MEIRAGTX HOLDINGS PLC You should read the following discussion and analysis of financial condition and operating results together with our financial statements and the related notes appearing in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the section of this Form 10-K captioned "Item 1A. Risk Factors" and elsewhere in this Form 10-K, 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. For convenience of presentation some of the numbers have been rounded in the text below.
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Overview
We are a vertically integrated, clinical stage gene therapy company with six programs in clinical development and a broad pipeline of preclinical and research programs. We have core capabilities in viral vector design and optimization and gene therapy manufacturing, as well as a potentially transformative gene regulation platform technology that allows precise, dose responsive control of gene expression by oral small molecules with dynamic range that can exceed 5000-fold. Led by an experienced management team, we have taken a portfolio approach by licensing, acquiring and developing technologies that give us depth across both product candidates and indications. Our initial focus is on three distinct areas of unmet medical need: ocular diseases, including both inherited retinal diseases as well as large degenerative ocular diseases, neurodegenerative diseases, and severe forms of xerostomia. Though initially focusing on the eye, central nervous system and salivary gland, we intend to expand our focus in the future to develop additional gene therapy treatments for patients suffering from a range of serious diseases.
We are an exempted company incorporated under the laws of the
We are a clinical stage company and have not generated any product revenues to
date. We have six clinical programs and a pipeline of preclinical programs.
Since inception, we have incurred significant operating losses. Our net losses
for the years ended
Our total operating expenses were
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well as the further development of internal manufacturing capabilities and capacity and other associated costs including the management of our intellectual property portfolio.
On
The Note Purchase Agreement provides for the issuance of the Tranche 1 Notes in
an initial amount of
On
We will require additional capital in the future, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable us to complete the development and potential commercialization of our product candidates. Furthermore, we expect to continue incurring costs associated with being a public company. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs.
Based on our cash and cash equivalents at
Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Any future debt financing or preferred equity or other financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interests.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or
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product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from 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.
Highlights and Recent Developments
Recent Development Highlights and Anticipated 2023 Milestones
Botaretigene Sparoparvovec for the Treatment of XLRP:
On
(NCT03252847) were presented in a late-breaking oral presentation at the Retina
? Subspecialty Day program of the AAO 2022 Annual Meeting; treatment with
botaretigene sparoparvovec was found to have an acceptable safety profile and
efficacy assessments in this study and demonstrated improvements in retinal
sensitivity, visual function and functional vision.1
Further sensitivity analysis was conducted on study participants by applying
? the Phase 3 Lumeos (NCT04671433) study eligibility criteria that corroborated
the endpoints selected for the Phase 3 study.1
We, in collaboration with Janssen, are dosing patients in the pivotal Phase 3
? Lumeos clinical trial of botaretigene sparoparvovec and remain on track for a
BLA submission in 2024.
1 Michaelides, M et al. Ph1/2 AAV5-RPGR (Botaretigene Sparoparvovec) Gene Therapy Trial in RPGR-associated X-linked Retinitis Pigmentosa (XLRP). Abstract #30071754. Presented at the 2022 American Academy of Ophthalmology Annual Meeting.
AAV-hAQP1 for the Treatment of Grade 2/3 Radiation-Induced Xerostomia:
? We reported positive clinical data from the AQUAx Phase 1 clinical trial in
Clinically meaningful improvements in xerostomia symptoms and disease burden in
o two validated Patient-Reported Outcome (PRO) measures in both unilateral and
bilateral treated cohorts were demonstrated.
? 18/24, or 75% achieved clinically meaningful symptom improvement using the
Global Rate of Change (GRCQ) PRO.
Using the Xerostomia Questionnaire (XQ), 71% (17/24) reported an improvement of
? >8 points (clinically meaningful), and 67% (16/24) had an improvement of ?10
(considered transformative by KOLs).
o Meaningful increases in whole saliva flow rates were observed post-treatment,
providing objective evidence of the biological activity of AAV-hAQP1 treatment.
o Early long-term follow-up data suggest durability of improvement 2+ years
post-treatment.
o AAV-hAQP1 appears safe and well-tolerated at each dose tested.
? All participants are followed for 1 year post-treatment and then enter a
long-term follow-up study for another 4 years.
? We intend to present the final 12 month data from the bilateral treated cohorts
from the AQUAx Phase 1 study in the second quarter of 2023.
Based on the favorable safety and efficacy profile of AAV-hAQP1 in the AQUAx
? Phase 1 study, we intend to initiate a randomized, double-blind,
placebo-controlled, Phase 2 study evaluating the bilateral administration of
two active doses of AAV-hAQP1 in the second quarter of 2023.
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AAV-GAD for the Treatment of Parkinson's Disease:
We are now dosing patients in the AAV-GAD clinical trial under a new IND using
? material manufactured in our cGMP facility in
proprietary production process.
? The AAV-GAD trial is a three-arm randomized Phase 1 clinical bridging study
with subjects randomized to one of two doses of AAV-GAD or sham control.
The objective of the AAV-GAD trial (NCT05603312) is to evaluate the safety and
? tolerability of AAV-mediated delivery of glutamic acid decarboxylase (GAD) gene
transfer into the subthalamic nuclei (STN) of participants with Parkinson's
disease.
? Completion of enrollment is anticipated by the third quarter of 2023.
Riboswitch Gene Regulation Platform & Vector Engineering:
We exhibited 15 poster presentations at the
Therapy 2022 Annual Congress, which included data from our novel gene
regulation platform, including the first data demonstrating the potential to
? regulate cell therapies including CAR-T, as well as data from our promoter
platforms and several new, optimized pre-clinical programs addressing severe
unmet needs for indications such as amyotrophic lateral sclerosis (ALS) and
Wilson's disease. In addition, we made several presentations on our proprietary
viral vector manufacturing technology and potency assay development.
Our next-generation riboswitch-based gene regulation platform can be used to
? precisely control the expression of any gene delivered in any context with an
unprecedented dynamic range using novel, synthetic, orally delivered small
molecules.
We now have over 30 novel orally available small molecules with high
? specificity and potency to our riboswitch aptamers moving through PK,
biodistribution and toxicology studies, with the first GMP material for IND
currently being manufactured.
Gene Therapy Manufacturing:
Our wholly-owned facilities have now produced GMP clinical trial material for 6
? different indications, using multiple AAV serotypes, including administration
into the eye, salivary gland and central nervous system.
? We believe that our proprietary platform production process has produced one of
the highest yields and full ratios in the industry.
We believe that bringing all aspects of testing and vector production in-house
? reduces regulatory risk, ensures the highest quality of products, lowers costs
and helps avoid bottlenecks in clinical development.
In addition to our 30,000-square-foot facility in
150,000-square-foot plant in Shannon,
? one built to be flexible and scalable for viral vector production, another to
manufacture plasmid DNA - the critical starting material for producing gene
therapy products - and third, a Quality Control (QC) hub performing advanced
biochemical quality control testing appropriate for commercialization.
Components of Our Results of Operations
License Revenue
Our license revenue consisted of the amortization of the upfront and milestone payments we received in connection with the Collaboration Agreement.
Operating Expenses
Our operating expenses since inception have consisted primarily of general and administrative costs and research and development costs.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and office facility-related expenses, which include direct depreciation costs.
We expect that our general and administrative expenses will increase in the
future as we increase our personnel headcount to support increased research and
development activities. We have also incurred and expect to continue to incur
increased expenses associated with being a public company, including costs of
accounting, audit, legal, regulatory and tax-related services associated with
maintaining compliance with Nasdaq and
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
? employee-related expenses, including salaries, benefits and travel of our
research and development personnel;
expenses incurred in connection with third-party vendors that conduct clinical
? and preclinical studies and manufacture the drug product for the clinical
trials and preclinical activities;
? acquisition of in process research and development;
costs associated with clinical and preclinical activities including costs
? related to facilities, supplies, rent, insurance, certain legal fees,
share-based compensation, and depreciation; and
? expenses incurred with the development and operation of our manufacturing
facilities.
We expense research and development costs as incurred.
Research and development activities are central to our business model. We expect
that our research and development expenses will continue to increase
substantially for the foreseeable future as we initiate additional preclinical
and clinical trials of our existing product candidates, including the ongoing
Phase 3 Lumeos trial of botaretigene sparoparvovec for the treatment of patients
with XLRP, and continue to discover and develop additional product candidates.
Certain of these increases in research and development costs will be partially
offset by the research funding provided in connection with the Collaboration
Agreement we entered into in
We cannot determine with certainty the duration and costs of future clinical trials of our product candidates or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our existing product candidates or any other product candidate we may develop will depend on a variety of factors, including:
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the scope, rate of progress, expense and results of clinical trials of our
? existing product candidates, as well as of any future clinical trials of other
product candidates and other research and development activities that we may
conduct;
? uncertainties in clinical trial design and patient enrollment rates;
the actual probability of success for our product candidates, including the
? safety and efficacy, early clinical data, competition, manufacturing capability
and commercial viability;
? significant and changing government regulation and regulatory guidance;
? the timing and receipt of any marketing approvals; and
? the expense of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights.
A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, if the FDA or another
Other non-operating income (expense)
Other non-operating income (expense) includes the following:
Foreign currency (loss) gain
Our consolidated financial statements are presented in
Other comprehensive income
Other comprehensive income includes the following:
Foreign currency translation gain
Expenses of subsidiaries have been translated into
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Critical Accounting Policies and Use of Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgements that affect the reporting amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgements, including those related to license and collaboration revenue, share-based compensation and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from our sources. Actual results may differ from these estimates under different assumptions.
While our significant accounting policies are described in more detail in the notes to our financial statements appearing in this Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Collaboration Arrangements
We evaluate our collaborative arrangements pursuant to Accounting Standards Codification ("ASC") 808, Collaborative Arrangements ("ASC 808") and ASC 606, Revenue from Contracts with Customers ("ASC 606"). We consider the nature and contractual terms of collaborative arrangements and assess whether the arrangement involves a joint operating activity pursuant to which we are an active participant and are exposed to significant risks and rewards with respect to the arrangement. If we are an active participant and exposed to significant risks and rewards with respect to the arrangement, we account for the arrangement as a collaboration under ASC 808. To date, we have entered into two separate collaboration agreements, both of which are with Janssen, which were determined to be within the scope of ASC 808.
ASC 808 does not address recognition or measurement matters related to collaborative arrangements. Payments between participants pursuant to a collaborative arrangement that are within the scope of other authoritative accounting literature on income statement classification are accounted for using the relevant provisions of that literature. If the payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments is based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election. Payments received from a collaboration partner to which this policy applies may include upfront payments in respect of a license of intellectual property, development and commercialization-based milestones, and royalties.
Revenue Recognition
Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. We evaluate the promised goods or services to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, we consider the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, we must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.
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When we conclude that a contract should be accounted for as a combined performance obligation and recognized over time, we must then determine the period over which revenue should be recognized and the method by which to measure revenue. We generally recognize revenue using a cost-based input method.
The Collaboration Agreement is accounted for under ASC 808, however, as ASC 808 does not address recognition or measurement matters such as determining the appropriate unit of accounting or when the recognition criteria are met, we account for the consideration received from Janssen in accordance with ASC 606. In accordance with ASC 606, we recognize revenue when the customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:
i. identify the contract(s) with a customer;
ii. identify the performance obligations in the contract;
iii. determine the transaction price;
iv. allocate the transaction price to the performance obligations within the
contract; and
v. recognize revenue when (or as) the entity satisfies a performance obligation.
We only apply the five-step model to contracts when we determine that it is probable we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
At contract inception, once the contract is determined to be by analogy within the scope of ASC 606, we assess the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services for our arrangements typically consist of a license to our intellectual property and research, development and manufacturing services. We may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.
We determine transaction prices based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, we estimate the probability and extent of consideration we expect to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. We then consider any constraints on the variable consideration and include in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
We then allocate the transaction price to each performance obligation based on the relative standalone selling price and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at
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a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
We record amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in our consolidated balance sheet. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue - related party, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue - related party.
Income Taxes
Since we have recurring losses and a valuation allowance against deferred tax
assets, there was no tax expense (benefit) for the years ended
Research and Development
Research and development costs are charged to expense as incurred. These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of our research and development personnel; expenses incurred under agreements with contract research organizations and investigative sites that conduct clinical and preclinical studies and manufacture the drug product for the clinical studies and preclinical activities; acquisition of in-process research and development; facilities; supplies; rent, insurance, certain legal fees, stock-based compensation, depreciation and other costs associated with clinical and preclinical activities and regulatory operations. Research funding under collaboration agreements and refundable research and development credits / tax credits received are recorded as an offset to these costs.
Costs for certain development activities, such as outside research programs funded by us, are recognized based on an evaluation of the progress to completion of specific tasks with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.
Share-Based Compensation
Options
We grant share options to employees, non-employee members of our board of directors and non-employee consultants as compensation for services performed. Employee and non-employee members of the board of directors' awards of share-based compensation are accounted for in accordance with ASC 718, Compensation-Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of share options, to be recognized in the statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of share options is estimated using the Black-Scholes option valuation model.
Using this model, fair value is calculated based on assumptions with respect to (i) the fair value of our ordinary shares on the grant date; (ii) expected volatility of our ordinary share price, (iii) the periods of time over which employees and members of our board of directors are expected to hold their options prior to exercise (expected term), (iv) expected dividend yield on our ordinary shares, and (v) risk-free interest rates.
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Our ordinary shares were not traded on a public exchange prior to our IPO in
Restricted Share Units
The Company grants restricted share units ("RSUs") to employees, non-employee members of our board of directors and non-employee consultants as compensation for services performed. Awards of RSUs are accounted for in accordance with ASC 718, Compensation - Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of RSUs, to be recognized in the consolidated statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of RSUs is determined using the closing market price of the Company's ordinary shares on the date of grant.
Results of Operations
Comparison of the Years Ended
2022 2021 Change
(in thousands)
License revenue - related party $ 15,920 $ 37,701 $ (21,781)
Operating expenses:
General and administrative 46,550 43,765 2,785
Research and development 85,725 66,694 19,031
Total operating expenses 132,275 110,459 21,816
Loss from operations (116,355) (72,758) (43,597)
Other non-operating income (expense)
Foreign currency loss (9,452) (6,293) (3,159)
Interest income 777 212 565
Interest expense (4,946) (288) (4,658)
Fair value adjustments 361 (434) 795
Net loss (129,615) (79,561) (50,054)
Other comprehensive income:
Foreign currency translation gain 8,718 2,226 6,492
Comprehensive loss $ (120,897) $ (77,335) $ (43,562)
License Revenue
License revenue was
General and Administrative Expenses
General and administrative expenses were
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related costs,
Research and Development Expenses
Research and development expenses for the years ended
2022 2021 Change
Gross research and development expenses
(73.3) (69.0) (4.3)
Tax incentive reimbursement (6.8) (5.4) (1.4)
Research and development expenses
Gross research and development expenses for the year ended
Reimbursements under the Collaboration Agreement for the year ended
Tax incentive reimbursement for the year ended
Foreign Currency Loss
Foreign currency loss was
Interest Income
Interest income was
Interest Expense
Interest expense was
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Other Comprehensive Income - Foreign Currency Translation Gain
Foreign currency translation adjustments resulted in a translation gain of
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. For the year
ended
We do not currently have any approved products and have never generated any
revenue from product sales. We have historically financed our operations
primarily through cash on hand and proceeds from the sale of our ordinary
shares, series A ordinary shares and convertible preferred C shares. In
Additionally, on
The Note Purchase Agreement provides for the issuance of the Tranche 1 Notes in
an initial amount of
Our obligations under the Note Purchase Agreement are secured by our
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The Note Purchase Agreement imposes covenants that include, among other things,
enrolling in a Phase III trial for AAV-RPGR on or before
In connection with entering into the Financing Agreement, we granted warrants
(the "Warrants") to Perceptive to purchase up to (i) 400,000 ordinary shares of
the Company at an exercise price of
Based on our current cash, cash equivalents and accounts receivable - related
party at
Cash Flows
We had
The following table summarizes our sources and uses of cash for the period
presented:
For the Years Ended December 31,
2022 2021
(in thousands)
Net cash used in operating activities $ (73,098) $ (10,530)
Net cash used in investing activities (44,963) (61,717)
Net cash provided by financing activities 95,200 1,708
Net decrease in cash and cash equivalents $ (22,861) $ (70,539) Operating Activities
During the year ended
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During the year ended
Investing Activities
Net cash used in investing activities for the year ended
Net cash used in investing activities for the year ended
Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements under applicable
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, (the "JOBS Act"), permits an
"emerging growth company," which we are, to take advantage of an extended
transition period to comply with new or revised accounting standards applicable
to public companies until those standards would otherwise apply to private
companies. We have elected to take advantage of this extended transition period
through
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