MONTE ROSA THERAPEUTICS, INC. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in "Part I, Item 1A, Risk Factors" in our 2021 Annual Report and under Part II, Item 1A, "Risk Factors" and elsewhere in this Quarterly Report. You should carefully read the "Risk Factors" section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled "Special note regarding forward-looking statements."
Overview
We are a biotechnology company developing a portfolio of novel small molecule precision medicines that employ the body's natural mechanisms to selectively degrade therapeutically-relevant proteins. We have developed a proprietary protein degradation platform, called QuEENTM, that enables us to rapidly identify protein targets and molecular glue degrader, or MGD, product candidates that are designed to eliminate therapeutically-relevant proteins in a highly selective manner. We believe our small molecule MGDs may give us significant advantages over existing therapeutic modalities, including other protein degradation approaches, by allowing us to target proteins that have been considered undruggable or inadequately drugged. We focus on therapeutic targets backed by strong biological and genetic rationale with the goal of discovering and developing novel precision medicines.
Liquidity
Since inception, we have had significant operating losses. Our primary use of
cash is to fund operating expenses, which consist primarily of research and
development expenditures and, to a lesser extent, general and administrative
expenditures. To date, we have financed our operations primarily through the
issuance and sale of convertible promissory notes and our convertible preferred
stock to outside investors in private equity financings, as well as our initial
public offering. From our inception through the date hereof, we raised an
aggregate of
Business effects of COVID-19
The ongoing COVID-19 pandemic has presented a substantial public health and
economic challenge around the world with continuing impact on our employees our
employees, potential patients, communities and business operations, as well as
the
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To date, our vendors have been able to continue to provide services and supply reagents, materials, and products and currently do not anticipate any material disruption in services or interruptions in supply. However, we are continuously assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, and our ability to hire and retain employees.
The COVID-19 pandemic has caused us to modify our business practices (including but not limited to curtailing or modifying employee travel, moving to partial remote work, and cancelling physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, patients and business partners.
We continue to monitor COVID-19 levels local to our research operations and adapt our employee working practices to ensure essential staffing levels in our operations remain in place, including maintaining key personnel in our laboratories.
For additional information on the various risks posed by the COVID-19 pandemic, please read the section entitled "Risk factors" in this Quarterly Report and Part I, Item 1A; Risk Factors" included in our 2021 Annual Report.
Components of operating results
Research and development expenses
Our research and development expenses include:
•
expenses incurred under agreements with consultants, third-party service providers that conduct research and development activities on our behalf;
•
personnel costs, which include salaries, benefits, pension and stock-based compensation;
•
laboratory and vendor expenses related to the execution of preclinical studies;
•
laboratory supplies and materials used for internal research and development activities; and
•
facilities and equipment costs.
Most of our research and development expenses have been related to the development of our QuEENTM platform and advancement of our GSPT1 program, advancement of our disclosed and undisclosed programs including for CDK2, NEK7, VAV1, and multiple sickle cell disease (SCD) targets. We have not reported program costs since our inception because we have not historically tracked or recorded our research and development expenses on a program-by-program basis. We use our personnel and infrastructure resources across the breadth of our research and development activities, which are directed toward identifying and developing product candidates.
We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as we advance our programs and conduct clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects, the costs of related clinical development costs or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
General and administrative expenses
Our general and administrative expenses consist primarily of personnel costs and
other expenses for outside professional services, including legal fees relating
to patent and corporate matters, professional fees for accounting, auditing, tax
and administrative consulting services, insurance costs and other operating
costs. We expect our general and administrative expenses to increase over the
next several years to support our continued research and development activities,
manufacturing activities, and the potential commercialization of our product
candidates and development of commercial infrastructure. We also anticipate our
general and administrative costs will increase and with respect to the hiring of
additional personnel, fees to outside consultants, lawyers and accountants, and
increased costs associated with being a public company such as expenses related
to services associated with maintaining compliance with Nasdaq listing rules and
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Non-operating income and (expense)
Our non-operating income and (expense) includes (i) interest earned on our
investments, including marketable securities and
Results of operations for the three months ended
The following sets forth our results of operations:
Three months ended
September 30,
(in thousands) 2022 2021 Dollar change
Operating expenses:
Research and development $ 21,342 $ 15,115 $ 6,227
General and administrative 7,020 4,753 2,267
Total operating expenses 28,362 19,868 8,494
Loss from operations (28,362 ) (19,868 ) (8,494 )
Other expense 1,044 31 1,013
Net loss $ (27,318 ) $ (19,837 ) $ (7,481 ) Research and development expenses
Research and development expenses were comprised of:
Three months ended
September 30,
(in thousands) 2022 2021 Dollar change
External research and development services
6,868 5,392 1,476
Laboratory and related expenses 1,778 1,586 192
Facility costs and other expenses 4,139 1,688 2,451
Research and development expenses $ 21,342 $ 15,115 $ 6,227
As of
Most of our research and development expenses have been related to the
development of our QuEENTM platform, advancement of our GSPT1 program including
IND-enabling work for MRT-2359, and the advancement of our disclosed and
undisclosed programs including for CDK2, NEK7, VAV1, multiple SCD targets, and
other discovery efforts. The increase for the three months ended
General and administrative expenses
General and administrative expenses to support our business activities were
comprised of:
Three months ended
September 30,
(in thousands) 2022 2021 Dollar change
Personnel costs $ 3,770 $ 2,750 $ 1,020
Professional services 1,246 772 474
Facility costs and other expenses 2,004 1,231 773
General and administrative expenses
As of
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months ended
Other income (expense)
Other income (expense), net was comprised of:
Three months ended
September 30,
(in thousands) 2022 2021
Interest income, net $ 997 $ 13
Foreign currency exchange gain (loss), net 63 18
Loss on disposal of fixed assets (16 ) -
Other income $ 1,044 $ 31 The increase in interest and other income for the three months ended
Foreign exchange gains on transactions of our Swiss subsidiary denominated in
currencies other than the
Results of operations for the nine months ended
The following sets forth our results of operations:
Nine months ended
September 30,
(in thousands) 2022 2021 Dollar change
Operating expenses:
Research and development $ 60,193 $ 39,025 $ 21,168
General and administrative 19,702 10,470 9,232
Total operating expenses 79,895 49,495 30,400
Loss from operations (79,895 ) (49,495 ) (30,400 )
Other expense 2,176 (1,023 ) 3,199
Net loss $ (77,719 ) $ (50,518 ) $ (27,201 ) Research and development expenses
Research and development expenses were comprised of:
Nine months ended
September 30,
(in thousands) 2022 2021 Dollar change
External research and development services
19,364 11,935 7,429
Laboratory and related expenses 5,507 4,144 1,363
Facility costs and other expenses 10,544 4,510 6,034
Research and development expenses $ 60,193 $ 39,025 $ 21,168 As of
Most of our research and development expenses have been related to the
development of our QuEENTM platform, advancement of our GSPT1 program including
IND-enabling work for MRT-2359, and the advancement of our disclosed and
undisclosed programs including for CDK2, NEK7, VAV1, multiple SCD targets, and
other discovery efforts. The increase for the nine months ended
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General and administrative expenses
General and administrative expenses to support our business activities were
comprised of:
Nine months ended
September 30,
(in thousands) 2022 2021 Dollar change
Personnel costs $ 10,819 $ 6,414 $ 4,405
Professional services 3,616 1,960 1,656
Facility costs and other expenses 5,267 2,096 3,171
General and administrative expenses
As of
Other income (expense)
Other income (expense), net was comprised of:
Nine months ended
September 30,
(in thousands) 2022 2021
Interest income, net $ 1,774 $ 33
Foreign currency exchange gain (loss), net 293 (96 )
Gain on disposal of fixed assets 109 -
Changes in fair value of preferred stock tranche
obligations, net - (960 )
Other income (expense) $ 2,176 $ (1,023 ) The increase in interest and other income for the nine months ended
Foreign exchange gains on transactions of our Swiss subsidiary denominated in
currencies other than the
Liquidity and capital resources
Overview
We were incorporated in
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Cash flows
The following table summarizes our cash flows for the periods indicated:
Nine months ended
September 30,
(in thousands) 2022 2021
Net cash (used in) provided by:
Operating activities $ (68,505 ) $ (45,191 )
Investing activities (165,280 ) (6,606 )
Financing activities 32 377,697
Net (decrease) increase in cash, cash equivalents and
restricted cash $ (233,753 ) $ 325,900
Operating activities
Net cash used in operating activities of
Net cash used in operating activities of
Investing activities
Cash used in investing activities of
For the six months ended
Financing activities
On
Net cash provided by financing activities for the nine months ended
Funding requirements
Any product candidates we may develop may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, costs relating to the build-out of our headquarters, laboratories and manufacturing facility, license payments or milestone obligations that may arise, laboratory and related supplies, clinical costs, manufacturing costs, legal and other regulatory expenses and general overhead costs.
Based upon 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 for at least the next twelve months. We base this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter
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into such other arrangements when needed on favorable terms or at all. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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the scope, progress, results and costs of researching, developing and manufacturing our current product candidates or any future product candidates, and conducting preclinical studies and clinical trials;
•
the timing of, and the costs involved in, obtaining regulatory approvals or clearances for our lead product candidates or any future product candidates;
•
the number and characteristics of any additional product candidates we develop or acquire;
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the cost of manufacturing our lead product candidate or any future product candidates and any products we successfully commercialize, including costs associated with building-out our manufacturing capabilities;
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our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such agreements that we may enter into;
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the expenses needed to attract and retain skilled personnel;
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the costs associated with being a public company;
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the timing, receipt and amount of sales of any future approved or cleared products, if any; and
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the impact of the COVID-19 pandemic and the corresponding responses of businesses and governments.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Critical accounting policies and significant judgments and estimates
Our unaudited interim condensed consolidated financial statements are prepared
in accordance with generally accepted accounting principles in
There have been no significant changes to our critical accounting policies from those described in "Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2021 Annual Report.
For a complete discussion of our significant accounting policies and recent accounting pronouncements, see Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report and Note 2 to our 2021 Annual Report.
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Recently issued and adopted accounting pronouncements
Refer to Note 2, "Summary of Significant Accounting Policies," in the accompanying notes to our and consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Contractual obligations and commitments
During the nine months ended
Off-balance sheet arrangements
During the periods presented, we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under
Emerging growth company status
In
We will cease to be an emerging growth company on the date that is the earliest
of (i) the last day of the fiscal year in which we have total annual gross
revenues of
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates plus the aggregate amount of gross proceeds to us
as a result of our IPO is less than
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