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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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: 001-38586

RUBIUS THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

46-2688109

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

399 Binney Street, Suite 300
Cambridge, Massachusetts
(Address of principal executive offices)

02139
(Zip code)

(617679-9600

(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, par value $0.001 per share

RUBY

The Nasdaq Global Select 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, if any, 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 April 29, 2022, the registrant had 90,213,126 shares of common stock, $0.001 par value per share, outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management, results of preclinical studies or clinical trials and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” including, among other things:

expectations regarding the success, cost and timing of our product development activities and clinical trials, including statements regarding the timing of initiation, enrollment in and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;
plans to advance product candidates into or successfully complete any clinical trial;
beliefs about data results and analyses, including what early data demonstrates or suggests, as well as expectations regarding the safety and efficacy, and overall potential and advantages, of our product candidates and our expected timing for data;
beliefs that 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;
beliefs that we can obtain or manufacture adequate and timely supply of our product candidates for clinical trials or for commercial use, if approved;
expectations regarding the operation of our manufacturing facility and any plans for further renovation or expansion;
beliefs regarding and plans for our identified research priorities to advance our technologies;
plans to license additional intellectual property relating to our product candidates and expectations that we will be able to comply with our existing license agreements;
expectations that our cash will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023 and that we will be able to obtain funding for our operations, including funding necessary to complete further development, clinical trials and, if approved, commercialization of our product candidates;
beliefs about the intellectual property rights of others and our ability to commercialize our products in light of such third-party rights;
beliefs about developments relating to cellular therapies, including red blood cell therapies;
expectations for competing therapies that are or become available;
plans for the commercialization of, and expectations for the market for, our product candidates, if approved;

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our plans to research, develop and commercialize our product candidates;
our plans to attract collaborators with development, regulatory and commercialization expertise;
expectations to enter into agreements with third parties in connection with the commercialization of our product candidates and any other approved product;
beliefs about the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
expectations for the impact of global economic and political developments on our business and on our clinical trials, including economic slowdowns or recessions that may result from the ongoing COVID-19 pandemic;
expectations for the rate and degree of market acceptance of our product candidates, if approved;
anticipated regulatory developments in the United States and foreign countries;
expectations that we will be able to contract with third-party suppliers and manufacturers and their ability to perform adequately;
estimates for expenses, future revenue, capital requirements and needs for, and ability to obtain, additional financing;
the expected impact of laws and regulations and legislative and regulatory changes;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates; and
our expectations regarding our transition to a large accelerated filer and our loss of emerging growth company status.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

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Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

we have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future;

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;

we have a limited operating history, which may make it difficult to evaluate our technology and product development capabilities and predict our future performance;

our business is highly dependent on the success of our initial product candidates targeting cancer and autoimmune diseases. All of our product candidates will require significant additional nonclinical and clinical development before we can seek regulatory approval for and launch a product commercially;

the successful development of cellular therapeutics, such as our investigational Red Cell Therapeutics, or RCTs, is highly uncertain;

our RCT product candidates are based on a new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all;

the FDA, the EMA and other regulatory authorities may implement additional regulations or restrictions on the development and commercialization of our product candidates, which may be difficult to predict;

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;

our ongoing and planned clinical trials or those of our future collaborators may reveal significant adverse events not seen in our preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates;

positive results from early preclinical studies or early clinical trials of our product candidates are not necessarily predictive of the results of later preclinical studies or any future clinical trials of our product candidates;

if we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected;

cellular therapies are a novel approach and negative perception of any product candidates that we develop could adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates;

we are subject to numerous laws and regulations, noncompliance with which would subject us to possible legal or regulatory action;

the effects of health epidemics like the ongoing COVID-19 pandemic, including recurring surges and waves of infection and emergent variants of the coronavirus, in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our clinical supply, preclinical studies, ongoing and planned clinical trials;

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if we are unable to obtain and maintain patent protection for any product candidates we develop or for our RED PLATFORM, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected;

we intend to rely on patent and other rights and available regulatory exclusivities, including the status of our product candidates, if approved, as products eligible for reference product exclusivity under the Biologics Price Competition and Innovation Act, or BPCIA. If we are unable to obtain or maintain exclusivity and otherwise protect our intellectual property from the combination of these approaches, we may not be able to compete effectively in our markets;

third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidates, RED PLATFORM and other technologies;

our product candidates are uniquely manufactured. If we or any third-party manufacturers that we may engage encounter difficulties in manufacturing our product candidates, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure;

we have acquired and are establishing our own manufacturing facility and infrastructure in addition to or in lieu of relying on contract manufacturing organizations for the manufacture of our product candidates, which is costly, time-consuming, and which may not be successful; and

we do not have extensive experience as a company managing a manufacturing facility.

The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

iv

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Rubius Therapeutics, Inc.

Table of Contents

Page No.

PART I - FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

1

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

2

Condensed Consolidated Statements of Cash Flows (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

4

Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

94

Item 3.

Defaults Upon Senior Securities

94

Item 4.

Mine Safety Disclosures

94

Item 5.

Other Information

94

Item 6.

Exhibits

95

Signatures

96

Solely for convenience, the trademarks, service marks and trade names referred to in this quarterly report are listed without the ®, (sm) and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

March 31, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

98,104

$

225,848

Investments

 

78,413

 

Prepaid expenses and other current assets

 

3,526

 

3,975

Total current assets

 

 

180,043

 

229,823

 

Operating lease, right-of-use-asset

33,847

35,095

Property, plant and equipment, net

 

51,660

 

51,530

Restricted cash

 

1,573

 

1,573

Total assets

$

267,123

$

318,021

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

 

Accounts payable

$

12,084

$

11,572

Accrued expenses and other current liabilities

 

7,752

 

14,072

Operating lease liabilities

 

9,082

 

9,015

Total current liabilities

 

28,918

 

34,659

Long-term debt, net of discount

 

76,377

 

76,154

Other long-term liabilities

101

135

Operating lease liabilities, net of current portion

 

27,078

 

28,291

Total liabilities

 

132,474

 

139,239

Commitments and contingencies (see Note 9)

 

 

Stockholders' equity:

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued or outstanding at March 31, 2022 and December 31, 2021

Common stock, $0.001 par value; 150,000,000 shares authorized at March 31, 2022 and December 31, 2021; 90,186,626 and 90,063,770 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

90

 

90

Additional paid-in capital

 

864,046

 

855,710

Accumulated other comprehensive loss

 

(57)

 

Accumulated deficit

 

(729,430)

 

(677,018)

Total stockholders' equity

 

134,649

 

178,782

Total liabilities and stockholders' equity

$

267,123

$

318,021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

 

2022

2021

 

Revenue

$

$

Operating expenses:

Research and development

38,299

 

27,677

General and administrative

12,563

 

13,240

Total operating expenses

50,862

 

40,917

Loss from operations

(50,862)

 

(40,917)

Other income (expense):

 

Interest income

48

 

26

Interest expense

(1,629)

 

(1,748)

Other income, net

31

309

Total other income (expense), net

(1,550)

 

(1,413)

Net loss

(52,412)

 

(42,330)

Net loss per share, basic and diluted

$

(0.58)

$

(0.51)

Weighted average common shares outstanding, basic and diluted

90,149,049

 

82,314,577

 

Comprehensive loss:

 

Net loss

$

(52,412)

$

(42,330)

Other comprehensive income (loss):

Unrealized gains (losses) on investments, net of tax of $0

(57)

 

3

Comprehensive loss

$

(52,469)

$

(42,327)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended March 31, 

    

2022

    

2021

    

Cash flows from operating activities:

 

  

 

  

 

Net loss

$

(52,412)

$

(42,330)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

Stock-based compensation expense

8,260

 

8,642

Depreciation and amortization expense

1,559

 

1,496

Amortization (accretion) of premium (discount) on investments

(25)

 

61

Non-cash interest expense

204

 

693

Changes in operating assets and liabilities:

 

  

Prepaid expenses and other current assets

287

 

(384)

Operating lease, right-of-use-asset

1,248

1,347

Accounts payable

124

 

(757)

Accrued expenses and other current liabilities

(5,200)

 

(6,325)

Other long-term liabilities

(34)

(34)

Operating lease liabilities

(1,146)

(1,148)

Net cash used in operating activities

(47,135)

 

(38,739)

Cash flows from investing activities:

  

 

  

Purchases of property, plant and equipment

(2,402)

 

(748)

Purchases of investments

(78,445)

 

Sales and maturities of investments

42,500

Net cash provided by (used in) investing activities

(80,847)

 

41,752

Cash flows from financing activities:

  

 

  

Proceeds from underwritten public offering of common stock, net of commissions and underwriting discounts

188,000

Proceeds from issuance of common stock upon exercise of stock options and under employee stock purchase plan

76

 

5,908

Net cash provided by financing activities

76

 

193,908

Net increase (decrease) in cash, cash equivalents and restricted cash

(127,906)

 

196,921

Cash, cash equivalents and restricted cash at beginning of period

227,583

 

92,901

Cash, cash equivalents and restricted cash at end of period

$

99,677

$

289,822

Supplemental cash flow information:

Cash paid for interest

$

1,425

$

1,054

Cash paid for leases

$

1,823

$

1,901

Supplemental disclosure of non-cash investing and financing information:

 

  

Purchases of property, plant and equipment included in accounts payable or accrued expenses

$

1,257

$

408

Offering costs included in accounts payable and accrued expenses

$

$

494

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

Accumulated

Additional

other

Total

Common stock

paid-in

comprehensive

Accumulated

stockholders’

   

Shares

   

Amount

   

capital

   

loss

   

deficit

   

equity

Balances at December 31, 2021

 

90,063,770

$

90

$

855,710

$

$

(677,018)

$

178,782

Issuance of common stock

upon exercise of stock

options

18,228

76

76

Vesting of restricted stock units

104,628

Stock-based compensation

expense

8,260

8,260

Unrealized losses on

investments

(57)

(57)

Net loss

(52,412)

(52,412)

Balances at March 31, 2022

 

90,186,626

$

90

$

864,046

$

(57)

$

(729,430)

$

134,649

Accumulated

Additional

other

Total

Common stock

paid-in

comprehensive

Accumulated

stockholders’

   

Shares

   

Amount

   

capital

   

income

   

deficit

   

equity

Balances at December 31, 2020

 

81,053,651

$

81

$

621,946

$

4

$

(480,471)

$

141,560

Issuance of common stock,

public offering, net of estimated

issuance costs of $800

6,896,552

 

7

 

187,193

 

 

 

187,200

Issuance of common stock

upon exercise of stock

options

 

1,237,324

 

1

 

5,907

 

 

 

5,908

Stock-based compensation

expense

 

 

 

8,642

 

 

 

8,642

Unrealized gains on

investments

 

3

 

3

Net loss

 

(42,330)

 

(42,330)

Balances at March 31, 2021

89,187,527

$

89

$

823,688

$

7

$

(522,801)

$

300,983

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business and Basis of Presentation

Rubius Therapeutics, Inc. (“Rubius” or the “Company”) is a biopharmaceutical company that is biologically engineering red blood cells into medicines, called Red Cell Therapeutics, for the treatment of cancer and autoimmune diseases. Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In January 2015, the Company changed its name to Rubius Therapeutics, Inc.

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 ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. In addition, the Company is subject to uncertainty regarding the performance and safety of its product candidates in humans. 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 drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company is monitoring the potential impact of the novel coronavirus (“COVID-19”), if any, on the carrying value of certain assets. To date, the Company has not experienced material business disruption, nor has it incurred impairment of any assets as a result of COVID-19. The extent to which these events may impact the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted at this time. The duration and intensity of these impacts and resulting disruption to the Company’s operations is uncertain and the Company will continue to assess the financial impact.

On July 20, 2018, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $254.3 million, after deducting underwriting discounts and commissions and other offering costs. Upon the closing of the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically converted into 51,845,438 shares of common stock.

On March 18, 2021, the Company completed an underwritten public offering (the “March 2021 Offering”), pursuant to which it issued and sold 6,896,552 shares of common stock. The aggregate net proceeds received by the Company from the March 2021 Offering were $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since inception, including net losses of $52.4 million for the three months ended March 31, 2022 and $196.5 million for the year ended December 31, 2021. As of March 31, 2022, the Company had an accumulated deficit of $729.4 million. The Company expects to continue to generate operating losses in the foreseeable future.

The Company has financed its operations to date primarily through proceeds from private placements, its IPO, the March 2021 Offering and borrowings under credit facilities. The Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials, and developing manufacturing capabilities. The Company will need to raise additional funds through public or private equity financings, debt financings, collaborations, strategic alliances or marketing, distribution or licensing arrangements to fund operations. The Company may not be able to obtain financing, or enter into collaboration or other arrangements, on

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acceptable terms, or at all. Furthermore, the terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. The Company implemented certain cost reduction actions in April 2022, which are intended to focus its capital on advancing its cancer and autoimmune programs and technology platform. If the Company is unable to obtain additional funding, it will implement further cost reduction actions that delay, scale back or discontinue some or all of its research and development programs and technology platform activities in order to further extend its forecasted cash runway. These actions could adversely affect its business prospects. As of May 10, 2022, the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments into the second half of 2023.

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed 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 condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2021, on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2022 and condensed consolidated results of operations for the three months ended March 31, 2022 and 2021 and the condensed consolidated cash flows for the three months ended March 31, 2022 and 2021 have been made. The Company’s condensed consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

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 revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

The full extent to which the ongoing COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As of the date of issuance of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ from those estimates or assumptions.

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Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. The Company’s cash, cash equivalents and investments, as of March 31, 2022, consisted of cash, money market accounts, U.S. government money market funds and U.S. government treasury bills. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and raw materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash

As of March 31, 2022 and December 31, 2021, the Company maintained letters of credit for the benefit of the landlords of its leased properties totaling $1.6 million and $1.7 million, respectively. The Company was required to maintain separate cash balances of these amounts to secure the letters of credit. Related to these separate cash balances, the Company included $1.6 million in restricted cash (non-current) in its condensed consolidated balance sheet as of March 31, 2022. As of December 31, 2021, the Company included $0.1 million in prepaid expenses and other current assets and $1.6 million in restricted cash (non-current) in its condensed consolidated balance sheet.

Cash, cash equivalents and restricted cash presented in the accompanying condensed consolidated statement of cash flows was $99.7 million and $289.8 million for the three months ended March 31, 2022 and 2021, respectively, of which $1.6 million and $1.7 million was restricted cash, respectively.

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 investments 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 liabilities. The carrying value of the Company’s long-term debt approximates its fair value due to its variable interest rate, which approximates a market interest rate.

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Investments

The Company’s investments are classified as available-for-sale and are carried at fair value. Realized gains and losses and declines in value are based on the specific identification method and are included as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company classifies its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such investments are available for current operations.

The Company evaluates its investments with unrealized losses for impairment. When assessing investments for unrealized declines in value, the Company considers whether the decline in value is related to a credit loss or non-credit loss. For credit losses, the Company reduces the investment to fair value through an allowance for credit losses recorded to the balance sheet and corresponding charge to the statement of operations. The allowance for credit losses and corresponding impairment charge is adjusted each period for changes in fair value. For non-credit losses, the Company reduces the investment to fair value through a charge to the statement of comprehensive loss, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. No such credit losses were recorded during the periods presented.

Leases

At the inception of an arrangement as lessee or lessor, the Company determines whether the arrangement is or contains a lease. Operating lease cost is recognized over the lease term on a straight-line basis. Variable lease cost and short-term leases (lease terms less than 12 months) are recognized as incurred. For both lessee and lessor arrangements, variable lease payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities costs, and are expensed when incurred. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

For lessee arrangements, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

The Company has elected the following lease policies at the inception of a lease: (1) for lessee and lessor arrangements within all asset classes, combine lease and non-lease components as a single component, with the lease expense recognized over the expected term on a straight-line basis and (2) for lessee arrangements, apply short-term lease exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for leases with terms of one year or less.

3. Investments and Fair Value of Financial Assets and Liabilities

As of March 31, 2022, investments by security type consisted of the following (in thousands):

March 31, 2022

Amortized Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Credit Losses

Fair Value

U.S. government treasury bills (due within one year)

 

$

78,470

 

$

 

$

(57)

$

$

78,413

$

78,470

$

$

(57)

$

$

78,413

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The Company had no investments as of December 31, 2021.

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

Fair value measurements at March 31, 2022 using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

  

Cash equivalents:

 

  

 

  

 

  

  

U.S. government money market funds

 

$

92,740

 

$

 

$

$

92,740

Investments:

 

 

 

 

  

U.S. government treasury bills

 

78,413

 

 

78,413

$

92,740

$

78,413

$

$

171,153

Fair value measurements at December 31, 2021 using:

    

Level 1 

    

Level 2 

    

Level 3

    

Total 

Assets:

 

  

 

  

 

  

  

Cash equivalents:

 

  

 

  

 

  

  

U.S government money market funds

 

$

217,009

 

$

 

$

$

217,009

$

217,009

$

$

$

217,009

U.S. government money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. government treasury bills were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. There have been no changes to the valuation methods during the three months ended March 31, 2022. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers between Level 1, Level 2 or Level 3 during the three months ended March 31, 2022.

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4. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following (in thousands):

    

March 31, 2022

    

December 31, 2021

    

Land

$

1,300

$

1,300

Manufacturing facility

35,735

33,203

Manufacturing equipment

8,861

8,831

Laboratory equipment

 

17,907

17,501

 

Computer equipment

 

 

2,710

 

2,645

 

Furniture and fixtures

1,306

1,281

Leasehold improvements

 

 

570

 

444

 

Construction-in-progress

 

 

2,686

 

4,181

 

 

 

71,075

 

69,386

 

Less: Accumulated depreciation and amortization

 

 

(19,415)

 

(17,856)

 

$

51,660

$

51,530

In February 2022, the Company placed into service $2.5 million of property, plant and equipment related to renovations to expand the Smithfield, Rhode Island manufacturing facility’s production capacity and operating capabilities. As of December 31, 2021, these additions were not ready for their intended use and continued to be included in construction-in-progress.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

    

March 31, 2022

    

December 31, 2021

    

Accrued employee compensation and benefits

 

$

2,152

$

7,451

 

Accrued external research and development expenses

 

 

3,065

 

2,713

 

Accrued manufacturing facility expenses

 

 

995

 

2,349

 

Accrued general and administrative expenses

710

889

Other

 

 

830

 

670

 

$

7,752

$

14,072

6. Debt

On December 21, 2018 (the “Closing Date”), the Company entered into a loan and security agreement (as amended, the “Loan Agreement”) with Solar Capital Ltd., now SLR Investment Corp., 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, the Company made an initial borrowing of $25.0 million. In June 2019, the Company made a second borrowing of $25.0 million and in June 2020, the Company made a third and final borrowing of $25.0 million.

On June 22, 2021 (the “Amendment Closing Date”), the Company entered into an amendment (the “Amendment”) to its Loan Agreement. Pursuant to the Amendment, the Company and its lenders agreed to extend the interest-only period applicable to borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024 and the final maturity date from December 21, 2023 until June 1, 2026. An additional tranche in the amount of $35.0 million is available at the request of the Company prior to the final maturity date, to be provided at the sole discretion of the lenders. The Amendment increases the LIBOR interest rate floor from 0.00% to 2.10%. Interest on the outstanding loan balance will accrue at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. Certain back-end fees are due to the lender at the time of final repayment based on the total funded term loans. The Company accrues the back-end fees that will be due at final repayment to outstanding debt by charges to interest expense over the term of the loans using the

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effective interest method. 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.

As the terms of the Amendment were not substantially different than the terms of the Loan Agreement, the Amendment was accounted for as a debt modification. In conjunction with the Amendment, the Company incurred issuance costs of $0.2 million payable to the lenders, which were recorded as an additional debt discount and will be amortized to interest expense over the remaining term, together with unamortized original issuance costs as of the Amendment Closing Date, using the effective interest method.

The Loan Agreement contains financial covenants that require the Company to maintain either a certain minimum cash balance or a minimum market capitalization threshold. The Company was in compliance with all such financial covenants as of May 10, 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 the Company’s assets, other than its intellectual property.

As of March 31, 2022, the estimated future principal payments due were as follows (in thousands):

Year ending December 31, 

    

  

2022 (nine months ending December 31)

$

2023

 

2024

18,750

2025

37,500

2026 and thereafter

18,750

$

75,000

7. Equity

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

On July 20, 2018, the Company filed a restated certificate of incorporation in the State of Delaware, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 160,000,000 shares, consisting of (i) 150,000,000 shares of common stock, $0.001 par value per share, and (ii) 10,000,000 shares of preferred stock, $0.001 par value per share. The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon issuance. The shares of preferred stock are currently undesignated.

On August 1, 2019, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink LLC (the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million through the Sales Agents. The Company’s registration statement on Form S-3 filed on August 1, 2019 was declared effective on August 21, 2019. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. The Sales Agents will be entitled to receive 3.0% of the gross sales price per share of common stock sold pursuant to the Distribution Agreement. As of March 31, 2022, no shares of common stock have been issued and sold pursuant to the Distribution Agreement.

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On March 18, 2021, the Company completed the March 2021 Offering, pursuant to which it issued and sold 6,896,552 shares of common stock. The aggregate net proceeds received by the Company from the March 2021 Offering were $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

8. Stock-Based Compensation

Service-Based Stock Options

During the three months ended March 31, 2022, the Company granted options with service-based vesting conditions for the purchase of 2,455,341 shares of common stock with a weighted average exercise price of $6.74 per share and a weighted average grant-date fair value of $4.61 per share.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended March 31, 

    

2022

    

2021

    

Research and development expenses

 

$

3,477

$

2,531

 

General and administrative expenses

 

4,783

 

6,111

 

$

8,260

$

8,642

As of March 31, 2022, total unrecognized compensation cost related to the unvested stock-based awards was $61.0 million, which is expected to be recognized over a weighted average period of 2.6 years.

9. Commitments and Contingencies

License Agreement with the Whitehead Institute for Biomedical Research

The Company has a license agreement with the Whitehead Institute for Biomedical Research (“WIBR”), as amended, under which the Company has been granted an exclusive, sublicensable, nontransferable license under certain patent families related to the development of the Company’s red blood cell therapies (as amended, the “WIBR License”). The Company is obligated to pay WIBR annual license maintenance fees of less than $0.1 million, as well as patent-related costs, including legal fees, and low single-digit royalties based on annual net sales of licensed products and licensed services by the Company and its sublicensees. Based on the progress the Company makes in the advancement of products covered by the licensed patent rights, the Company is required to make aggregate milestone payments of up to $1.6 million upon the achievement of specified preclinical, clinical and regulatory milestones. In addition, the Company is required to pay to WIBR a percentage of the non-royalty payments that it receives from sublicensees of the patent rights licensed by WIBR. This percentage varies from low single-digit to low double-digit percentages and will be based upon the clinical stage of the product that is the subject of the sublicense. Royalties shall be paid by the Company on a licensed product-by-licensed product and country-by-country basis, beginning on the first commercial sale of such licensed product in such country until expiration of the last valid patent claim covering such licensed product in such country.

The Company has the right to terminate the WIBR License in its entirety, on a patent-by-patent or country-by-country basis, at will upon three months’ notice to WIBR. WIBR may terminate the agreement upon breach of contract or in the event of the Company’s bankruptcy, liquidation, insolvency or cessation of business related to the license.

401(k) Plan

In January 2018, the Company established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company

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makes matching contributions at a rate of 50% of each employee’s contribution up to a maximum employee contribution of 6% of eligible plan compensation. For the three months ended March 31, 2022 and 2021, the Company made matching contributions of $0.4 million and $0.3 million, respectively.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, 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 executive officers 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. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Legal Proceedings

The Company is not currently 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 as incurred the costs related to such legal proceedings.

10. Net Loss per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

Three Months Ended March 31, 

    

2022

    

2021

    

Numerator:

 

  

 

  

 

Net loss

$

(52,412)

$

(42,330)

 

  

 

  

Denominator:

 

  

 

  

Weighted average common shares outstanding, basic and diluted

 

90,149,049

 

82,314,577

Net loss per share, basic and diluted

$

(0.58)

$

(0.51)

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares from the periods in the table above, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

March 31, 

    

2022

    

2021

    

Unvested restricted common stock

 

1,188,074

 

724,854

 

Stock options to purchase common stock

 

19,428,320

 

17,416,717

 

 

20,616,394

 

18,141,571

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on February 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 the American Association for Cancer Research Annual Meeting in April 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. In January 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 in December 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 of April 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

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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

In April 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-15Rα) 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 in April 2022 at the American 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 on March 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.

In April 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 of March 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.

In June 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.

In January 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.

In November 2021, we presented preclinical data for RTX-224 at the Society 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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In May 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)

In December 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 in Smithfield, 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.

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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.

On July 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. In August 2019, we entered into a Distribution Agreement with J.P. Morgan Securities LLC, Jefferies LLC and SVB 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. In March 2021, we completed an underwritten public offering, or the March 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 ended March 31, 2022 and $196.5 million for the year ended December 31, 2021. As of March 31, 2022, we had an accumulated deficit of $729.4 million. We expect to continue to incur significant expenses and operating losses for at

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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 in April 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 of May 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

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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 U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority;

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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 the United States and internationally;
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 March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

 

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 ended March 31, 2022, compared to less than $0.1 million for the three months ended March 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 ended March 31, 2022, compared to $1.7 million for the three months ended March 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 ended March 31, 2022, compared to $0.3 million for the three months ended March 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 our March 2021 Offering, described and defined further below. As of March 31, 2022, we had cash, cash equivalents and investments of $176.5 million. In July 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. In December 2018, we entered into a loan and security agreement, which was amended in June 2021, which provides for aggregate borrowings of up to $75.0 million. As of March 31, 2022, $75.0 million is outstanding under the agreement and principal payments

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commence in July 2024. In March 2021, we completed the March 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.

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

$

(127,906)

$

196,921

Operating Activities

During the three months ended March 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 ended March 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 ended March 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 ended March 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 ended March 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 in Smithfield, Rhode Island.

During the three months ended March 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 in Smithfield, Rhode Island and our laboratory space in Cambridge, Massachusetts.

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities of $0.1 million consisted of proceeds received from issuance of common stock upon exercise of stock options of $0.1 million.

During the three months ended March 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 in March 2021.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 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

 

Total

Less Than 1 Year

1 to 3 Years

3 to 5 Years

More Than 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 Cambridge, Massachusetts under two operating lease agreements that expire in January 2027 and August 2028, respectively.

(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

In December 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, in June 2019 and in June 2020.

On June 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 from December 21, 2021 until July 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 to June 1, 2026 (from December 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-month U.S. LIBOR rate. Monthly principal payments will commence on July 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 of March 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

On August 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

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Form S-3 and a related prospectus supplement, both filed with the SEC on August 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 of March 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 in April 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 the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the 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 ended December 31, 2021, filed with the SEC on February 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 ended December 31, 2021 filed with the SEC on February 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of March 31, 2022, we had cash, cash equivalents and investments of $176.5 million, which consisted of cash, money market accounts, U.S. government money market funds and U.S. treasury bills. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.

As of March 31, 2022, we had $75.0 million of borrowings outstanding under the Loan Agreement. Interest on the outstanding borrowings under the Loan Agreement accrues at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. An immediate 10% change in the one-month U.S. LIBOR rate would not have a material impact on our debt-related obligations, financial position or results of operations.

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We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors that are located in Europe, Australia and China. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor, research supplies and materials and manufacturing raw materials. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors

Our business is subject to numerous risks. You should carefully consider the ri