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Form 10-Q Merus N.V. For: Jun 30

August 8, 2022 4:10 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from to

Commission File Number: 001-37773

 

MERUS N.V.

(Exact name of registrant as specified in its charter)

 

 

The Netherlands

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

Yalelaan 62

3584 CM Utrecht

The Netherlands

Not Applicable

(Address of principal executive offices)

(Zip code)

 

+31 85 016 2500

(Registrant’s telephone number, including area code)

 

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 shares, nominal value €0.09 per share

MRUS

The Nasdaq Stock Market LLC

(Nasdaq Global Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 1, 2022, the registrant had 45,878,167 common shares, nominal value €0.09 per share, outstanding.

 


 

 

 


 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

2

 

 

Condensed Consolidated Balance Sheets
as of June 30, 2022 and December 31, 2021

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss
for the three and six months ended June 30, 2022 and 2021

3

 

 

Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2022 and 2021

4

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity
for the three and six months ended June 30, 2022 and 2021

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

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

16

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

23

 

 

Item 4. Controls and Procedures

23

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

24

 

 

Item 1A. Risk Factors

24

 

 

Item 5. Other Information

69

 

 

Item 6. Exhibits

69

 

 

Signatures

70

 

 


 

Cautionary Note Regarding Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our plans to develop and commercialize our product candidates, the timing of our ongoing or planned clinical trials, the timing of and our ability to obtain and maintain regulatory approvals, the anticipated impact of the COVID-19 pandemic on our business and operations, the clinical utility and commercial potential of our product candidates, our commercialization, marketing and manufacturing capabilities and strategy, our expectations surrounding our collaborations, our expectations about the willingness of healthcare professionals to use our product candidates, the sufficiency of our cash, cash equivalents and investments, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties, assumptions and other important factors, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common shares. The principal risks and uncertainties affecting our business include the following:

 

We have incurred significant net losses since our inception and we expect to continue to incur significant expenses and operating losses for the foreseeable future.
We have a limited operating history, have not completed any registrational clinical trials, and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce or eliminate one or more of our research and drug development programs or future commercialization efforts.
The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA or other comparable foreign regulatory authorities.
The clinical trial and regulatory approval processes are lengthy, time consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Our antibody candidates may have serious adverse, undesirable or unacceptable side effects which may delay or prevent marketing approval. If such side effects are identified during the development of our antibody candidates or following approval, if any, we may need to abandon our development of such antibody candidates, the commercial profile of any

 


 

approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.
We have never commercialized an antibody candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable collaborators.
We rely, and expect to continue to rely, on third parties, including independent clinical investigators and contract research organizations or CROs, to conduct our pre-clinical studies, clinical trials, chemistry, manufacturing and controls and potential development of a companion diagnostic. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our antibody candidates or we may be subject to other significant negative consequences following marketing approval, if any and our business could be substantially harmed.
Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain antibody candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.
The competition for qualified personnel is particularly intense in our industry. If we are unable to retain or hire key personnel, we may not be able to sustain or grow our business.
We operate in highly competitive and rapidly changing industries, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
Our success depends on our ability to protect our intellectual property and our proprietary technologies. If we are unable to adequately protect our intellectual property and our proprietary technologies, or obtain and maintain issued patents which are sufficient to protect our product candidates and proprietary technologies, others could compete against us more directly, which would negatively impact our business.
Our existing collaborations are important to our business and future licenses may also be important to us, and if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected.
The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations.

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MERUS N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

213,930

 

 

$

241,435

 

Marketable securities

 

 

162,177

 

 

 

168,990

 

Accounts receivable

 

 

3,896

 

 

 

1,697

 

Accounts receivable (related party)

 

 

 

 

 

4,609

 

Prepaid expenses and other current assets

 

 

18,822

 

 

 

7,448

 

Total current assets

 

 

398,825

 

 

 

424,179

 

Marketable securities

 

 

20,694

 

 

 

20,297

 

Property and equipment, net

 

 

6,179

 

 

 

3,549

 

Operating lease right-of-use assets

 

 

13,589

 

 

 

3,733

 

Intangible assets, net

 

 

2,076

 

 

 

2,347

 

Deferred tax assets

 

 

241

 

 

 

417

 

Other assets

 

 

3,189

 

 

 

2,078

 

Total assets

 

$

444,793

 

 

$

456,600

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,961

 

 

$

13,237

 

Accrued expenses and other liabilities

 

 

21,257

 

 

 

22,506

 

Income taxes payable

 

 

 

 

 

 

Current portion of lease obligation

 

 

1,331

 

 

 

1,494

 

Current portion of deferred revenue

 

 

30,714

 

 

 

16,613

 

Current portion of deferred revenue (related party)

 

 

 

 

 

18,048

 

Total current liabilities

 

 

60,263

 

 

 

71,898

 

Lease obligation

 

 

12,291

 

 

 

2,257

 

Deferred revenue, net of current portion

 

 

45,630

 

 

 

10,962

 

Deferred revenue, net of current portion (related party)

 

 

 

 

 

55,282

 

Total liabilities

 

 

118,184

 

 

 

140,399

 

Commitments and contingencies - Note 6

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common shares, €0.09 par value; 67,500,000 shares authorized as at June 30, 2022 and December 31, 2021;
45,866,820 and 43,467,052 shares issued and outstanding as at
June 30, 2022 and December 31, 2021, respectively

 

 

4,711

 

 

 

4,481

 

Additional paid-in capital

 

 

848,623

 

 

 

787,869

 

Accumulated other comprehensive income

 

 

(35,190

)

 

 

(9,221

)

Accumulated deficit

 

 

(491,535

)

 

 

(466,928

)

Total stockholders’ equity

 

 

326,609

 

 

 

316,201

 

Total liabilities and stockholders’ equity

 

$

444,793

 

 

$

456,600

 

 

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

2


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

12,684

 

 

$

5,118

 

 

$

24,339

 

 

$

6,717

 

Collaboration revenue (related party)

 

 

 

 

 

7,261

 

 

 

 

 

 

14,012

 

Total revenue

 

 

12,684

 

 

 

12,379

 

 

 

24,339

 

 

 

20,729

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

31,096

 

 

 

24,612

 

 

 

58,071

 

 

 

45,418

 

General and administrative

 

 

12,695

 

 

 

10,569

 

 

 

24,448

 

 

 

19,902

 

Total operating expenses

 

 

43,791

 

 

 

35,181

 

 

 

82,519

 

 

 

65,320

 

Operating loss

 

 

(31,107

)

 

 

(22,802

)

 

 

(58,180

)

 

 

(44,591

)

Other (loss) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income, net

 

 

316

 

 

 

(51

)

 

 

422

 

 

 

(133

)

Foreign exchange gains (loss)

 

 

24,607

 

 

 

(4,525

)

 

 

32,337

 

 

 

7,678

 

Other (losses) gains , net

 

 

601

 

 

 

52

 

 

 

1,059

 

 

 

(385

)

Total other income (loss), net

 

 

25,524

 

 

 

(4,524

)

 

 

33,818

 

 

 

7,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(5,583

)

 

 

(27,326

)

 

 

(24,362

)

 

 

(37,431

)

Income tax expense

 

 

131

 

 

 

62

 

 

 

245

 

 

 

111

 

Net loss

 

$

(5,714

)

 

$

(27,388

)

 

$

(24,607

)

 

$

(37,542

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

 

(19,921

)

 

 

3,475

 

 

 

(25,969

)

 

 

(5,916

)

Comprehensive loss

 

$

(25,635

)

 

$

(23,913

)

 

$

(50,576

)

 

$

(43,458

)

Net loss per share attributable to common stockholders:
      Basic and diluted

 

$

(0.13

)

 

$

(0.71

)

 

$

(0.56

)

 

$

(1.01

)

Weighted-average common shares outstanding:
      Basic and diluted

 

 

43,636

 

 

 

38,376

 

 

 

43,781

 

 

 

37,299

 

 

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

3


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)

 

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(24,607

)

 

$

(37,542

)

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

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

538

 

 

 

634

 

Amortization of intangible assets

 

 

135

 

 

 

147

 

Foreign exchange gain

 

 

(50,072

)

 

 

(7,611

)

Stock-based compensation expense

 

 

11,996

 

 

 

7,959

 

Amortization of discount on investments

 

 

504

 

 

 

48

 

Deferred tax expense

 

 

176

 

 

 

270

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

2,014

 

 

 

(2,097

)

Operating lease right-of-use assets and lease obligations

 

 

18

 

 

 

(11

)

Prepaid expenses and other current assets

 

 

4,014

 

 

 

(1,852

)

Accounts payable

 

 

(6,068

)

 

 

3,190

 

Accrued expenses and other liabilities

 

 

486

 

 

 

3,207

 

Deferred revenue

 

 

(17,265

)

 

 

28,704

 

Net cash provided by (used in) operating activities

 

 

(78,131

)

 

 

(4,954

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(120,006

)

 

 

(24,850

)

Proceeds from maturities of marketable securities

 

 

126,293

 

 

 

28,163

 

Purchases of property and equipment

 

 

(3,200

)

 

 

(260

)

Net cash provided by investing activities

 

 

3,087

 

 

 

3,053

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

48,015

 

 

 

129,398

 

Proceeds from issuance of common stock - Lilly

 

 

 

 

 

16,477

 

Proceeds from stock options exercised

 

 

1,063

 

 

 

6,728

 

Repurchase of restricted stock units

 

 

 

 

 

(285

)

Net cash provided by financing activities

 

 

49,078

 

 

 

152,318

 

Foreign exchange impact on cash, cash equivalents and restricted cash

 

 

(1,176

)

 

 

(2,027

)

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

 

 

(27,142

)

 

 

148,390

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

241,749

 

 

 

163,283

 

Cash, cash equivalents, and restricted cash, end of period

 

$

214,607

 

 

$

311,673

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

Lease liabilities arising from obtaining right-of-use assets

 

$

11,493

 

 

$

1,662

 

Income taxes paid

 

$

 

 

$

491

 

Non-cash purchases of property, equipment and intangibles

 

$

616

 

 

$

22

 

Non-cash issuance of stock options

 

$

 

 

$

573

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

 

 

 

 

Cash and cash equivalents

 

$

213,930

 

 

$

311,472

 

Restricted cash included in non-current other assets

 

 

677

 

 

 

201

 

 

 

$

214,607

 

 

$

311,673

 

 

See accompanying notes to the Condensed Consolidated Financial Statements.

4


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(Amounts in thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at January 1, 2021

 

 

31,602,953

 

 

$

3,211

 

 

$

490,093

 

 

$

(400,112

)

 

$

9,071

 

 

$

102,263

 

Issuance of common stock, net

 

 

5,575,757

 

 

 

610

 

 

 

128,793

 

 

 

 

 

 

 

 

 

129,403

 

Issuance of common stock - Lilly

 

 

706,834

 

 

 

77

 

 

 

16,400

 

 

 

 

 

 

 

 

 

16,477

 

Exercise of stock options and vesting of restricted stock units

 

 

386,097

 

 

 

42

 

 

 

4,782

 

 

 

 

 

 

 

 

 

4,824

 

Repurchase of restricted stock units

 

 

 

 

 

 

 

 

(285

)

 

 

 

 

 

 

 

 

(285

)

Stock-based compensation

 

 

 

 

 

 

 

 

3,400

 

 

 

 

 

 

 

 

 

3,400

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,391

)

 

 

(9,391

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,154

)

 

 

 

 

 

(10,154

)

Balance at March 31, 2021

 

 

38,271,641

 

 

$

3,940

 

 

$

643,183

 

 

$

(410,266

)

 

$

(320

)

 

$

236,537

 

Exercise of stock options and vesting of restricted stock units

 

 

172,939

 

 

 

19

 

 

 

1,885

 

 

 

 

 

 

 

 

 

1,904

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,559

 

 

 

 

 

 

 

 

 

4,559

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,475

 

 

 

3,475

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(27,388

)

 

 

 

 

 

(27,388

)

Balance at June 30, 2021

 

 

38,444,580

 

 

$

3,959

 

 

$

649,627

 

 

$

(437,654

)

 

$

3,155

 

 

$

219,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

 

 

43,467,052

 

 

$

4,481

 

 

$

787,869

 

 

$

(466,928

)

 

$

(9,221

)

 

$

316,201

 

Exercise of stock options and vesting of restricted stock units

 

 

82,273

 

 

 

8

 

 

 

871

 

 

 

 

 

 

 

 

 

879

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,334

 

 

 

 

 

 

 

 

 

5,334

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,048

)

 

 

(6,048

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(18,893

)

 

 

 

 

 

(18,893

)

Balance at March 31, 2022

 

 

43,549,325

 

 

$

4,489

 

 

$

794,074

 

 

$

(485,821

)

 

$

(15,269

)

 

$

297,473

 

Issuance of common stock in connection with public offerings, net of underwriting discounts and commissions and offering costs

 

 

2,298,906

 

 

 

220

 

 

 

47,705

 

 

$

 

 

$

 

 

 

47,925

 

Exercise of stock options and vesting of restricted stock units

 

 

18,589