated clinical data from our ongoing Phase 1 arm of RTX-240 in patients with locally advanced or relapsed/refractory solid tumors, which we believe provides clinical validation for our RED PLATFORM and supports the development of our entire oncology pipeline of RCTs. We continue to enroll patients in our Phase 1 arm evaluating RTX-240 in combination with pembrolizumab in patients with advanced solid tumors and have added an additional cohort to evaluate the combination in patients with non-small cell lung cancer (NSCLC) and renal cell carcinoma (RCC) to inform a Phase 2 clinical trial. We plan to report initial clinical data for RTX-240 in combination with pembrolizumab in advanced solid tumors and data from the initial NSCLC and RCC patients enrolled in the expansion cohort during the second half of 2022. InJanuary 2022 , we began dosing patients in the Phase 1/2 clinical trial of RTX-224, our second broad immune agonist, for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 clinical trial of RTX-224 by year-end 2022 or during the first quarter of 2023. At our Investor Day inDecember 2021 , we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for bystander suppression in two stringent type 1 diabetes preclinical models. These findings are potentially translatable beyond type 1 diabetes to multiple autoimmune diseases, including our priority target indications such as multiple sclerosis and celiac disease. We continue to advance our manufacturing capabilities and achieved significant manufacturing milestones, including successfully scaling our manufacturing to 200L bioreactors in support of a potential future pivotal trial for RTX-240 and potential commercialization, as ofApril 2022 . This results in a process at a scale four times our previous 50L bioreactor process. We continue to provide uninterrupted clinical supply for the RTX-240 clinical trial, the Phase 1 RTX-321 trial and the Phase 1 RTX-224 trial. We have the potential to significantly expand our manufacturing capabilities and plan to 14
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stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization.
Highlights of our clinical product candidates, RTX-240, RTX-321 and RTX-224 are described further below.
Broad Immune Stimulation for the Treatment of Cancer
RTX-240
InApril 2022 , we announced updated clinical data from the ongoing Phase 1/2 clinical trial of monotherapy RTX-240 in advanced solid tumors that we believe provides clinical validation of the RED PLATFORM's potential ability to mimic the human immune system and stimulate adaptive and innate immunity to generate clinical responses in cancer patients with refractory disease. RTX-240 is an allogeneic, off-the-shelf cellular therapy product candidate that is engineered to simultaneously present hundreds of thousands of copies of the costimulatory molecule 4-1BB ligand (4-1BBL) and IL-15TP (trans-presentation of IL-15 on IL-15R?) in their native forms. RTX-240 is designed to broadly stimulate the immune system by activating and expanding both NK and CD8+ memory T cells to generate a potent anti-tumor response. The data reported inApril 2022 at theAmerican Association for Cancer Research Annual Meeting included initial safety (n=34) and efficacy (n=27) data from the monotherapy RTX-240 Phase arm in relapsed/refractory or locally advanced solid tumors. Nine dose cohorts were completed at the time of the data cutoff onMarch 4, 2022 . Enrollment continues in the 5e10 Q3W dose cohort. As of the cutoff date, disease control was observed in 10 patients (1 partial response, 2 unconfirmed partial responses and 7 with stable disease), 9 of whom had previously experienced disease progression on prior anti-PD-1/anti-PD-L1 therapy.
There were three best responses of partial response (PR) in NSCLC, anal cancer and uveal melanoma patients:
an unconfirmed PR (uPR) with 41% decrease of all target lesions and a notable ? decrease of an external protruding chest wall mass in a patient with NSCLC
whose disease had progressed on prior anti-PD-L1 therapy;
? a confirmed PR with a 54% reduction in the target lesions in a patient with
metastatic anal cancer whose disease had progressed on anti-PD-L1 therapy; and
a uPR with 100% decrease of the target hepatic lesion and resolution of ? multiple non-target hepatic lesions in a patient with metastatic uveal melanoma
whose disease had progressed on anti-PD-1 therapy.
Amount the patients with stable disease (SD), there were 3 with metastatic NSCLC and 2 with RCC across the 3e10 cohorts, supporting the Company's decision to expand the Phase 1 arm of RTX-240 plus pembrolizumab to NSCLC and RCC patients. One patient each with NSCLC and RCC remained on monotherapy treatment with SD greater than 6 months as of the cutoff date.
As of the cutoff date, RTX-240 has been shown to have been generally well tolerated with no treatment-related or investigator-identified immune-related Grade 3/4 adverse events (AEs) and no dose-limiting toxicities.
Based on the totality of clinical, tolerability and pharmacodynamic data, a recommended monotherapy Phase 2 dose of 5e10 cells administered every 3 weeks was selected. This dose will be further explored in the combination expansion cohort of NSCLC and RCC patients. Enrollment continues in the monotherapy arm of the trial at the recommended Phase 2 dose of 5e10 cells administered every 3 weeks. InApril 2022 , we also announced final clinical results from the Phase 1 arm of monotherapy RTX-240 in relapsed/refractory AML. As of the cutoff date ofMarch 4, 2022 , seventeen patients were enrolled across 4 dose levels. No DLTs were observed and there were 3 treatment-related Grade 3/4 adverse events. There
were
no investigator-
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reported immune-related AEs. Five patients had SD greater than 3 months, and 1 patient had a significant blast count reduction (53% to 6%).
In this study, RTX-240 showed activation and expansion of NK and T cells with favorable safety results, which continues to support the proposed mechanism of action of RTX-240. Based on these data, we believe RTX-240 could improve outcomes for AML patients when used as maintenance therapy for patients in remission following high-dose chemotherapy and/or stem cell transplantation and that we have established the necessary foundation to evaluate RTX-240 in the maintenance setting for the treatment of AML. However, to focus our resources on advancing RTX-240 in combination with pembrolizumab in NSCLC and RCC, we do not plan to pursue a separate clinical trial in AML in the near-term. InJune 2021 , we began dosing patients in the arm of our RTX-240 clinical trial that is evaluating RTX-240 as a combination therapy with pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid tumors. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may have synergy with immune checkpoint inhibition and could potentially overcome resistance to PD-1 inhibition. Based on the updated clinical results from the ongoing Phase 1 arm of monotherapy RTX-240 in advanced solid tumors, we expanded the Phase 1 arm of RTX-240 in combination with pembrolizumab to evaluate the combination in up to 20 patients with NSCLC and RCC to inform a Phase 2 clinical trial. Patients with two or fewer prior treatment regimens in the metastatic setting are eligible for the trial. If patients previously have received a PD-1/PD-L1 regimen, a prior response of either SD ?6 months, PR or complete response is required. We expect to report initial clinical results from this arm of the ongoing Phase 1/2 clinical of RTX-240 in advanced solid tumors and data from the initial enrolled NSCLC and RCC patients during the second
half of 2022. RTX-224 RTX-224 is an allogeneic cellular therapy that is engineered to express hundreds of thousands of copies of 4-1BBL and interleukin-12, or IL-12, on the cell surface. RTX-224 is designed as a broad immune agonist of both adaptive and innate responses, designed to activate CD8+ and CD4+ T cells, activate and expand NK cells, and promote antigen presentation. It is expected to produce a broad and potent anti-tumor T cell response and an innate immune response and have anti-tumor activity in those tumor types with known sensitivity to T cell killing, including tumor types with high mutational burden, PD-L1 expression and known responsiveness to checkpoint inhibitors. The combination of IL-12 and 4-1BBL has the potential to broadly induce an immune response in patients with solid tumors and may serve as the bridge between the innate and adaptive immune systems. InJanuary 2022 , we began dosing patients in the Phase 1/2 clinical trial of RTX-224 for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 trial by year-end 2022 or during the first quarter of 2023. InNovember 2021 , we presented preclinical data for RTX-224 at theSociety for Immunotherapy of Cancer's 36th Annual Meeting, showing that RTX-224 activated immune cells in the spleen and blood, leading to their trafficking into the tumor microenvironment to deliver an anti-tumor effect in our preclinical models.
Antigen-Specific Immune Stimulation for the Treatment of Cancer
RTX-321
RTX-321 is an allogeneic, off-the-shelf artificial antigen presenting cells, or
aAPC, therapy product candidate that is engineered to induce a tumor-specific
immune response by expanding antigen-specific T cells. RTX-321 expresses
hundreds of thousands of copies of an HPV 16 peptide antigen bound to major
histocompatibility complex class I proteins, the costimulatory molecule 4-1BBL
and the cytokine IL-12 on the cell surface to mimic human T cell-APC
interactions.
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InMay 2022 , we announced that given the additional investment required to dose escalate and the eventual need for a companion diagnostic for patient selection for RTX-321, we are focusing our resources at this time on advancing our broad agonism approach with RTX-240 and RTX-224. We believe RTX-321 has shown promising pharmacodynamic effects with dramatic expansion of CD4+ T cells observed, which is one of the key cells involved in the mechanism by which IL-12 stimulates a broad anti-tumor response. Importantly, RTX-321 was generally well tolerated with no dose-limiting toxicities and no treatment-related AE's, giving us confidence that we may be able to safely exploit IL-12's potent anti-tumor activity with RTX-224, which expresses higher copy numbers of IL-12 on the cell surface than does RTX-321. Three dose cohorts were completed (n=9) with one patient with anal squamous cell carcinoma with SD ongoing at 16 weeks at the highest dose cohort to date of 1e10 administered every three weeks. Prior to enrollment, the patient experienced disease progression on anti-PD-1 therapy. Consistent with the combined mechanism of action of IL-12 and 4-1BBL, increases in activated CD4+ T cells, activated CD8+ T cells and activated NK cells were observed at the higher dose levels. Antigen-Specific Immune Tolerance for the Treatment of Autoimmune Diseases
RTX-T1D (Type 1 Diabetes)
InDecember 2021 , we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for bystander suppression in two stringent type 1 diabetes preclinical models. Specifically, we established efficacy in the BDC2.5 adoptive transfer model with data showing that an RTX-T1D surrogate reversed established inflammation and induced two types of regulatory T cells, resulting in protection against re-challenge. Moreover, the data showed that repeated dosing could extend duration of disease protection to 5 months (the endpoint of the study). We also showed early efficacy in the non-obese diabetic mouse, or NOD, preclinical model. Results at 25 weeks showed that a mouse surrogate of RTX-T1D that delivered only two antigens delayed disease. As disease in NOD mice is caused by many autoantigens, these results demonstrate the potential for bystander suppression. These findings are potentially translatable beyond type 1 diabetes to multiple autoimmune diseases, including other Rubius' high priority target indications such as multiple sclerosis and celiac disease.
We intend to present these results in a peer-reviewed setting and expect to provide details of our development timeline later in 2022.
Manufacturing
Using our RED PLATFORM, we are utilizing our universal engineering and manufacturing processes to advance a broad pipeline of RCT product candidates into clinical trials in cancer and autoimmune diseases. Common design and manufacturing elements of our RCTs should enable us to achieve significant advantages in product development.
To more efficiently develop new RCTs designed to treat different diseases, we modify one of our initial manufacturing steps in which we add a gene or genes of interest that encode biotherapeutic proteins within the cell or on the cell surface. Using this approach, we have expressed more than 1,000 different therapeutic proteins since platform inception. This programmable process allows for the repeated generation of product candidates and enables us to leverage common CMC and toxicology data packages across our therapies. Recognizing the importance of controlling our own manufacturing capabilities to produce consistent and reproducible product at greater scale, we acquired, renovated and operationalized a manufacturing facility inSmithfield, RI , which is currently providing cGMP supply for our ongoing Phase 1 clinical trials: RTX-240 in advanced solid tumors, RTX-240 in combination with pembrolizumab and RTX-224 in advanced solid tumors. We have industrialized the production of RCTs by developing and scaling up a manufacturing process by which hematopoietic progenitor cells are expanded, then biologically engineered and subsequently differentiated into erythroid cells (RCTs) that express biotherapeutic proteins within the cell or on the cell surface. The RED PLATFORM allows us to generate a wide variety of allogeneic, ready-to-use RCT product candidates with a universal and proprietary process. 17 Table of Contents
We have recently achieved the following manufacturing milestones:
successfully scaled our manufacturing to 200L bioreactors in support of a ? potential future pivotal trial for RTX-240 and potential commercialization.
This results in a process at a scale four times our previous 50L bioreactor
process;
increased cells produced per batch in 50L bioreactors by four times that of ? 2020, enabling uninterrupted clinical supply for three Phase 1 arms of the
RTX-240 clinical trial; and
? introduced frozen drug substance for RTX-224, potentially enabling inventory
storage for more than two years.
Additional accomplishments include:
? greater than 90% lot success rate for RTX-240 and RTX-321 clinical supply in
the 50L bioreactor;
? hundreds of doses administered across all three arms of our RTX-240 Phase 1/2
trial, RTX-321 Phase 1 trial and RTX-224 Phase 1/2 trial;
? high transduction efficiency, with greater than 90% of cells transduced with
therapeutic proteins; and
? highly consistent protein expression (dual or triple).
We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization.
Funding Overview
Since our inception, we have focused substantially all of our resources on building our proprietary RED PLATFORM, establishing and protecting our intellectual property portfolio, conducting research and development activities, developing our manufacturing process and manufacturing product candidate material, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations with proceeds from the sale of preferred stock and issuance of debt and with proceeds from our public offerings. OnJuly 20, 2018 , we completed our IPO pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters' option to purchase additional shares. We received proceeds of$254.3 million after deducting underwriting discounts and commissions and other offering costs. InAugust 2019 , we entered into a Distribution Agreement withJ.P. Morgan Securities LLC ,Jefferies LLC andSVB Leerink LLC with respect to an at-the-market, or ATM, offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having aggregate gross proceeds of up to$100.0 million . We have not yet sold any shares of our common stock under the ATM offering program. InMarch 2021 , we completed an underwritten public offering, or theMarch 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We received proceeds of$187.2 million , after deducting underwriting discounts and commissions and other offering costs. Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. We reported net losses of$52.4 million for the three months endedMarch 31, 2022 and$196.5 million for the year endedDecember 31, 2021 . As ofMarch 31, 2022 , we had an accumulated deficit of$729.4 million . We expect to continue to incur significant expenses and operating losses for at 18
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least the next several years. We expect that our expenses and capital requirements will increase in connection with our ongoing activities, particularly if, and as, we:
conduct clinical trials for our product candidates and to the extent we ? continue to experience delays, setbacks or disruptions to our preclinical
studies, clinical trials or clinical supply chain due to the ongoing COVID-19
pandemic;
? further develop our RED PLATFORM;
? continue to discover and develop additional product candidates;
? maintain, expand and protect our intellectual property portfolio;
? hire additional clinical, scientific, manufacturing and commercial personnel;
? expand in-house manufacturing capabilities, including through the operation and
any future renovation or expansion of our manufacturing facility;
establish a commercial manufacturing source and secure supply chain capacity ? sufficient to provide commercial quantities of any product candidates for which
we may obtain regulatory approval;
? acquire or in-license other product candidates and technologies;
? seek regulatory approvals for any product candidates that successfully complete
clinical trials;
? establish a sales, marketing and distribution infrastructure to commercialize
any products for which we may obtain regulatory approval; and
add operational, financial and management information systems and personnel, ? including personnel to support our product development and planned future
commercialization efforts, as well as to continue to support the requirements
of a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. Further, we expect to continue to incur costs associated with operating as a public company. 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 public and private equity financings, debt financings, borrowings under our credit facility, collaborations, strategic alliances and marketing, distribution and 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. We implemented certain cost reduction actions inApril 2022 , which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to further extend our forecasted cash runway. These actions could adversely affect our business prospects. As ofMay 10, 2022 , the issuance date of the interim condensed consolidated financial statements, we expect that our cash, cash equivalents and investments will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023. 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 19
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profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
See "-Liquidity and Capital Resources."
Impact of the Ongoing COVID-19 Pandemic
Since March of 2020 and throughout the ongoing COVID-19 pandemic, we have implemented various precautionary measures to protect the health and safety of our employees, partners and prospective clinical trial participants, to comply with applicable national, state and local governmental orders, proclamations and/or directives in effect at any time aimed at minimizing the spread of COVID-19 and to minimize disruption to our operations. Such measures have included, at certain times, the elimination of business travel, shifting to remote work wherever possible and implementing rotating laboratory work schedules to reduce the number of people onsite at our facilities, advance ordering of certain raw materials impacted by delays in the global supply chain, as well as working with our external partners and clinical sites to utilize virtual clinical trial site training and monitoring, minimizing patient visits and instituting telemedicine to minimize patient exposure. We will continue to use these, and other precautionary measures, as required until such time as the ongoing COVID-19 pandemic, including any subsequent outbreak whether or not due to emerging variants thereof, is contained. While the ongoing COVID-19 pandemic has impacted manufacturing, supply chain and clinical trial activities worldwide, including those of our suppliers, vendors and clinical trial sites, these disruptions have not significantly impacted our results of operations to date. The ultimate impact on our operations, however, is unknown and will depend on future developments, such as the duration, spread and intensity of the pandemic, among others, which are highly uncertain and cannot be predicted with confidence. In particular, global developments concerning COVID-19, including the identification of new strains of coronavirus, and the magnitude of interventions to contain the spread of viruses, such as government-mandated quarantines, shelter-in-place mandates, restrictions on travel, shutdowns for non-essential businesses, requirements regarding social distancing, impact of government-imposed restrictions on the global supply chain, including through use of the Defense Production Act, distribution of vaccines and other public health safety measures, will determine the impact of the pandemic on our business. We are continuing to monitor the latest developments regarding the ongoing COVID-19 pandemic and its impact on our business, financial condition, results of operations and prospects. However, any resulting financial impact cannot be reasonably estimated at this time and may have a material adverse impact on our business, financial condition and results of operations.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license agreements that we may enter into with third parties, or any combination thereof. Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred for our research activities, including our drug discovery efforts, and the development and manufacturing of our product candidates, which include:
employee-related expenses, including salaries, related benefits and stock-based ? compensation expense for employees engaged in research and development
functions;
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expenses incurred in connection with the preclinical and clinical development ? of our product candidates and research programs, including under agreements
with third parties, such as consultants, contractors and contract research
organizations, or CROs;
the cost of developing and scaling our manufacturing process and manufacturing
product candidates for use in our preclinical studies and clinical trials, ? including those produced in our manufacturing facility as well as components
that are produced under agreements with third parties, such as consultants,
contractors and any contract manufacturing organizations, or CMOs, that we may
engage;
? laboratory supplies and research materials;
? facilities, depreciation and other expenses, which include direct and allocated
expenses for rent and maintenance of facilities and insurance; and
? payments made under third-party licensing agreements.
We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Our direct research, manufacturing and development expenses are tracked on a program-by-program basis for clinical candidates. These consist mostly of fees, reimbursed materials, testing and other costs paid to consultants, contractors, CMOs and CROs, as well as the cost of materials incurred for internal manufacturing. In addition, we allocate the cost of operating our manufacturing facility to research and development program costs, consisting of associated personnel costs, other than stock-based compensation expense, and manufacturing facility costs, including depreciation. We do not allocate costs associated with our platform development, early-stage research and shared research and development, including associated personnel costs, laboratory supplies, non-manufacturing facilities expenses and other indirect costs, to research and development programs, because these costs are deployed across multiple programs and our technology platform and, as such, are not separately classified. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, due to the increased size and duration of later stage clinical trials. Therefore, we have reduced preclinical and other development activities to advance our current clinical programs. As a result, we expect research and development expenses related to those preclinical and other development activities to decrease while we focus on achieving clinical endpoints. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:
? the timing and progress of preclinical and clinical development activities;
? the number and scope of preclinical and clinical programs we decide to pursue;
? our ability to raise the additional funds necessary to complete preclinical and
clinical development of and commercialize our drug candidates;
? the progress of the development efforts of parties with whom we may enter into
collaboration arrangements;
? our ability to maintain our current research and development programs and to
establish new ones;
? our ability to establish new licensing or collaboration arrangements;
the successful initiation and completion of clinical trials with safety,
? tolerability and efficacy profiles that are satisfactory to the
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? the continued impact of the ongoing COVID-19 pandemic on our operations;
? the receipt and related terms of regulatory approvals from applicable
regulatory authorities;
? the availability of specialty raw materials for use in production of our
product candidates;
? our ability to consistently manufacture our product candidates for use in
clinical trials;
? our ability to operate a manufacturing facility, or secure manufacturing supply
through relationships with third parties;
? our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in
? our ability to protect our rights in our intellectual property portfolio;
? our ability to successfully commercialize our product candidates, if and when
approved;
? our ability to obtain and maintain third-party insurance coverage and adequate
reimbursement;
? the acceptance of our product candidates, if approved, by patients, the medical
community and third-party payors;
? competition with other products; and
? a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses include salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. Other Income (Expense) Interest Income
Interest income consists of interest earned on our invested cash balances.
Interest Expense
Interest expense consists of interest owed on outstanding borrowings under our Loan Agreement (as defined below), as well as amortization of debt discount.
Other Income, Net
Other income, net consists of miscellaneous income and expense unrelated to our
core operations.
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Income Taxes
Since our inception, we have not recorded any income tax benefits for the net
losses we have incurred in each year or for our research and development tax
credits generated, as we believe, based upon the weight of available evidence,
that it is more likely than not that all of our net operating loss, or NOL,
carryforwards and tax credits will not be realized. As of December 31, 2021 , we
had U.S. federal and state net operating loss carryforwards of $534.2 million
and $534.8 million , respectively, which may be available to offset future
taxable income. The federal NOLs include $37.2 million , which expire at various
dates through 2037, and $497.0 million , which carryforward indefinitely. The
state NOLs expire at various dates through 2041. As of December 31, 2021 , we
also had U.S. federal and state research and development tax credit
carryforwards of $22.7 million and $15.6 million , respectively, which may be
available to offset future tax liabilities and begin to expire in 2034 and 2026,
respectively. We have recorded a full valuation allowance against our net
deferred tax assets at each balance sheet date.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31,
2022 2021 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 38,299 27,677 10,622
General and administrative 12,563 13,240 (677)
Total operating expenses 50,862 40,917 9,945
Loss from operations (50,862) (40,917) (9,945)
Other income (expense):
Interest income 48 26 22
Interest expense (1,629) (1,748) 119
Other income, net 31 309 (278)Total other income (expense), net (1,550) (1,413)
(137)
Net loss $ (52,412) $ (42,330) $ (10,082) Research and Development Expenses
Three Months Ended March 31,
2022 2021 Change
(in thousands)
Research and development program expenses:
Rare disease $ - $ 197 $ (197)
Cancer 17,011 11,742 5,269
Platform development, early-stage research and
unallocated expenses:
Personnel-related 8,832 6,388 2,444
Stock-based compensation expense 3,477 2,531 946
Contract research and development 2,605 1,328 1,277
Laboratory supplies and research materials 2,725 1,759 966
Facility related and other 3,649 3,732 (83)
Total research and development expenses $ 38,299 $ 27,677 $ 10,622
Research and development expenses were $38.3 million for the three months ended
March 31, 2022 , compared to $27.7 million for the three months ended March 31,
2021 . The increase in direct costs of $5.3 million related to RTX-240, RTX-321
and RTX-224, was principally related to clinical research organization, or
CRO,
costs and internal
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manufacturing costs incurred in connection with all three programs. We have prioritized the advancement of clinical endpoints and, therefore, expect these costs to decrease in future periods. Platform development, early-stage research and unallocated expenses increased by$5.6 million principally due to increases of$2.4 million in personnel-related costs and$0.9 million in stock-based compensation related to the increase in headcount to support our expanded operations. Additionally, increases of$1.3 million in contract research and development and$1.0 million in laboratory supplies and research materials are related to drug discovery activities and platform development.
General and Administrative Expenses
Three Months Ended March 31,
2022 2021 Change
(in thousands)
Personnel-related $ 3,486 $ 3,125 $ 361
Stock-based compensation expense 4,783 6,111 (1,328)
Professional and consultant fees 2,632 2,275 357
Facility related and other 1,662 1,729 (67)
Total general and administrative expenses $ 12,563 $ 13,240 $ (677)
General and administrative expenses were $12.6 million for the three months
ended March 31, 2022 , compared to $13.2 million for the three months ended March
31, 2021 . The decrease in general and administrative expenses of $0.7 million
was primarily due to a decrease in stock-based compensation expense of $1.3
million , which was driven by stock option awards that fully vested during the
third quarter of 2021. The reduction in stock-based compensation was offset by
an increase in personnel-related expenses of $0.4 million driven by additions to
headcount in our general and administrative function and an increase in
professional and consultant fees of $0.4 million resulting primarily from
additional costs to support operations as a public company.
Interest Income
Interest income was less than$0.1 million for the three months endedMarch 31, 2022 , compared to less than$0.1 million for the three months endedMarch 31, 2021 . The change in interest income was not significant during the period.
Interest Expense
Interest expense was$1.6 million for the three months endedMarch 31, 2022 , compared to$1.7 million for the three months endedMarch 31, 2021 . The change in interest expense was not significant during the period.
Other Income, Net
Other income, net was less than$0.1 million for the three months endedMarch 31, 2022 , compared to$0.3 million for the three months endedMarch 31, 2021 . The decrease in other income, net was due to the expiration of our sublease agreement in the third quarter of 2021, concurrent with the expiration of the associated lease.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. To date, we have funded our operations with proceeds from the sale of preferred stock, with the issuance of debt, with proceeds from our IPO and, most recently, with proceeds from ourMarch 2021 Offering, described and defined further below. As ofMarch 31, 2022 , we had cash, cash equivalents and investments of$176.5 million . InJuly 2018 , we completed our IPO, pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters' option to purchase additional shares. We received proceeds of$254.3 million , after deducting underwriting discounts and commissions and other offering costs. InDecember 2018 , we entered into a loan and security agreement, which was amended inJune 2021 , which provides for aggregate borrowings of up to$75.0 million . As ofMarch 31, 2022 ,$75.0 million is outstanding under the agreement and principal payments 24 Table of Contents
commence in
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three Months Ended March 31,
2022 2021
(in thousands)
Cash used in operating activities $ (47,135) $ (38,739)
Cash provided by (used in) investing activities (80,847) 41,752
Cash provided by financing activities 76 193,908
Net increase in cash, cash equivalents and restricted cash
$ 196,921
Operating Activities
During the three months endedMarch 31, 2022 , operating activities used$47.1 million of cash, primarily resulting from our net loss of$52.4 million , offset by net non-cash charges of$10.0 million , predominantly consisting of stock-based compensation expense. Net cash used in our operating assets and liabilities for the three months endedMarch 31, 2022 consisted of a$6.3 million decrease in accounts payable, accrued expenses and other current liabilities, other long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets and operating lease, right-of-use asset of$1.5 million . During the three months endedMarch 31, 2021 , operating activities used$38.7 million of cash, primarily resulting from our net loss of$42.3 million , offset by net non-cash charges of$10.9 million , predominantly consisting of stock-based compensation expense. Net cash used in our operating assets and liabilities for the three months endedMarch 31, 2021 consisted of a$8.3 million decrease in accounts payable, accrued expenses and other current liabilities, other long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets and operating lease, right-of-use asset of$1.0 million .
Investing Activities
During the three months endedMarch 31, 2022 , net cash used in our investing activities was$80.8 million , consisting of purchases of investments of$78.4 million and purchases of property, plant and equipment of$2.4 million . Our cash purchases of property, plant and equipment primarily relate to renovation expenditures incurred at our manufacturing facility inSmithfield, Rhode Island . During the three months endedMarch 31, 2021 , net cash provided by investing activities was$41.8 million , consisting of sales and maturities of investments of$42.5 million , offset by purchases of property, plant and equipment of$0.7 million . Our cash purchases of property, plant and equipment relate to the purchase of computer and laboratory equipment installed in our manufacturing facility inSmithfield, Rhode Island and our laboratory space inCambridge, Massachusetts .
Financing Activities
During the three months ended
During the three months endedMarch 31, 2021 , net cash provided by financing activities of$193.9 million consisted primarily of proceeds of$188.0 million , net of commissions and underwriting discounts, and proceeds received from issuance of common stock upon exercise of stock options of$5.9 million from the Offering completed inMarch 2021 . 25
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Contractual Obligations and Commitments
The following table summarizes our contractual obligations as ofMarch 31, 2022 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: Payments Due by Period Less Than More Than Total 1 Year 1 to 3 Years 3 to 5 Years 5 Years (in thousands) Operating lease commitments (1)$ 44,298 $ 9,082 $ 15,097 $ 7,873 $ 12,246 Debt obligations (2) 97,739 5,700
38,813 53,226 - Total$ 142,037 $ 14,782 $ 53,910 $ 61,099 $ 12,246
(1)Amounts in table reflect payments due for our leases of office and laboratory
space in
(2)Amounts in table reflect the contractually required principal and interest payments payable under the Loan Agreement. For purposes of this table, the interest due under the Loan Agreement was calculated using an assumed interest rate of 8.86% per annum, which was the interest rate in effect as of March
31, 2022. Loan and Security Agreement
InDecember 2018 , or the Closing Date, we entered into a loan and security agreement, or, as amended, the Loan Agreement, with SLR Investment Corp. (formerly Solar Capital Ltd.) as collateral agent for the lenders party thereto for an aggregate principal amount of$75.0 million . The aggregate principal amount was funded in three tranches of term loans of$25.0 million each, on the Closing Date, inJune 2019 and inJune 2020 . OnJune 22, 2021 , or the Amendment Closing Date, we entered into an amendment, or the Amendment, to our Loan Agreement. Pursuant to the Amendment, we and our lenders agreed to extend the interest-only period in respect of our borrowings under the Loan Agreement fromDecember 21, 2021 untilJuly 1, 2024 . The parties also agreed to extend the final maturity date on which all of our outstanding obligations under the Loan Agreement become due toJune 1, 2026 (fromDecember 21, 2023 originally). An additional tranche in the amount of$35.0 million is available to us prior to the final maturity date, to be provided at the sole discretion of the lenders. Interest on the outstanding loan balance will accrue at a rate of 5.50%, plus the greater of 2.10% or the one-monthU.S. LIBOR rate. Monthly principal payments will commence onJuly 1, 2024 and will be amortized over the following 24 months. Certain back-end fees are due to the lender at the time of final repayment based on the total funded term loans. The term loans are subject to a prepayment fee of 1.00% if prepayment occurs within the first year subsequent to the Amendment Closing Date, 0.50% in the second year and 0.25% in the third year through final maturity date. The Loan Agreement contains financial covenants that require us to maintain either a certain minimum cash balance or a minimum market capitalization threshold. We were in compliance with all such financial covenants as ofMarch 31, 2022 . The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of our assets, other than our intellectual property.
Common Stock Sales Agreement
OnAugust 1, 2019 , we entered into a Distribution Agreement, or the Distribution Agreement, with multiple sales agents, pursuant to which the Company may offer and sell to or through the agents, from time to time, shares of the Company's common stock, par value$0.001 per share, having an aggregate gross sales price of up to$100.0 million . Sales, if any, of the Company's shares of common stock will be made primarily in "at-the-market" offerings, as defined in Rule 415 under the Securities Act. The shares of common stock will be offered and sold pursuant to our registration statement on 26
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Form S-3 and a related prospectus supplement, both filed with theSEC onAugust 1, 2019 . We intend to use substantially all of the net proceeds from any sale of shares of the Company's common stock for working capital and other general corporate purposes. There have been no shares of the Company's common stock sold under the Distribution Agreement as ofMarch 31, 2022 .
Funding Requirements
We expect our expenses to increase substantially in the future as we conduct the activities necessary to advance our product candidates through development. The timing and amount of our operating and capital expenditures will depend largely on:
? the timing and progress of preclinical and clinical development activities;
the commencement, enrollment or results of the planned clinical trials of our ? product candidates or any future clinical trials we may conduct, or changes in
the development status of our product candidates;
? the timing and outcome of regulatory review of our product candidates;
the continued impact of the ongoing COVID-19 pandemic, including from any ? subsequent outbreak whether or not due to emerging variants thereof, on our
operations;
? our decision to initiate a clinical trial, not to initiate a clinical trial or
to terminate an existing clinical trial;
? changes in laws or regulations applicable to our product candidates, including
but not limited to clinical trial requirements for approvals;
? developments concerning our key vendors;
? our ability to obtain materials to produce adequate product supply for any
approved product or inability to do so at acceptable prices;
the costs associated with the operation of our multi-suite manufacturing ? facility and the costs and timing of any future renovation or expansion of the
facility;
? our ability to establish collaborations if needed;
the costs and timing of future commercialization activities, including product ? manufacturing, marketing, sales and distribution, for any of our product
candidates for which we obtain marketing approval;
? the legal patent costs involved in prosecuting patent applications and
enforcing patent claims and other intellectual property claims;
? additions or departures of key scientific or management personnel;
? unanticipated serious safety concerns related to the use of our product
candidates; and
? the terms and timing of any collaboration, license or other arrangement,
including the terms and timing of any milestone payments thereunder.
We believe that our existing cash, cash equivalents and investments will be
sufficient to fund our operating expenses, capital expenditure requirements and
debt service payments into the second half of 2023. We have based this estimate
on assumptions that may prove to be wrong, and we could utilize our available
capital resources sooner than we expect.
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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public and private equity financings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, investors' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect investors' rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. We implemented certain cost reduction actions inApril 2022 , which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to further extend our forecasted cash runway. These actions could adversely affect our business prospects.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC .
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe United States , or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onFebruary 25, 2022 . If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC onFebruary 25, 2022 .
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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