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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
| | | | | |
(Mark One) |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
or
| | | | | |
o | 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: 001-40969
____________________________
ENTRADA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
____________________________
| | | | | |
Delaware | 81-3983399 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| |
One Design Center Place
| |
Suite 17-500 | |
Boston, MA | 02210 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (857) 520-9158
_________________
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 $0.0001 per share | | TRDA | | The 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 x No o
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 x No o
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 | o | Accelerated filer | o | | |
| | | | | |
Non-accelerated filer | x | Smaller reporting company | x | Emerging growth company | x |
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 31, 2024, the registrant had 37,199,550 shares of common stock, $0.0001 par value per share, outstanding.
TABLE OF CONTENTS
We own various U.S. federal trademark applications and unregistered trademarks, including our company name and logo, that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q ("Quarterly Report") may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Quarterly Report is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this Quarterly Report may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner of these trademarks, service marks and trade names will not assert, to the fullest extent under applicable law, its rights.
From time to time, we may use our website or our LinkedIn profile at www.linkedin.com/company/entradatx to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors Relations section of our website, available at www.entradatx.com. Investors are encouraged to review the Investors Relations section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website or our LinkedIn profile is not incorporated into, and does not form a part of, this Quarterly Report.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q ("Quarterly Report") contains express or implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are based on our management’s current beliefs, expectations and assumptions about future events, conditions and results and on information currently available to us.
These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report include but are not limited to statements about:
•the initiation, timing, progress, results and costs of conducting our research and development programs, our current and future preclinical studies, and our current and future clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our current and future programs;
•the ability of our preclinical studies and clinical trials to demonstrate safety and efficacy of our therapeutic candidates, and other positive results;
•the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our therapeutic candidates;
•the timing, scope and likelihood of regulatory filings and approvals, including timing of any Investigational New Drug application ("IND") and final U.S. Food and Drug Administration ("FDA") or foreign equivalent approval of our current therapeutic candidates or any future therapeutic candidates;
•the timing or content of any update regarding our regulatory filings;
•the ability to leverage our proprietary EEV platform ("EEV Platform") to efficiently develop additional therapeutic candidates, including by applying learnings from one program to other programs and from one indication to our other indications;
•our estimates of the number of patients that we will enroll and our ability to initiate, recruit and enroll patients in and conduct and successfully complete clinical trials at the pace that we project;
•the costs of manufacturing and our ability to scale-up our manufacturing and processing approaches to appropriately address our anticipated commercial needs, which will require significant resources;
•our ability to establish or maintain collaborations or strategic relationships and the ability and willingness of our third-party strategic collaborators to undertake research and development activities relating to our current or future therapeutic candidates and discovery programs;
•our expectations regarding the potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic arrangements and transactions we have entered into or may enter into in the future;
•the potential benefits of our technologies and programs, including those with strategic partners;
•our ability to obtain funding for our operations necessary to complete further development and commercialization of our therapeutic candidates;
•our ability to take advantage of expedited regulatory pathways for our therapeutic candidates;
•our ability to obtain and maintain regulatory approval of our therapeutic candidates;
•the implementation of our business model, and strategic plans for our business, therapeutic candidates, and technology;
•the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates and other therapeutic candidates we may develop, including the extensions of existing patent terms where available, and the validity of intellectual property;
•rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
•the period over which we estimate our available financial resources, together with ongoing research support will enable us to fund the Company’s current and future operating expenses and capital expenditure requirements;
•our financial performance and estimates of our future expenses, revenues, capital requirements, use of our cash reserves, and our needs for additional financing;
•future agreements with third parties in connection with the development and commercialization of our therapeutic candidates and any other approved product;
•the rate and degree of market acceptance and the size and growth potential of the markets for our therapeutic candidates, and our ability to serve those markets;
•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•our ability to produce our therapeutic candidates with advantages in turnaround times or manufacturing cost;
•our competitive position and the success of competing therapies that are or may become available;
•our need for and ability to attract and retain key scientific, management and other personnel and to identify, hire and retain additional qualified professionals;
•our expectations regarding the period during which we will remain an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act");
•our anticipated use of our existing resources;
•the expected timing, progress and success of our collaboration with Vertex Pharmaceuticals Incorporated ("Vertex"), including any future payments we may receive under our collaboration and license agreements, as well as our ability to identify and enter into future license agreements and collaborations;
•our beliefs and expectations regarding milestone, royalty or other payments that could be due to third parties under existing agreements;
•the impact of global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflicts in Ukraine and the Middle East, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our common stock and our ability to access capital markets;
•other risks and uncertainties, including those listed under the caption “Risk Factors”.
In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “seek,” “predict,” “future,” “project,” “potential,” “continue,” “target,” "contemplate," "possible," "can," or the negative of these terms or other comparable terminology, and similar expressions, although not all forward-looking statements contain these identifying words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Quarterly Report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the Securities and Exchange Commission thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
The forward-looking statements in this Quarterly Report represent our views as of the date of this Quarterly Report. We do not undertake any obligation to publicly update any forward-looking statement except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.
This Quarterly Report also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. All of the market data used in this Quarterly Report involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample
size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.
This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed as exhibits to this Quarterly Report. Unless the context otherwise requires, reference in this Quarterly Report to the terms “Entrada,” “Entrada Therapeutics,” “the Company,” “we,” “us,” “our,” and similar designations refer to Entrada Therapeutics, Inc. and, where appropriate, our wholly-owned subsidiary.
SUMMARY OF MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties and are subject to change based on various factors, including those highlighted in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report"). These risks include, but are not limited to, the following:
•We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue from product sales or become profitable or, if we achieve profitability, we may not be able to sustain it.
•We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development programs, commercialization efforts or other operations.
•We are early in our development efforts and as a result it will be years before we commercialize a therapeutic candidate, if ever. If we are unable to identify and advance therapeutic candidates through preclinical studies and/or clinical trials, obtain marketing approval and ultimately commercialize them, or experience significant delays in doing so, our business will be materially harmed.
•The U.S. Food and Drug Administration ("FDA") has placed the Investigational New Drug application ("IND") for ENTR-601-44 for the potential treatment of Duchenne muscular dystrophy on clinical hold. Should our response to the clinical hold in the United States not be satisfactory to the FDA, the clinical hold may not be lifted on a timely basis, or at all.
•Our business is highly dependent on the clinical advancement of our programs and modalities and is especially dependent on the success of our lead Endosomal Escape Vehicle ("EEV") therapeutic candidates, ENTR-601-44, ENTR-601-45, ENTR-601-50 and our partnered candidate VX-670. Delay or failure to advance programs or modalities, including ENTR-601-44, ENTR-601-45, ENTR-601-50 and VX-670 could adversely impact our business.
•Our EEV therapeutic candidates are based on a novel therapeutic approach, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.
•Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies are not necessarily predictive of the results of later preclinical studies and any clinical trials of our therapeutic candidates. We have not completed the testing of any of our therapeutic candidates in clinical trials and our therapeutic candidates may not have favorable results in clinical trials, if any, or receive regulatory approval on a timely basis, if at all.
•Substantial delays in the commencement, enrollment or completion of our planned clinical trials, or failure to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities could prevent us from commercializing any therapeutic candidates we determine to develop on a timely basis, if at all.
•Our approach to the discovery and development of therapeutic candidates based on our EEV platform ("EEV Platform") is unproven, and we do not know whether we will be able to develop any products of commercial value, or if competing technological approaches will limit the commercial value of our therapeutic candidates or render our EEV Platform obsolete.
•We rely, and expect to continue to rely, on third parties to conduct some or all aspects of our product manufacturing, research and preclinical and clinical testing, and these third parties may not perform satisfactorily or, dedicate adequate resources to meet our needs, or may be unable to acquire the necessary supplies to perform successfully.
•We have and may in the future enter into collaborations, licenses and other similar arrangements with third parties for the research, development and commercialization of certain of the therapeutic candidates we may develop, including our collaboration with Vertex Pharmaceuticals Incorporated ("Vertex"). If any such arrangements are not successful, we may not be able to capitalize on the market potential of those therapeutic candidates.
•We face significant competition, and if our competitors develop technologies or therapeutic candidates more rapidly than we do or their technologies are more effective, our business and our ability to develop and successfully commercialize products may be adversely affected.
•We expect to expand our development and regulatory capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
•While we will attempt to diversify our risks by developing one or more programs in each modality, there are risks that are unique to each modality and risks that are applicable across modalities. These risks may impair our ability to advance one or more of our programs in clinical development, obtain regulatory approval, or ultimately
commercialize our programs, or cause us to experience significant delays in doing so, any of which may materially harm our business.
•If we or our collaborators are unable to obtain and maintain patent protection for our EEV Platform, therapeutic development programs and other proprietary technologies we develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our therapeutic programs and other proprietary technologies we may develop may be adversely affected.
•Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel.
•The market price of our common stock may be volatile, and investors could lose all or part of their investment.
•Volatility in capital markets may affect our ability to access new capital, which may harm our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets.
•Unstable market and economic conditions may have adverse consequences for our business, financial condition and stock price.
The material and other risks summarized above should be read together with the text of the full risk factors and in the other information set forth in this Quarterly Report, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission (the "SEC"). If any such material and other 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 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.
PART I —FINANCIAL INFORMATION
Item 1. Financial Statements
ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(unaudited)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 185,253 | | $ | 67,602 |
Marketable securities | 284,493 | | 284,367 |
Collaboration receivable | 7,674 | | 5,878 |
Prepaid expenses and other current assets | 12,116 | | 11,924 |
Total current assets | 489,536 | | 369,771 |
Property and equipment, net | 11,344 | | 11,191 |
Restricted cash | 3,950 | | 3,950 |
Right-of-use assets, operating leases | 76,386 | | 81,490 |
Other non-current assets | 747 | | 2,790 |
Total assets | $ | 581,963 | | $ | 469,192 |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 1,635 | | $ | 3,277 |
Accrued expenses and other current liabilities | 10,999 | | 11,325 |
Income taxes payable | 4,111 | | 4,024 |
Operating lease obligations, current portion | 8,567 | | 7,909 |
Deferred revenue, current portion | 60,497 | | 132,261 |
Total current liabilities | 85,809 | | 158,796 |
Operating lease obligations, net of current portion | 55,876 | | 60,321 |
Deferred revenue, net of current portion | 10,353 | | 7,715 |
Total liabilities | 152,038 | | 226,832 |
Commitments and contingencies (Note 11) | | | |
Stockholders’ equity: | | | |
Common stock, par value $0.0001; 150,000,000 shares authorized; 37,190,149 shares issued and 37,172,496 shares outstanding as of June 30, 2024 and 33,461,771 shares issued and 33,437,296 shares outstanding as of December 31, 2023 | 4 | | 3 |
Additional paid‑in capital | 546,693 | | 437,132 |
Accumulated other comprehensive (loss) income | (329) | | | 195 |
Accumulated deficit | (116,443) | | | (194,970) | |
Total stockholders’ equity | 429,925 | | 242,360 |
Total liabilities and stockholders’ equity | $ | 581,963 | | $ | 469,192 |
| | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Collaboration revenue | $ | 94,694 | | $ | 18,170 | | $ | 153,814 | | $ | 43,430 |
Operating expenses: | | | | | | | |
Research and development | 32,035 | | 26,300 | | $ | 60,643 | | 49,402 |
General and administrative | 9,236 | | 8,169 | | 18,635 | | 16,107 |
Total operating expenses | 41,271 | | 34,469 | | 79,278 | | 65,509 |
Income (loss) from operations | 53,423 | | (16,299) | | | 74,536 | | (22,079) | |
Other income: | | | | | | | |
Interest and other income | 4,366 | | 4,218 | | 8,580 | | 6,875 |
Total other income | 4,366 | | 4,218 | | 8,580 | | 6,875 |
Income (loss) before provision for income taxes | 57,789 | | (12,081) | | | 83,116 | | (15,204) | |
Provision for income taxes | (2,758) | | (13,847) | | | $ | (4,589) | | | (17,398) | |
Net income (loss) | $ | 55,031 | | $ | (25,928) | | | $ | 78,527 | | $ | (32,602) | |
Net income (loss) per share, basic | $ | 1.61 | | $ | (0.78) | | | $ | 2.32 | | $ | (0.99) | |
Net income (loss) per share, diluted | $ | 1.55 | | $ | (0.78) | | | $ | 2.23 | | $ | (0.99) | |
Weighted‑average common shares outstanding, basic | 34,180,549 | | 33,163,320 | | 33,838,811 | | 32,770,989 |
Weighted‑average common shares outstanding, diluted | 35,507,029 | | 33,163,320 | | 35,148,221 | | 32,770,989 |
Other comprehensive (loss) income: | | | | | | | |
Unrealized (loss) gain on marketable securities | (83) | | (363) | | | (524) | | | 1,052 | |
Total other comprehensive (loss) income | (83) | | (363) | | | (524) | | 1,052 | |
Total comprehensive income (loss) | $ | 54,948 | | $ | (26,291) | | | $ | 78,003 | | $ | (31,550) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid‑in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| Shares | | Amount | | | | |
Balances at December 31, 2022 | 31,394,767 | | | $ | 3 | | | $ | 402,893 | | | $ | (2,057) | | | $ | (188,285) | | | $ | 212,554 | |
Issuance of common stock upon exercise of stock options | 18,344 | | | — | | | 129 | | | — | | | — | | | 129 | |
Vesting of early exercised options | 10,153 | | | — | | | 26 | | | — | | | — | | | 26 | |
Vesting of restricted stock units | 91,859 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock in connection with the Vertex Agreement | 1,618,613 | | | — | | | 19,407 | | | — | | | — | | | 19,407 | |
Stock‑based compensation | — | | | — | | | 2,755 | | | — | | | — | | | 2,755 | |
Other comprehensive income | — | | | — | | | — | | | 1,415 | | | — | | | 1,415 | |
Net loss | — | | | — | | | — | | | — | | | (6,674) | | | (6,674) | |
Balances at March 31, 2023 | 33,133,736 | | | $ | 3 | | | $ | 425,210 | | | $ | (642) | | | $ | (194,959) | | | $ | 229,612 | |
Issuance of common stock upon exercise of stock options | 46,175 | | | $ | — | | | $ | 257 | | | $ | — | | | $ | — | | | $ | 257 | |
Vesting of early exercised options | 9,468 | | | $ | — | | | $ | 25 | | | $ | — | | | $ | — | | | $ | 25 | |
Purchase of common stock under the employee stock purchase plan | 16,314 | | | $ | — | | | $ | 186 | | | $ | — | | | $ | — | | | $ | 186 | |
Stock‑based compensation | — | | | $ | — | | | $ | 3,119 | | | $ | — | | | $ | — | | | $ | 3,119 | |
Other comprehensive loss | — | | | $ | — | | | $ | — | | | $ | (363) | | | $ | — | | | $ | (363) | |
Net loss | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (25,928) | | | $ | (25,928) | |
Balances at June 30, 2023 | 33,205,693 | | | $ | 3 | | | $ | 428,797 | | | $ | (1,005) | | | $ | (220,887) | | | $ | 206,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid‑in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| Shares | | Amount | | | | |
Balances at December 31, 2023 | 33,437,296 | | | $ | 3 | | | $ | 437,132 | | | $ | 195 | | | $ | (194,970) | | | $ | 242,360 | |
Issuance of common stock upon exercise of stock options | 30,888 | | | — | | | 206 | | | — | | | — | | | 206 | |
Vesting of early exercised options | 3,411 | | | — | | | 13 | | | — | | | — | | | 13 | |
Vesting of restricted stock units | 132,458 | | | — | | | — | | | — | | | — | | | — | |
Stock‑based compensation | — | | | — | | | 3,733 | | | — | | | — | | | 3,733 | |
Other comprehensive loss | — | | | — | | | — | | | (441) | | | — | | | (441) | |
Net income | — | | | — | | | — | | | — | | | 23,496 | | | 23,496 | |
Balances at March 31, 2024 | 33,604,053 | | | $ | 3 | | | $ | 441,084 | | | $ | (246) | | | $ | (171,474) | | | $ | 269,367 | |
Issuance of common stock upon exercise of stock options | 166,155 | | | $ | — | | | $ | 1,104 | | | $ | — | | | $ | — | | | $ | 1,104 | |
Vesting of early exercised options | 3,411 | | | $ | — | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 13 | |
Vesting of restricted stock units | 11,490 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Purchase of common stock under the employee stock purchase plan | 20,384 | | | $ | — | | | $ | 263 | | | $ | — | | | $ | — | | | $ | 263 | |
Issuance of common stock and pre-funded warrants in registered direct offering, net of issuance costs of $392 | 3,367,003 | | | $ | 1 | | | $ | 99,607 | | | $ | — | | | $ | — | | | $ | 99,608 | |
Stock‑based compensation | — | | | $ | — | | | $ | 4,622 | | | $ | — | | | $ | — | | | $ | 4,622 | |
Other comprehensive loss | — | | | $ | — | | | $ | — | | | $ | (83) | | | $ | — | | | $ | (83) | |
Net income | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 55,031 | | | $ | 55,031 | |
Balances at June 30, 2024 | 37,172,496 | | | $ | 4 | | | $ | 546,693 | | | $ | (329) | | | $ | (116,443) | | | $ | 429,925 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 78,527 | | | $ | (32,602) | |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | | | |
Depreciation expense | 1,844 | | 1,271 |
Stock‑based compensation expense | 8,355 | | 5,874 |
Amortization/(accretion) of marketable securities | (4,298) | | (1,928) |
Changes in operating assets and liabilities: | | | |
Collaboration receivable | (1,796) | | | (3,744) | |
Prepaid expenses and other current assets | (192) | | 10,884 | |
Right-of-use assets, operating leases | 5,104 | | 6,881 |
Other non-current assets | 2,043 | | (9,311) |
Accounts payable | (1,541) | | (3,846) |
Accrued expenses and other current liabilities | (906) | | (943) |
Income tax payable | 87 | | 7,359 | |
Operating lease liabilities | (3,787) | | (8,743) | |
Deferred revenue | (69,126) | | 197,156 |
Net cash provided by operating activities | 14,314 | | 168,308 |
Cash flows from investing activities: | | | |
Purchases of property and equipment | (1,884) | | (3,190) |
Purchases of marketable securities | (207,627) | | (241,897) |
Maturities of marketable securities | 211,275 | | 91,386 |
Net cash provided by (used in) investing activities | 1,764 | | | (153,701) | |
Cash flows from financing activities: | | | |
Proceeds from issuance of common stock and pre-funded warrants in registered direct offering, net of issuance costs paid | 100,000 | | — |
Proceeds from issuance of common stock in connection with the Vertex Agreement | — | | 19,407 |
Proceeds from exercise of stock options | 1,310 | | 386 |
Proceeds from issuance of common stock under the employee stock purchase plan | 263 | | 186 |
Net cash provided by financing activities | 101,573 | | 19,979 |
Net increase in cash, cash equivalents, and restricted cash | 117,651 | | 34,586 |
Cash, cash equivalents, and restricted cash at beginning of period | 71,552 | | 49,107 |
Cash, cash equivalents, and restricted cash at end of period | $ | 189,203 | | $ | 83,693 |
Supplemental cash flow disclosures: | | | |
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 321 | | $ | 889 |
Right-of-use assets obtained in exchange from operating lease liabilities | $ | — | | $ | 77,584 |
Right-of-use assets surrendered as part of lease modification | $ | — | | $ | 7,761 |
Transfer of deposits for equipment from operating to investing cash flows | $ | — | | $ | 617 |
Vesting of options early exercised subject to repurchase | $ | 26 | | $ | 51 |
Deferred offering costs included in accrued expenses | $ | 392 | | $ | — |
The accompanying notes are an integral part of these condensed consolidated financial statements.
ENTRADA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of the Business
Organization
Entrada Therapeutics, Inc. ("Entrada" or the "Company") is a clinical-stage biopharmaceutical company aiming to transform the lives of patients by establishing a new class of medicines which engage intracellular targets that have long been considered inaccessible. The Company’s Endosomal Escape Vehicle ("EEV™")-therapeutics are designed to enable the efficient delivery of a wide range of therapeutics into a variety of organs and tissues, resulting in an improved therapeutic index. The Company was incorporated in Delaware on September 22, 2016 and its principal offices are located in Boston, Massachusetts.
Liquidity and Capital Resources
Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its proprietary, highly versatile and modular EEV platform ("EEV Platform"), advancing development of its portfolio of programs and general and administrative support for these operations, including raising capital. The Company is subject to risks and uncertainties common to earlier stage companies in the biotechnology industry, including, but not limited to, technical risks associated with the successful research, development and manufacturing of therapeutic candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and the ability to secure additional capital to fund operations. Therapeutic 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 will require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.
In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. Since its inception, the Company has incurred significant net losses. As of June 30, 2024, the Company had an accumulated deficit of $116.4 million. To date, the Company has funded its operations primarily through the sale of equity securities and collaboration payments. Other than the recognition of revenue related to collaboration payments, the Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future.
The Company expects that its cash, cash equivalents and marketable securities of $469.7 million as of June 30, 2024 will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its business strategy and may pursue additional cash resources through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing, or other arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed or on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.
In June 2024, the Company entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering (the “June 2024 Offering”) of 3,367,003 shares of the Company’s common stock at a purchase price of $14.85 per share and, in lieu of common stock to certain investors who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of Common Stock at a purchase price of $14.8499 per Pre-Funded Warrant, which represents the price per share at which the shares of common stock were sold to the investors in the June 2024 Offering, minus $0.0001, which is the exercise price of each Pre-Funded Warrant. The June 2024 Offering was made pursuant to the shelf registration statement on Form S-3 (File No. 333-268099) previously filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 and declared effective by the SEC on November 7, 2022. The aggregate net proceeds from the sale of common stock and Pre-Funded Warrants in the June 2024 Offering were approximately $99.6 million, after deducting offering expenses payable by the Company. The Company will receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.
2. Summary of Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the "SEC") on March 13, 2024 (the "Annual Report"), except as described below.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). The condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted, as is permitted by GAAP. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2024, and results of operations for the interim periods ended June 30, 2024 and 2023.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the years ended December 31, 2023 and 2022, and the notes thereto, included in the Annual Report.
Common Stock Warrants
The Company’s common stock warrants are evaluated pursuant to ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies its freestanding warrants as (i) liabilities, if the warrant terms allow settlement of the warrant exercise in cash, or (ii) equity, if the warrant terms only allow settlement in shares of common stock. Please refer to Note 8 below for the application to the Company’s pre-funded warrants.
Recently Adopted Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
3. Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. At June 30, 2024 and December 31, 2023, cash and cash equivalents include standard checking accounts and money market account funds that invest primarily in U.S. government-backed securities and treasuries.
As of June 30, 2024 and December 31, 2023, restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities located at One Design Center Place, Boston, Massachusetts. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the statement of cash flows is as follows (in thousands):
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Cash and cash equivalents | $ | 185,253 | | | $ | 67,602 | |
Restricted cash | 3,950 | | | 3,950 | |
Total cash, cash equivalents and restricted cash | $ | 189,203 | | | $ | 71,552 | |
4. Marketable Securities
The following are summaries of the Company's marketable securities at June 30, 2024 and December 31, 2023 (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2024 | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
U.S. government agency securities and treasuries | | $ | 214,143 | | | $ | 2 | | | $ | (212) | | | $ | 213,933 | |
Corporate debt securities | | 45,176 | | | 23 | | | (51) | | | 45,148 | |
Total securities with a maturity of one year or less | | $ | 259,319 | | | $ | 25 | | | $ | (263) | | | $ | 259,081 | |
| | | | | | | | |
U.S. government agency securities and treasuries | | 14,555 | | | — | | | (79) | | | 14,476 | |
Corporate debt securities | | 10,947 | | | — | | | (11) | | | 10,936 | |
Total securities with a maturity of more than one year | | $ | 25,502 | | | $ | — | | | $ | (90) | | | $ | 25,412 | |
Total available-for-sale securities | | $ | 284,821 | | | $ | 25 | | | $ | (353) | | | $ | 284,493 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2023 | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
U.S. government agency securities and treasuries | | $ | 235,500 | | | $ | 127 | | | $ | (41) | | | $ | 235,586 | |
Corporate debt securities | | 25,466 | | | — | | | (29) | | | 25,437 | |
Total securities with a maturity of one year or less | | $ | 260,966 | | | $ | 127 | | | $ | (70) | | | $ | 261,023 | |
| | | | | | | | |
U.S. government agency securities and treasuries | | 15,537 | | | 45 | | | — | | | 15,582 | |
Corporate debt securities | | 7,669 | | | 93 | | | — | | | 7,762 | |
Total securities with a maturity of more than one year | | $ | 23,206 | | | $ | 138 | | | $ | — | | | $ | 23,344 | |
Total available-for-sale securities | | $ | 284,172 | | | $ | 265 | | | $ | (70) | | | $ | 284,367 | |
As of June 30, 2024, the Company had 46 marketable securities with a total fair market value of $252.3 million in an unrealized loss position. All of the Company’s investments are classified as available-for-sale and are carried at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss). The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities as available for sale.
The Company believes that any unrealized losses associated with the decline in value of its securities are temporary and believes that it is more likely than not that it will be able to hold its debt securities to maturity and that there was no material change in the credit risk of the above instruments since January 1, 2024. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and no allowance for credit losses was recognized.
As of June 30, 2024 and December 31, 2023, $1.4 million and $1.7 million, respectively, of accrued interest receivable was included in prepaid expenses and other current assets.
5. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at June 30, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: (1) | | | | | | | |
Money market funds | $ | 160,800 | | $ | — | | $ | — | | $ | 160,800 |
U.S. government agency securities and treasuries(2) | $ | — | | $ | 23,953 | | $ | — | | $ | 23,953 |
Marketable securities: | | | | | | | |
U.S. government agency securities and treasuries | — | | 228,409 | | — | | 228,409 |
Corporate bonds | — | | 56,084 | | — | | 56,084 |
Total | $ | 160,800 | | $ | 308,446 | | $ | — | | $ | 469,246 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: (1) | | | | | | | |
Money market funds | $ | 67,102 | | $ | — | | $ | — | | $ | 67,102 |
Marketable securities: | | | | | | | |
U.S. government agency securities and treasuries | $ | — | | $ | 251,168 | | $ | — | | $ | 251,168 |
Corporate bonds | — | | 33,199 | | — | | 33,199 |
Total | $ | 67,102 | | $ | 284,367 | | $ | — | | $ | 351,469 |
(1)The cash equivalent amounts above do not include $0.5 million of cash related to checking accounts included in cash and cash equivalents as of June 30, 2024 and December 31, 2023. These amounts are excluded as no valuation is needed for cash in checking accounts.
(2)The amortized cost of debt securities classified as cash equivalents approximated fair value.
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The Company measures its debt securities at fair value on a recurring basis using inputs that are observable or can be corroborated by observable market data and classifies those instruments within Level 2 of the fair value hierarchy.
6. Property and Equipment, Net
Property and equipment, net consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Laboratory equipment | $ | 14,328 | | $ | 12,596 |
Furniture and fixtures | 2,241 | | 2,228 |
Computer equipment | 431 | | 431 |
Leasehold improvements | 1,932 | | 1,859 |
Total property and equipment | 18,932 | | 17,114 |
Less: accumulated depreciation | (7,588) | | (5,923) |
Property and equipment, net | $ | 11,344 | | $ | 11,191 |
Depreciation expense for the three months ended June 30, 2024 and 2023 was $0.9 million and $0.7 million, respectively. Depreciation expense for the six months ended June 30, 2024 and 2023 was $1.8 million and $1.3 million, respectively.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Employee compensation and benefits | $ | 3,585 | | $ | 6,660 |
External research and development expenses | 5,566 | | 2,894 |
General and administrative professional service expenses | 948 | | 767 |
Other | 900 | | 1,004 |
Total accrued expenses and other current liabilities | $ | 10,999 | | $ | 11,325 |
8. Common Stock and Preferred Stock
Common Stock
As of June 30, 2024 and December 31, 2023, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 150,000,000 shares of common stock, par value $0.0001 per share.
In February 2023, in connection with the closing of the Vertex Agreement (as defined in Note 12, Collaboration and License Agreements), the Company and Vertex also closed their Stock Purchase Agreement (the "Stock Purchase Agreement") for the sale and issuance of 1,618,613 shares of Entrada's common stock (the “Shares”) to Vertex for an aggregate purchase price of approximately $26.3 million or $16.26 per share. See Note 12, Collaboration and License Agreements, for further discussion of the Company's accounting for the Shares sold in connection with the closing of the Vertex Agreement.
In September 2023, the Company entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC, acting as the Company's agent and/or principal (the "Sales Agent"), with respect to an "at the market offering" program under which the Company may, from time to time, at its sole discretion, issue and sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. During the six months ended June 30, 2024, there have been no sales of common stock pursuant to the Sales Agreement.
In June 2024, the Company entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering (the “June 2024 Offering”) of 3,367,003 shares of the Company’s common stock at a purchase price of $14.85 per share and, in lieu of common stock to certain investors who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of Common Stock at a purchase price of $14.8499 per Pre-Funded Warrant, which represents the price per share at which the shares of common stock were sold to the investors in the June 2024 Offering, minus $0.0001, which is the exercise price of each Pre-Funded Warrant. The June 2024 Offering was made pursuant to the shelf registration statement on Form S-3 (File No. 333-268099) previously filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 and declared effective by the SEC on November 7, 2022. The aggregate net proceeds from the sale of common stock and Pre-Funded Warrants in the June 2024 Offering were approximately $99.6 million, after deducting offering expenses payable by the Company. The Company will receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.
The Pre-Funded Warrants were evaluated pursuant to ASC 480 and ASC 815. The Company classified the Pre-Funded Warrants as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date at fair value. The Pre-Funded Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable, are immediately exercisable, do not embody an obligation for the Company to repurchase its common shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. The Company valued the Pre-Funded Warrants at issuance, concluding their sales price approximated their fair value.
Shares Reserved for Future Issuance
The Company has reserved the following shares of common stock for future issuance as of:
| | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Exercise of outstanding stock options | | 5,580,320 | | | 5,414,360 | |
Vesting of outstanding restricted stock | | 2,012,533 | | | 1,268,461 | |
Future awards under the 2021 Stock Option and Incentive Plan | | 1,784,890 | | | 1,697,832 | |
Future awards under the 2021 Employee Stock Purchase Plan | | 1,153,675 | | | 839,539 | |
Total shares of authorized common stock reserved for future issuance | | 10,531,418 | | | 9,220,192 | |
Preferred Stock
As of June 30, 2024 and December 31, 2023, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, par value $0.0001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof. As of June 30, 2024 and December 31, 2023, there were no shares of undesignated preferred stock issued or outstanding.
9. Stock-Based Compensation
2021 Plan
The total remaining shares of common stock authorized for issuance under the 2021 Stock Option and Incentive Plan (the "2021 Plan") increased from 6,336,068 as of December 31, 2023 to 7,520,961 as of June 30, 2024 primarily due to the automatic annual increase provision of the 2021 Plan.
2016 Plan
The total remaining shares of common stock authorized for issuance under the 2016 Stock Incentive Plan as of June 30, 2024 and December 31, 2023 were 1,856,782 shares and 2,044,585 shares, respectively.
2021 Employee Stock Purchase Plan
The total remaining shares of common stock authorized for issuance under the 2021 Employee Stock Purchase Plan (the "2021 ESPP") increased from 839,539 as of December 31, 2023 to 1,153,675 as of June 30, 2024 due to the automatic annual increase provision of the 2021 ESPP.
Stock-Based Compensation
Stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Research and development expenses | $ | 2,014 | | $ | 1,418 | | $ | 3,627 | | $ | 2,716 |
General and administrative expenses | 2,608 | | 1,701 | | 4,728 | | 3,158 |
Total | $ | 4,622 | | $ | 3,119 | | $ | 8,355 | | $ | 5,874 |
Stock Option Valuation
The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted during the six months ended June 30, 2024 and 2023:
| | | | | | | | | | | |
| June 30, 2024 | | June 30, 2023 |
Risk‑free interest rate | 4.16 | % | | 4.00 | % |
Expected volatility | 75 | % | | 72 | % |
Expected dividend yield | — | | | — | |
Expected term (in years) | 6.00 | | 5.98 |
Early Exercise of Unvested Stock Options
Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in current liabilities on the balance sheet. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. Vesting can occur in the year of exercise and thereafter. There were 7,923 and 14,745 unvested shares related to early exercises of stock options as of June 30, 2024 and December 31, 2023, respectively. As of both June 30, 2024 and December 31, 2023, the liability associated with the unvested early exercise of stock options was less than $0.1 million.
Stock Options
The following table summarizes the Company’s stock option activity during the six months ended June 30, 2024:
| | | | | | | | | | | |
| Number of Shares | | Weighted‑ Average Exercise Price |
| | | |
Outstanding as of December 31, 2023 | 5,414,360 | | $ | 11.42 |
Granted | 660,200 | | 14.06 |
Exercised | (197,043) | | | 6.65 |
Forfeited | (297,197) | | | 14.13 |
Outstanding as of June 30, 2024 | 5,580,320 | | $ | 11.76 |
Exercisable as of June 30, 2024(1) | 3,451,080 | | $ | 10.22 |
(1)This represents the number of vested and unvested options exercisable as of June 30, 2024.
The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2024 and 2023 was $9.62 per share and $8.49 per share, respectively. As of June 30, 2024, there was $20.0 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.18 years.
Restricted Stock Units
During the six months ended June 30, 2024, restricted stock units ("RSUs") were granted to employees with vesting conditions based on continued service over time. Accordingly, stock-based compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company's common stock on the date of grant.
A summary of restricted stock activity during the six months ended June 30, 2024 is as follows:
| | | | | | | | | | | |
| Shares | | Weighted‑ Average Grant‑Date Fair Value |
Unvested as of December 31, 2023 | 1,268,461 | | $ | 13.83 |
Granted | 1,007,490 | | $ | 13.81 |
Vested | (143,948) | | $ | 11.93 |
Forfeited | (119,470) | | $ | 13.93 |
Unvested as of June 30, 2024 | 2,012,533 | | $ | 13.95 |
As of June 30, 2024, there was $24.2 million of unrecognized stock-based compensation expense related to restricted stock that is expected to vest. These costs are expected to be recognized over a weighted-average remaining vesting period of 3.16 years.
10. Income Taxes
The Company records income tax expense in any interim period based on the estimated effective tax rate for the fiscal year for those tax jurisdictions in which the Company can reliably estimate the effective tax rate. The calculation of the estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction as well as total tax expense for the fiscal year. Accordingly, the annual estimated effective tax rate is subject to adjustment if there are changes to the initial estimates of total tax expense or pre-tax income.
Provision for Income Taxes
The Company recorded income tax expense of $2.8 million for the three months ended June 30, 2024 and $13.8 million for the three months ended June 30, 2023. The Company recorded income tax expense of $4.6 million for the six months ended June 30, 2024 and $17.4 million for the six months ended June 30, 2023. For all periods, the income tax expense recorded was driven largely by the projected current tax liabilities associated with the tax recognition of payments received pursuant to the Vertex Agreement.
Despite the collaboration revenue, the Company continues to maintain a valuation allowance against all remaining deferred tax assets. The Company believes that it is more likely than not that it will not realize a future tax benefit of these attributes as the Company expects to continue to generate operating losses. Ultimate realization of any deferred tax asset is dependent on the Company’s ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any.
The Company recognizes interest and penalties owed to taxing authorities as part of the provision for income taxes. The Company currently anticipates that there will be no change in its unrecognized tax benefits in the next twelve months. As of June 30, 2024, the Company had no unrecognized tax benefits.
The Company has not yet conducted a study of its research and development credit carryforwards. Such a study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amount is being presented as an uncertain tax position.
11. Commitments and Contingencies
The Company's commitments, including significant license agreements, are disclosed in Note 10 Commitments and Contingencies in the audited financial statements for the year ended December 31, 2023, and notes thereto, included in the Annual Report. Since the date of those financial statements, there have been no material changes to its commitments except those discussed below.
Concurrently with the Company entering into and later amending the Vertex Agreement, the Company entered into a sublicense agreement with Vertex, which was amended in October 2023 (the "Sublicense Agreement"). Pursuant to the Sublicense Agreement, the Company granted to Vertex an exclusive sublicense under certain intellectual property licensed to the Company under the Ohio State Innovation Foundation (the "OSIF License Agreement"). The material terms of the Sublicense Agreement mirror those of the Vertex Agreement, and the payments described in connection with the
Vertex Agreement in Note 12, Collaboration and License Agreements, in our Annual Report, are in consideration for the rights granted under both the Vertex Agreement and Sublicense Agreement.
Pursuant to the OSIF License Agreement, in July 2024, the Company paid Ohio State Innovation Foundation ("OSIF") a sublicense fee of $1.0 million. The sublicense fee was recorded in accrued expenses and other current liabilities as of June 30, 2024 and recorded in research and development expenses for the six months ended June 30, 2024. No other sublicense fees were owed to OSIF as of June 30, 2024. If the Company receives any additional sublicensing consideration, it will owe additional fees to OSIF pursuant to the terms of the OSIF License Agreement. For more information on the terms of the license agreement with OSIF, see “Business—Intellectual property— License agreement with The Ohio State University” and Note 10, Commitments and Contingencies, to our consolidated financial statements included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2023.
12. Collaboration and License Agreements
Vertex Agreement - Overview
The Company and Vertex closed their Strategic Collaboration and License Agreement in February 2023, as amended in October 2023 (the "Vertex Agreement"), pursuant to which the Company granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, the Company’s intracellular EEV-based therapeutic candidate for the treatment of myotonic dystrophy type 1 ("DM1"), as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of DM1 in the course of the parties’ global research collaboration. In October 2023, the Company and Vertex amended the Vertex Agreement to clarify a milestone and related payment terms.
The Vertex Agreement provides for a four-year global research collaboration under which Entrada will continue to perform preclinical development of the Company's partnered candidate VX-670 pursuant to the mutually agreed-upon research plan (the "Research Plan"). The Research Plan is overseen by a Joint Research Committee ("JRC") as detailed in the Vertex Agreement. Pursuant to the terms of the Vertex Agreement, the JRC may amend the Research Plan to include additional DM1-related research activities with a goal of identifying other EEV-based therapeutic product candidates for the potential treatment of DM1. Vertex is obligated to reimburse the Company’s research expenses incurred in performing activities under the Research Plan.
Pursuant to the Vertex Agreement, the Company received an upfront payment of $223.7 million, and Vertex made an equity investment of $26.3 million by purchasing 1,618,613 shares of the Company's common stock, pursuant to the Stock Purchase Agreement. Under the terms of the Vertex Agreement, the Company is eligible to receive up to $485.0 million upon the achievement of certain research, development, regulatory and commercial milestones. The Company will also receive tiered royalties, from the mid to high single digits based on potential future net sales of licensed products as set forth in the Vertex Agreement.
In October 2023, the Company achieved a milestone pursuant to the Vertex Agreement related to preclinical IND-enabling Good Laboratory Practices ("GLP") toxicology studies of VX-670 that triggered a $17.5 million milestone payment, which the Company received in the fourth quarter of 2023. In the first quarter of 2024, the Company achieved a milestone related to the clinical advancement of VX-670, which triggered a $75.0 million payment. The Company received this payment in the second quarter of 2024.
The term of the Vertex Agreement will expire in its entirety upon expiration of the royalty term as set forth in the Vertex Agreement. Vertex may terminate the Vertex Agreement for convenience by providing adequate written notice to the Company. The Company may terminate the Vertex Agreement under certain specified circumstances, including in the event Vertex or any of its affiliates or sublicensees challenges directly or indirectly in a legal or administrative proceeding the patentability, enforceability, or validity of any licensed patent as set forth in the Vertex Agreement. Either party may terminate the Vertex Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. Neither party may assign the agreement without the prior written consent of the other party, except that a party may assign its rights and obligations to an affiliate or third party that acquires all or substantially all of the business or assets to which the Vertex Agreement relates and agrees in writing to be bound by the terms of the Vertex Agreement.
Vertex Agreement - Accounting Analysis
The Company determined that the Vertex Agreement should be accounted for in accordance with ASC 606 as Vertex was deemed to be a customer. The Company assessed the promised goods and services under the Vertex Agreement in accordance with ASC 606. At inception, the Vertex Agreement included one performance obligation which was the
combination of the exclusive license and the performance of the research activities for VX-670 ("Performance Obligation One"). The Company concluded that the license is not distinct from the research and development services for VX-670 during the research collaboration as Vertex cannot fully exploit the value of the license without receipt of such services. The Company also determined that Vertex's ability to engage Entrada to perform work on additional EEV-based therapeutic candidates for the potential treatment of DM1 through the JRC represented customer options. The Company concluded that these customer options do not represent a material right as these services will be reimbursed by Vertex at a price that represents standalone selling price for such services.
In the second quarter of 2023, pursuant to the terms of the Vertex Agreement, Vertex amended the Research Plan (the "Amended Research Plan") to engage the Company to perform work on additional EEV-based therapeutic candidates for the potential treatment of DM1 ("Performance Obligation Two"). Such work is treated as a separate contract for accounting purposes and represents a separate performance obligation as the activities are distinct from the research activities for VX-670.
Determination of Transaction Price
At the commencement of the arrangement, the Vertex Agreement had a fixed transaction price of $232.0 million, primarily consisting of the $223.7 million upfront fee plus a premium of $6.9 million related to the 1,618,613 shares sold to Vertex under the Stock Purchase Agreement when measured at fair value on the date of issuance. The shares issued to Vertex pursuant to the Stock Purchase Agreement were unregistered and therefore considered restricted securities at the time of issuance. As a result, the fair value of the shares issued to Vertex of $19.4 million was calculated using the closing price of the Company's unrestricted shares of common stock on February 8, 2023, adjusted to reflect a discount for lack of marketability ("DLOM") due to the shares issued being unregistered and therefore subject to related sale restrictions.
The Company is also entitled to reimbursement of costs incurred associated with the delivery of services under the Research Plan. The Company utilized the most likely amount approach to estimate the expected cost reimbursement. The Company concluded that these amounts do not require a constraint and are included in the transaction price at inception. The Company considers this estimate at each reporting date and updates the estimate based on information available.
In October 2023, the Company achieved a milestone related to preclinical IND-enabling GLP toxicology studies of VX-670, which triggered a $17.5 million payment. In the first quarter of 2024, the Company achieved a milestone related to the clinical advancement of VX-670, which triggered a $75.0 million payment. The Company received this payment in the second quarter of 2024. No additional milestones were deemed probable of being achieved as of June 30, 2024 and, therefore, all remaining milestone payments were fully constrained and excluded from the transaction price as of June 30, 2024. The Company re-evaluates the probability of achievement of development milestones and any related constraint at each period end, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment.
Allocation and Recognition
As of June 30, 2024, the transaction price for the combination of the exclusive license and the performance of the research activities for VX-670 primarily consists of (i) the upfront payment, (ii) the equity premium paid by Vertex (iii) the milestone achieved in October 2023, (iv) the milestone achieved in the first quarter of 2024 and (v) reimbursement of costs incurred in connection with the delivery of services under the Amended Research Plan associated with VX-670. The transaction price for the work on additional EEV-based therapeutic candidates consists of the reimbursement of costs incurred in connection with the delivery of services under the Amended Research Plan associated with such work.
The Company recognizes revenue associated with both performance obligations as the related research and development services are provided using an input method, according to the costs incurred as related to the respective research services and the costs expected to be incurred in the future to satisfy the performance obligations in accordance with the Amended Research Plan. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligations. The estimated costs associated with the remaining effort required to complete the performance obligations in accordance with the research plans may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to the performance obligations under the Vertex Agreement and records any necessary adjustment to revenue for the change in estimate.
The amounts received that have not yet been recognized as revenue are deferred on the Company’s consolidated balance sheet and will be recognized over the remaining research and development period until the performance obligation is satisfied. The performance obligations have not been fully satisfied as of June 30, 2024.
During the three months ended June 30, 2024, the Company recognized $94.7 million in revenue under the Vertex Agreement, including $7.5 million of cost reimbursements and $87.2 million from amounts that were recorded in deferred revenue as of March 31, 2024. During the six months ended June 30, 2024, the Company recognized $152.8 million in revenue under the Vertex Agreement, including $9.6 million of cost reimbursements, $17.4 million related to a cumulative catch-up adjustment for the milestone achieved in the first quarter of 2024, and $125.8 million from amounts that were recorded in deferred revenue as of December 31, 2023.
The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations recorded in deferred revenue at June 30, 2024 is $70.9 million. The Company will recognize the deferred revenue related to the research and development services based on a cost input method, over the remaining term of the Amended Research Plan.
13. Net Income (Loss) per Share
The computation of basic net income (loss) per share is based on the weighted-average number of the Company's common shares outstanding. The weighted-average common shares outstanding used in the basic and diluted net loss per share calculation includes the Pre-Funded Warrants issued in connection with the Company’s registered direct offering in June 2024 as the Pre-Funded Warrants are exercisable for nominal cash consideration.
The computation of diluted net income (loss) per share is based on the weighted-average number of the Company's common shares outstanding and potential dilutive common shares outstanding during the period as determined by using the treasury stock method.
The following table illustrates the determination of basic and diluted net income (loss) per share for each period presented (in thousands, except share and per share date):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Numerator: | | | | | | | |
Net income (loss) | $ | 55,031 | | $ | (25,928) | | | $ | 78,527 | | $ | (32,602) | |
Denominator: | | | | | | | |
Weighted‑average common shares outstanding, basic | 34,180,549 | | 33,163,320 | | 33,838,811 | | 32,770,989 |
Effect of dilutive securities | 1,326,480 | | — | | | 1,309,410 | | | — | |
Weighted‑average common shares outstanding, diluted | 35,507,029 | | 33,163,320 | | 35,148,221 | | 32,770,989 |
| | | | | | | |
Net income (loss) per share, basic | $ | 1.61 | | $ | (0.78) | | | $ | 2.32 | | $ | (0.99) | |
Net income (loss) per share, diluted | $ | 1.55 | | $ | (0.78) | | | $ | 2.23 | | $ | (0.99) | |
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Unvested restricted common stock | 30,200 | | 708,234 | | 82,880 | | 708,234 |
Unvested shares from early exercises | — | | 34,120 | | | | 34,120 |
Stock options to purchase common stock | 3,768,987 | | 5,369,626 | | 3,809,263 | | 5,369,626 |
| 3,799,187 | | 6,111,980 | | 3,892,143 | | 6,111,980 |
14. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the condensed consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has concluded that no subsequent events have occurred that require disclosure.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and the audited financial information and the notes thereto included in the Company's Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the "SEC") on March 13, 2024 ("Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, 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 “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” section of this Quarterly Report, 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. You should carefully read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company aiming to transform the lives of patients by establishing a new class of medicines which engage intracellular targets that have long been considered inaccessible. The Company’s Endosomal Escape Vehicle ("EEV™")-therapeutics are designed to enable the efficient delivery of a wide range of therapeutics into a variety of organs and tissues, resulting in an improved therapeutic index. Through our proprietary, highly versatile and modular EEV platform ("EEV Platform"), we are building a robust development portfolio of therapeutic candidates. Our first two drug candidates, ENTR-601-44 and our partnered candidate, VX-670, are in clinical trials, and we expect to initiate additional regulatory filings by the end of 2024. We believe that the potential success of our early programs can translate into the efficient development of additional EEV therapeutic candidates and allow us to build portfolios in neuromuscular disease and beyond.
Lead Neuromuscular Programs
We are initially focused on the development of EEV therapeutics for rare neuromuscular diseases, starting with Duchenne muscular dystrophy ("Duchenne" or "DMD"). DMD is caused by genetic mutations that prevent the creation of functional dystrophin, a protein required to maintain the structural integrity of muscle cells. In our neuromuscular disease programs, we link EEVs to small strands of nucleic acids called oligonucleotides, including phosphorodiamidate morpholino oligomers ("PMOs"). We are developing EEV-PMOs that promote the skipping of these mutations associated with DMD. We believe that our EEV-PMO exon-skipping therapy will enable the production of functional dystrophin to slow, stop or even reverse disease progression. Our most advanced therapeutic candidate, ENTR-601-44, is being developed for patients with DMD that are exon 44 skipping amenable.
On June 24, 2024, we announced positive preliminary data from our Phase 1 clinical trial of ENTR-601-44, our most advanced product candidate being developed for patients with DMD. The data announced was based upon data collected as of that date, was aggregated based upon the placebo and study drug groups and did not include urinary biomarkers for the 6 mg/kg cohort. The study has since been completed with no adverse findings noted in the urinary biomarkers for the 6 mg/kg cohort.
The primary objective of the Phase 1 clinical trial was to evaluate the safety and tolerability of a single dose of ENTR-601-44. The trial also evaluated pharmacokinetics and target engagement, as measured by exon skipping in the skeletal muscle. The trial included a total of 32 healthy male volunteers across four cohorts, with each cohort consisting of six participants receiving ENTR-601-44 and two participants receiving a placebo control. The doses administered across the cohorts were 0.75 mg/kg, 1.5 mg/kg, 3 mg/kg and 6 mg/kg.
There were no serious adverse events, no drug-related adverse events and no clinically significant changes or trends noted in vital signs, electrocardiograms, physical exams or laboratory assessments observed in the trial. The study demonstrated target engagement as measured by exon skipping on a ng/g of tissue adjusted basis supporting the importance of endosomal escape to therapeutic index optimization. Muscle concentration was detected in all six subjects in the 6 mg/kg dose cohort (mean of 53.8 ng/g, range 40 ng/g-73.5 ng/g) and mean target engagement as measured by exon skipping was 0.44% (range 0.3-0.65%). Exon skipping was statistically significant compared to the placebo control (p<0.005) in the 6 mg/kg dose cohort. These results are based upon data collected to date and are aggregated based upon the placebo and
study drug groups. Data will be featured in a poster presentation at the 29th Annual Congress of the World Muscle Society, taking place in Prague, Czechia from October 8-12, 2024.
Based on the positive data from the Phase 1 clinical trial, the Company is on track to submit regulatory applications in the fourth quarter of 2024 to initiate separate global Phase 2 clinical trials for ENTR-601-44 in patients with Duchenne who are exon 44 skipping amenable and for ENTR-601-45 in patients with Duchenne who are exon 45 skipping amenable, subject to regulatory feedback. In addition, we plan to submit regulatory applications in 2025 to initiate a global Phase 2 clinical trial for our third Duchenne candidate, ENTR-601-50, in patients who are exon 50 skipping amenable, subject to regulatory feedback.
Duchenne Muscular Dystrophy Franchise Summary
•ENTR-601-44: Positive Phase 1 clinical data reported and Phase 2 regulatory submissions expected in Q4 2024
•ENTR-601-45: Expect to submit Clinical Trial Application ("CTA")/IND in Q4 2024
•ENTR-601-50: Expect to submit CTA/IND in 2025
•Exon 51: Candidate selection expected by the end of 2024
We have also entered into a Strategic Collaboration and License Agreement, which was amended in October 2023, (the "Vertex Agreement") with Vertex Pharmaceuticals Incorporated ("Vertex") pursuant to which we granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, our intracellular EEV-based therapeutic candidate for the treatment of myotonic dystrophy type 1 ("DM1") that targets expanded CUG repeats in DM1 protein kinase ("DMPK") mRNA transcripts, as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of DM1 in the course of the parties’ global research collaboration. The Vertex Agreement provides for a four-year global research collaboration under which Vertex will fund our continued preclinical development of VX-670, as well as the option to fund additional DM1-related research activities with a goal of identifying other EEV-based therapeutic product candidates for the potential treatment of DM1. Other than our efforts under this research collaboration, Vertex will be responsible for global development, manufacturing and commercialization of the licensed products.
Under the terms of the Vertex Agreement, we initially received $250.0 million from the Vertex Agreement comprised of an upfront payment of $223.7 million and an equity investment of $26.3 million in our common stock at $16.26 per share. In October 2023, we achieved a milestone pursuant to the Vertex Agreement related to preclinical IND-enabling Good Laboratory Practices ("GLP") toxicology studies of VX-670 that triggered a $17.5 million milestone payment, which we received in the fourth quarter of 2023. In the first quarter of 2024, we achieved a milestone related to the clinical advancement of VX-670, which triggered a $75.0 million payment. We received this payment in the second quarter of 2024.
On May 6, 2024, Vertex announced that its IND for the Phase 1/2 clinical trial of VX-670 in people with DM1 has cleared, as have the CTAs in Canada, the United Kingdom and the European Union, and the Clinical Trials Notification ("CTN") in Australia. On August 1, 2024, Vertex announced that they continue to enroll and dose patients in the global Phase 1/2 clinical trial for VX-670 in people with DM1 and expect to complete the single ascending dose (SAD) portion of the study by the end of 2024. Following completion of the SAD portion of the trial, Vertex will move into the multiple ascending dose portion, where both the safety and efficacy of VX-670 will be evaluated.
Since our inception, we have devoted substantially all our resources to research and development efforts relating to our EEV Platform, advancing development of our portfolio of programs and general and administrative support for these operations, including raising capital. Since our inception, we have raised over $850.0 million of gross proceeds from equity sales to leading biotechnology investors and from the Vertex Agreement.
Since inception, we have incurred significant net losses. As of June 30, 2024, we had an accumulated deficit of $116.4 million. Other than the recognition of revenue related to collaboration payments, we expect to continue to generate operating losses and negative operating cash flows for the foreseeable future as we advance our platform and EEV therapeutic candidates. We will not generate any revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more therapeutic candidates, if ever. If we obtain regulatory approval for any therapeutic candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.
Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. As a result, we will need substantial additional funding
to support our continuing operations and pursue our growth strategy, as we advance therapeutic candidates through preclinical and, if successful, into clinical development, seek regulatory approval, prepare for and, if any therapeutic candidates are approved, proceed to commercialization and operate as a public company. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.
If we are unable to obtain funding, we will be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion and ultimate commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations. Although we continue to pursue these plans, we may not be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
Because of the numerous risks and uncertainties associated with product 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 can generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of June 30, 2024, we had cash, cash equivalents and marketable securities of $469.7 million. Based on our current operating plans, we believe that our cash, cash equivalents and marketable securities as of June 30, 2024 will be sufficient to fund our operations into 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.
Components of Our Results of Operations
Revenue
Substantially all of our revenue to date has been derived from the Vertex Agreement. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. If our development efforts for our therapeutic candidates are successful and result in regulatory approval or we successfully enter into collaboration or license arrangements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license arrangements including those that we may enter into with third parties, or any combination thereof.
Operating Expenses
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 programs. These expenses include:
•personnel-related expenses, including salaries, related benefits, and stock-based compensation expense for individuals engaged in research and development functions;
•expenses incurred in connection with our research programs and development of our therapeutic candidates, including those incurred under agreements with third parties, such as consultants, contractors, and clinical research organizations ("CROs") to conduct preclinical studies and clinical trials;
•the cost of developing and validating our manufacturing process for use in our preclinical studies and clinical trials, including the cost of raw materials used in our research and development activities, and engaging with third party contract manufacturing organizations ("CMOs");
•costs incurred in connection with the performance of research and development activities under the Vertex Agreement;
•the cost of laboratory supplies and research materials;
•the costs of payments made under third-party licensing agreements and related future payments should certain development and regulatory milestones be achieved; and
•facilities, depreciation and other direct and allocated expenses, including rent and other operating costs, incurred as a result of our research and development activities.
We expense research and development costs as incurred. Non-refundable 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, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
Our research and development costs are primarily devoted to supporting our neuromuscular program development efforts. Our direct, external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We expect to track these external research and development costs on a program-by-program basis as we identify specific programs and product candidates to advance into clinical development.
We do not allocate employee costs, costs associated with our development efforts and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources and third-party consultants primarily to conduct our research and development activities as well as for managing our process development, manufacturing and clinical development activities.
Therapeutic candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our platform development efforts and planned preclinical and planned and current clinical development activities in the near term and in the future. We further expect that the research and development expenses of our programs will increase in the near term as we initiate or continue CTA/IND-enabling activities for our therapeutic candidates. Therefore, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our therapeutic candidates. The successful development of our therapeutic candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:
•the scope, timing, rate of progress and expenses of our ongoing and potential future research activities, including preclinical and CTA/IND-enabling studies, clinical trials and other research and development activities we decide to pursue;
•the successful initiation, enrollment and completion of clinical trials under current good clinical practices ("GCPs");
•the timing of filing and acceptance of INDs or comparable foreign applications that allow commencement of future clinical trials for our therapeutic candidates;
•the timing and likelihood of resolution of the clinical hold on our IND for ENTR-601-44 and initiation of a clinical trial in the United States;
•whether our therapeutic candidates show safety and efficacy in our clinical trials and an acceptable risk-benefit profile in the intended populations;
•our ability to hire and retain key research and development personnel;
•our ability to successfully develop, obtain regulatory and marketing approvals of our therapeutic candidates for the expected indications and patient populations;
•our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our therapeutic candidates are approved;
•commercializing therapeutic candidates, if and when approved, whether alone or in collaboration with others;
•our ability to maintain a continued acceptable safety, tolerability and efficacy profile of our therapeutic candidates following approval;
•our ability to establish new licensing or collaboration arrangements to support our potential therapeutic candidates on favorable business terms;
•any decisions we make to discontinue, delay or modify our programs to focus on others;
•obtaining, maintaining, protecting and enforcing patent and trade secret protection and regulatory exclusivity for our therapeutic candidates;
•obtaining and maintaining adequate coverage and reimbursement from third party payors; and
•the effects of worldwide pandemics and health crises.
A change in the outcome of any of these variables with respect to the development of any of our therapeutic candidates could significantly change the costs and timing associated with the development of that therapeutic candidate. We may never succeed in obtaining regulatory approval for any of our therapeutic candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, corporate and business development, human resources and other administrative functions. General and administrative expenses also include: legal fees relating to intellectual property and corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; information technology expenses; and facility costs not otherwise included in research and development expenses.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount and expand our facilities to support our continued research activities and development of our programs and EEV Platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance and investor and public relations expenses associated with operating as a public company.
Interest and Other Income (Expense)
Interest and other income (expense) consists primarily of interest earned on our invested cash equivalents and marketable securities, gains and losses on disposal of fixed assets and gains and losses on foreign currency transactions.
Income Taxes
Provision for income tax benefit (expense) recorded in any interim period is based on the estimated effective tax rate for the fiscal year for those tax jurisdictions that can be reliably estimated. Our calculation of the estimated effective tax rate requires us to estimate pre‑tax income by tax jurisdiction as well as total tax benefit (expense) for the fiscal year. Accordingly, the annual estimated effective tax rate is subject to adjustment if there are changes to the initial estimates of total tax benefit (expense) or pre‑tax income.
As part of the Tax Cuts and Jobs Act of 2017, beginning with the 2022 tax year, we are required to capitalize research and development expenses, as defined under Internal Revenue Code section 174. For expenses that are incurred for research and development in the U.S., the amounts will be amortized over 5 years, and expenses that are incurred for research and experimentation outside the United States will be amortized over 15 years. See Note 10, Income Taxes, for further discussion of our tax provisions for the three months ended June 30, 2024 and June 30, 2023.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates from those reported in the Annual Report, except as described further in Note 2 Summary of Significant Accounting Policies in the condensed consolidated financial statements elsewhere in this Quarterly Report.
Results of Operations
Comparison of the three months ended June 30, 2024 and 2023
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
(in thousands) | 2024 | | 2023 | | Change |
Collaboration revenue | $ | 94,694 | | $ | 18,170 | | $ | 76,524 |
Operating expenses: | | | | | |
Research and development | 32,035 | | 26,300 | | 5,735 |
General and administrative | 9,236 | | 8,169 | | 1,067 |
Total operating expenses | 41,271 | | 34,469 | | 6,802 |
Income (loss) from operations | 53,423 | | (16,299) | | 69,722 |
Other income: | | | | | |
Interest and other income, net | 4,366 | | 4,218 | | 148 | |
Total other income, net | 4,366 | | 4,218 | | 148 |
Income (loss) before provision for income taxes | 57,789 | | (12,081) | | 69,870 |
Provision for income taxes | (2,758) | | (13,847) | | 11,089 |
Net Income (loss) | $ | 55,031 | | $ | (25,928) | | $ | 80,959 |
Collaboration Revenue
Collaboration revenue was $94.7 million for the three months ended June 30, 2024 and $18.2 million for the three months ended June 30, 2023. The increase was primarily driven by the additional research activities completed during the three months ended June 30, 2024, as well as the milestone related to the clinical advancement of VX-670 that was achieved in March of 2024 and added to the transaction price.
Research and Development Expenses
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
(in thousands) | 2024 | | 2023 | | Change |
External research and development expenses: | | | | | |
ENTR-601-44 | $ | 2,120 | | $ | 3,665 | | $ | (1,545) |
ENTR-601-45 | 573 | | 4,419 | | (3,846) |
ENTR-601-50 | 3,216 | | 456 | | 2,760 |
Collaboration services | 6,648 | | 2,116 | | 4,532 |
Other preclinical and discovery programs | 1,982 | | 962 | | 1,020 |
Other unallocated | 427 | | 181 | | 246 |
Total external costs | 14,966 | | 11,799 | | 3,167 |
Internal costs, including personnel related | 17,069 | | 14,501 | | 2,568 |
Total research and development expenses | $ | 32,035 | | $ | 26,300 | | $ | 5,735 |
Research and development expenses were $32.0 million for the three months ended June 30, 2024, compared to $26.3 million for the three months ended June 30, 2023. The increase of $5.7 million in research and development expenses was primarily attributable to:
•an increase of $3.1 million in external costs primarily driven by additional research activities performed for VX-670 and additional preclinical costs incurred related to ENTR-601-50 and additional investments into our
discovery programs. These increases were slightly offset by lower costs incurred related to ENTR-601-44 and ENTR-601-45; and
•an increase of $2.6 million in internal costs driven by increased headcount in our research and development function, inclusive of stock-based compensation expense of $2.0 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively, and increased facilities costs to support our expanding operations.
We expect that our research and development expenses will increase as we advance ENTR-601-44 / ENTR-601-45 through clinical trials, and ENTR-601-50 through preclinical development and into clinical trials, support our partnered candidate, VX-670, and continue to perform discovery work for future product candidates.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2024 were $9.2 million, compared to $8.2 million for the three months ended June 30, 2023. The increase of $1.0 million was primarily attributable to an increase in personnel costs as the headcount in our general and administrative function increased. Our general and administrative personnel costs are inclusive of stock-based compensation expense of $2.6 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively.
Interest and Other Income, net
Total interest and other income, net was $4.4 million for the three months ended June 30, 2024, compared to $4.2 million of interest and other income for the three months ended June 30, 2023; this increase is primarily driven by higher interest income from investments in debt securities due to an overall increase in interest rates.
Provision for Income Taxes
The Company recorded an income tax expense of $2.8 million for the three months ended June 30, 2024 and an income tax expense of $13.8 million for the three months ended June 30, 2023. For both periods, the income tax expense recorded was driven largely by the projected current tax liabilities associated with the tax recognition of payments received pursuant to the Vertex Agreement resulting in taxable income during the respective periods.
Comparison of the six months ended June 30, 2024 and 2023
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
(in thousands) | 2024 | | 2023 | | Change |
Collaboration revenue | $ | 153,814 | | $ | 43,430 | | $ | 110,384 |
Operating expenses: | | | | | |
Research and development | 60,643 | | 49,402 | | 11,241 |
General and administrative | 18,635 | | 16,107 | | 2,528 |
Total operating expenses | 79,278 | | 65,509 | | 13,769 |
Income (loss) from operations | 74,536 | | (22,079) | | 96,615 |
Other income: | | | | | |
Interest and other income, net | 8,580 | | 6,875 | | 1,705 | |
Total other income, net | 8,580 | | 6,875 | | 1,705 |
Income (loss) before provision for income taxes | 83,116 | | (15,204) | | 98,320 |
Provision for income taxes | (4,589) | | (17,398) | | 12,809 |
Net Income (loss) | $ | 78,527 | | $ | (32,602) | | $ | 111,129 |
Collaboration Revenue
Collaboration revenue was $153.8 million for the six months ended June 30, 2024 and $43.4 million for the six months ended June 30, 2024. The $110.4 million increase was primarily driven by the additional research activities completed during the six months ended June 30, 2024, as well as the milestone related to the clinical advancement of VX-670 that was achieved in March of 2024 and added to the transaction price.
Research and Development Expenses
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
(in thousands) | 2024 | | 2023 | | Change |
External research and development expenses: | | | | | |
ENTR-601-44 | $ | 5,221 | | $ | 5,628 | | $ | (407) |
ENTR-601-45 | 3,031 | | 5,360 | | (2,329) |
ENTR-601-50 | 5,716 | | 475 | | 5,241 |
Collaboration services | 7,395 | | 6,131 | | 1,264 |
Other preclinical and discovery programs | 3,056 | | 1,754 | | 1,302 |
Other unallocated | 2,036 | | 2,910 | | (874) |
Total external costs | 26,455 | | 22,258 | | 4,197 |
Internal costs, including personnel related | 34,188 | | 27,144 | | 7,044 |
Total research and development expenses | $ | 60,643 | | $ | 49,402 | | $ | 11,241 |
Research and development expenses were $60.6 million for the six months ended June 30, 2024, compared to $49.4 million for the six months ended June 30, 2023. The increase of $11.2 million in research and development expenses was primarily attributable to:
•an increase of $7.0 million in internal costs driven by increased headcount in our research and development function, inclusive of stock-based compensation expense of $3.6 million and $2.7 million for the six months ended June 30, 2024 and 2023, respectively, and;
•an increase of $4.2 million in external costs primarily driven by additional preclinical costs incurred for ENTR-601-50, higher research activities performed for VX-670 and additional costs incurred related to discovery programs as we continue investing in our platform
We expect that our research and development expenses will increase as we advance ENTR-601-44 / ENTR-601-45 through clinical trials, and ENTR-601-50 through preclinical development and into clinical trials, support our partnered candidate, VX-670, and continue to perform discovery work for future product candidates.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2024 were $18.6 million, compared to $16.1 million for the six months ended June 30, 2023. The increase of $2.5 million was primarily attributable to higher personnel costs as our headcount in our general and administrative function increased. Our general and administrative personnel costs for the six months ended June 30, 2024 and 2023 are inclusive of stock-based compensation expense of $4.7 million and $3.2 million, respectively.
Interest and Other Income, net
Total interest and other income, net was $8.6 million for the six months ended June 30, 2024, compared to $6.9 million of interest and other income for the six months ended June 30, 2023; this increase is primarily driven by higher interest income from investments in debt securities due to an overall increase in interest rates and also an increase in the amount of debt securities held.
Provision for Income Taxes
The Company recorded an income tax expense of $4.6 million for the six months ended June 30, 2024 and an income tax expense of $17.4 million for the six months ended June 30, 2023. For both periods, the income tax expense recorded was driven largely by the projected current tax liabilities associated with the tax recognition of payments received pursuant to the Vertex Agreement resulting in taxable income during the respective periods.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception in 2016, we have incurred significant operating losses. As of June 30, 2024 and December 31, 2023, we had an accumulated deficit of $116.4 million and $195.0 million, respectively. We expect to generate significant operating losses and negative operating cash flows for the foreseeable future as we advance our platform and EEV therapeutic candidates. Since our inception, we have raised over $850.0 million of gross proceeds from sales of stock to leading biotechnology investors and from the Vertex Agreement. As of June 30, 2024, we had cash, cash equivalents and marketable securities of $469.7 million.
In September 2023, we entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC (the "Sales Agent") under which we may, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $150.0 million, in a series of one or more ATM equity offerings (the "2023 ATM Program"). The Sales Agent is not required to sell any specific share amounts but acts as the Company’s sales agent, using commercially reasonable efforts consistent with its normal trading and sales practices. Pursuant to the Sales Agreement, shares will be sold pursuant to our shelf registration statement on Form S-3 (File No. 333-268099) filed with the SEC on November 1, 2022, including the base prospectus contained therein, as declared effective by the SEC on November 7, 2022 (the "Shelf Registration Statement"). The Company’s common stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary. As of June 30, 2024 we have not sold any shares of common stock under the 2023 ATM Program.
In June 2024, the Company entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering (the “June 2024 Offering”) of 3,367,003 shares of the Company’s common stock at a purchase price of $14.85 per share and, in lieu of common stock to certain investors who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of Common Stock at a purchase price of $14.8499 per Pre-Funded Warrant, which represents the price per share at which the shares of common stock were sold to the investors in the June 2024 Offering, minus $0.0001, which is the exercise price of each Pre-Funded Warrant. The June 2024 Offering was made pursuant to the shelf registration statement on Form S-3 (File No. 333-268099) previously filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 and declared effective by the SEC on November 7, 2022. The aggregate net proceeds from the sale of common stock and Pre-Funded Warrants in the June 2024 Offering were approximately $99.6 million, after deducting offering expenses payable by the Company. The Company will receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
| | | | | | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2024 | | 2023 |
Net cash provided by operating activities | $ | 14,314 | | $ | 168,308 |
Net cash provided by (used in) investing activities | 1,764 | | (153,701) | |
Net cash provided by financing activities | 101,573 | | 19,979 |
Net increase in cash, cash equivalents and restricted cash | 117,651 | | 34,586 |
Operating Activities
For the six months ended June 30, 2024, net cash provided by operating activities was $14.3 million, driven by our net income of $78.5 million, as adjusted for non-cash items consisting of stock-based compensation expense of $8.4 million, depreciation expense of $1.8 million, and accretion of premiums and discounts of $4.3 million, partially offset by net cash used in changes in our operating assets and liabilities of $70.1 million.
For the six months ended June 30, 2023, net cash provided by operating activities was $168.3 million, driven by our net loss of $32.6 million, net cash provided by changes in our operating assets and liabilities of $195.6 million primarily resulting from the upfront payment received in connection with the Vertex Agreement, and adjustments for non-cash expenses relating to stock-based compensation expense of $5.9 million, depreciation expense of $1.3 million, and accretion of premiums and discounts on marketable securities of $1.9 million.
Investing Activities
Net cash provided by investing activities was $1.8 million for the six months ended June 30, 2024, consisting primarily of $211.3 million from the maturities of marketable securities, partially offset by $207.6 million in purchases of marketable securities and $1.9 million of purchases of property and equipment.
Net cash used in investing activities was $153.7 million for the six months ended June 30, 2023, consisting primarily of $241.9 million in purchases of marketable securities and $3.2 million from purchases of property and equipment, partially offset by $91.4 million from the maturities of marketable securities.
Financing Activities
Net cash provided by financing activities was $101.6 million for the six months ended June 30, 2024, consisting of $100.0 million of proceeds from sales of our common stock and pre-funded warrants, $1.3 million in proceeds from stock option exercises and $0.3 million from the issuance of common stock under our employee stock purchase plan.
Net cash provided by financing activities was $20.0 million for the six months ended June 30, 2023, consisting of $19.4 million in net proceeds from the issuance of 1,618,613 shares in connection with the Vertex Agreement, $0.4 million of proceeds from stock option exercises and $0.2 million from the issuance of common stock under our employee stock purchase plan.
Future Funding Requirements
We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. In addition, we expect to incur additional costs associated with operating as a public company. Our operating expenses and future funding requirements are expected to increase substantially as we continue to advance our portfolio of programs. Based on our current operating plans, we believe that our cash, cash equivalents and marketable securities as of June 30, 2024 will be sufficient to fund our operations into 2027. 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.
Because of the numerous risks and uncertainties associated with research, development, and commercialization of our candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including costs associated with:
•the continuation of our current research programs and our clinical and preclinical development of therapeutic candidates from our current research programs;
•seeking to identify additional research programs and additional therapeutic candidates;
•advancing our existing and future therapeutic candidates into clinical development;
•initiating preclinical studies and clinical trials for any therapeutic candidates we identify and develop or expand development of existing programs into additional indications;
•maintaining, expanding, enforcing, defending and protecting our intellectual property portfolio and providing reimbursement of third-party expenses related to our patent portfolio;
•timing of manufacturing for our therapeutic candidates and commercial manufacturing if any therapeutic candidate is approved;
•establishing and maintaining clinical and commercial supply for the development and manufacture of our therapeutic candidates;
•seeking regulatory and marketing approvals for any of our therapeutic candidates that we develop, if any;
•seeking to identify, establish and maintain additional collaborations and license agreements, and the success of those collaborations and license agreements;
•ultimately establishing a sales, marketing and distribution infrastructure to commercialize any platforms for which we may obtain marketing approval, either by ourselves or in collaboration with others;
•generating revenue from commercial sales of therapeutic candidates we may develop for which we receive marketing approval;
•hiring additional personnel, including research and development, clinical and commercial personnel;
•adding operational, financial and management information systems and personnel, including personnel to support our product development;
•achieving sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
•acquiring or in-licensing products, intellectual property, and technologies; and
•the ongoing costs of operating as a public company and recent increases in inflationary rates.
Until such time, if ever, as we can generate substantial product revenue to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and 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 capital expenditures, or declaring dividends. If we raise funds through collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or therapeutic candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our therapeutic candidates even if we would otherwise prefer to develop and market such therapeutic candidates ourselves.
Contractual Obligations and Commitments
Lease Commitments
During the three months ended June 30, 2024, there were no material changes to our lease commitments from those described in Note 11, Leases, of our financial statements in the Annual Report.
Purchase and Other Obligations
We enter into contracts in the normal course of business with CROs, third-party manufacturers, and other third parties for preclinical research studies and testing and manufacturing services. These contracts do not contain minimum purchase commitments and are cancellable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.
We have also entered into license agreements under which we are obligated to make certain payments. During the three months ended June 30, 2024, there were no material changes to our commitments and contingencies related to our license agreements from those described in “Business—Intellectual property— License agreement with The Ohio State University” and Note 10, Commitments and Contingencies, to our financial statements in the Annual Report, with the exception of the sublicense fee paid to OSIF in July of 2024 that we accrued for as of June 30, 2024 in connection with the milestone achieved in the first quarter of 2024 under the Vertex Agreement. For additional information regarding our license agreements, refer to Note 11, Commitments and Contingencies, to our condensed consolidated financial statements in this Quarterly Report.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company,” ("EGC"), under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act"), for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.
As an EGC, we may, and intend to, take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:
•we may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;
•we may avail ourselves of the exemption from providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act");
•we may avail ourselves of the exemption from complying with any requirement that may be adopted by the Public Company Accounting Oversight Board ("PCAOB") regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis;
•we may provide reduced disclosure about our executive compensation arrangements; and
•we may not require nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments.
We will remain an EGC until the earliest to occur of (i) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering ("IPO"), (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous rolling three-year period or (iv) the date on which we are deemed to be a large accelerated filer under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
For purposes of this Quarterly Report, we also qualify as a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates was less than $700 million as of June 30, 2023 and our annual revenue was less than $100 million at the end of fiscal year 2022, the relevant periods for this determination. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recently Issued Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. 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 a company that are designed to ensure that information required to be disclosed by a company 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 a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our 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 June 30, 2024, our Chief Executive Officer and our 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 June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of our business. While the outcome of any such proceedings cannot be predicted with certainty, as of June 30, 2024, we were not a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
In evaluating the Company and our business, careful consideration should be given to the following risk factors, in addition to the other information set forth in this Quarterly Report on Form 10-Q ("Quarterly Report") and in other documents that we file with the Securities and Exchange Commission ("SEC"). Investing in our common stock involves a high degree of risk. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline and you could lose part or all of your investment. Unless otherwise indicated, reference in this section and elsewhere in this Quarterly Report to our business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and our future prospects. The material and other risks and uncertainties summarized above and described below are not intended to be exhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking Statements.”
Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue from product sales or become profitable or, if we achieve profitability, we may not be able to sustain it.
Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a biopharmaceutical company with a limited operating history upon which our stockholders can evaluate our business and prospects. Most of our development programs, with the exception of ENTR-601-44 and our partnered candidate VX-670, but including ENTR-601-45 and ENTR-601-50, are in preclinical development or in the drug discovery stage. We commenced operations in 2016, and to date, we have focused primarily on organizing and staffing our company, business planning, raising capital, developing our proprietary, highly versatile and modular Endosomal Escape Vehicle ("EEV") platform ("EEV Platform"), identifying EEV therapeutic candidates, establishing our intellectual property portfolio and conducting research and preclinical studies. Our approach to the discovery and development of therapeutic candidates based on our EEV Platform is unproven, and we do not know whether we will be able to conduct clinical studies on any of our therapeutic candidates beyond ENTR-601-44 and our partnered candidate VX-670, develop any therapeutic candidates that succeed in clinical development or produce products of commercial value. As an organization, the only clinical trial we have completed is our Phase 1 clinical trial of ENTR-601-44 in the UK, and we have not completed the clinical development of any therapeutic candidate nor have we obtained any regulatory approvals, manufactured a commercial-scale product, or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.
We have incurred significant operating losses since our inception. We do not have any products approved for sale and have not generated any product revenue since our inception. If our therapeutic candidates are not successfully developed and approved, we may never generate any significant revenue from product sales. We have incurred significant net losses since inception. As of June 30, 2024, we had an accumulated deficit of $116.4 million. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. All of our therapeutic candidates will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses
will increase substantially as we continue our development of, seek regulatory approval for and potentially commercialize any of our therapeutic candidates.
To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our therapeutic candidates, identifying lead therapeutic candidates, discovering additional therapeutic candidates, conducting preclinical studies prior to submitting an Investigational New Drug application ("IND") and/or Clinical Trial Application ("CTA"), obtaining clearance for INDs/CTAs, obtaining regulatory approval for these therapeutic candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may not succeed in completing necessary activities and regulatory approvals necessary to bring a product to market and, even if we do, may never generate revenues that are significant enough to achieve profitability. In addition, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical industry. Because of the numerous risks and uncertainties associated with biopharmaceutical 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 profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable may have an adverse effect on the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our therapeutic candidates or even continue our operations. A decline in the value of our company could also cause our stockholders to lose all or part of their investment.
Our limited operating history may make it difficult to evaluate our technology and industry and predict our future performance. Though several groups have conducted or are conducting studies involving the intracellular delivery of therapeutic molecules, the relevance of those studies to the evaluation of therapeutic candidates developed using our EEV Platform may be difficult to ascertain. Our short history as an operating company and novel therapeutic approach make any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by earlier stage companies in rapidly evolving fields. Failure to address these risks successfully will cause our business to suffer. Similarly, we expect that our financial condition and operating results will fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. As a result, our stockholders should not rely upon the results of any quarterly or annual period as an indicator of future operating performance.
In addition, as an early clinical-stage company, we have encountered unforeseen expenses, difficulties, complications, delays and other known and unknown circumstances. As we advance our EEV therapeutic candidates, we will need to continue our transition from a company with a research focus to a company supporting clinical development and if successful, capable of supporting commercial activities. We may not continue to be successful in our transition.
We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development programs, commercialization efforts or other operations.
The development of biopharmaceutical therapeutic candidates is capital-intensive. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our ongoing and planned preclinical studies of our development programs, continue to initiate clinical trials for our therapeutic candidates and seek regulatory approval for our current therapeutic candidates and any future therapeutic candidates we may develop. If we obtain regulatory approval for any of our therapeutic candidates, we also expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Because the outcome of any preclinical study or clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our therapeutic candidates. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Failing to raise capital when needed or on attractive terms could force us to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
Based on our current operating plans, we believe that our cash, cash equivalents and marketable securities as of June 30, 2024 will be sufficient to fund our operations into 2027. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources, including potentially additional collaborations, licenses and other similar arrangements.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. For example, in September 2023, we entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC acting as our agent and/or principal (the "Sales Agent"), with respect to an "at the market offering" program under which we may offer and sell, from time to time, at our sole discretion, shares of common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. However, there can be no assurance that the Sales Agent will be successful in consummating future sales based on prevailing market conditions or in the quantities or at the prices that we deem appropriate. Additionally, in June 2024, we entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering of 3,367,003 shares of common stock, at a purchase price of $14.85 per share and, in lieu of common stock to certain purchasers who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of common stock at a purchase price of $14.8499 per Pre-Funded Warrant. Attempting to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop our therapeutic candidates. Our future capital requirements will depend on many factors, including, but not limited to:
•the type, number, scope, progress, expansions, results, costs and timing of our preclinical studies and any clinical trials of the therapeutic candidates that we are pursuing or may choose to pursue in the future;
•the clinical development plans we establish for our EEV therapeutic candidates;
•the costs and timing of manufacturing for our therapeutic candidates and commercial manufacturing if any therapeutic candidate is approved;
•the costs of establishing and maintaining clinical and commercial supply for the development and manufacture of our therapeutic candidates;
•the costs, timing and outcome of regulatory review of our therapeutic candidates;
•the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
•our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;
•the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;
•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements, if any;
•the costs and timing of establishing or securing sales and marketing capabilities if any therapeutic candidate is approved;
•subject to receipt of regulatory approval, revenue, if any, received from commercial sales of our therapeutic candidates;
•our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
•the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
•the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and
•the ongoing costs of operating as a public company.
Identifying potential therapeutic candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and commercialize our therapeutic candidates. In addition, our therapeutic candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.
Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.
Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. From time to time, we may enter into license or collaboration agreements or strategic
partnerships with other companies that include development funding and significant upfront and milestone payments and/or royalties, which may become an important source of our revenue. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next.
In addition, we measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award as determined by our board of directors, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly.
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following:
•the timing and cost of, and level of investment in, research and development activities relating to our programs, which will change from time to time;
•our ability to enroll patients in clinical trials and the timing of enrollment;
•the cost of manufacturing our current therapeutic candidates and any future therapeutic candidates, which may vary depending on the U.S. Food and Drug Administration ("FDA"), the European Medicines Agency ("EMA") or other comparable foreign regulatory authority guidelines and requirements, the quantity of production and the terms of our agreements with manufacturers;
•expenditures that we will or may incur to acquire or develop additional therapeutic candidates and technologies or other assets;
•the timing and outcomes of preclinical studies and clinical trials for ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 and any therapeutic candidates from our discovery programs, or competing therapeutic candidates;
•the need to conduct unanticipated clinical trials or trials that are larger or more complex than anticipated;
•competition from existing and potential future products that compete with ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 or any of our discovery programs, and changes in the competitive landscape of our industry, including consolidation among our competitors or partners;
•any delays in regulatory review or approval of ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 or therapeutic candidates from any of our discovery programs;
•the level of demand for any of our therapeutic candidates, if approved, which may fluctuate significantly and be difficult to predict;
•the risk/benefit profile, cost and reimbursement policies with respect to our therapeutic candidates, if approved, and existing and potential future products that compete with ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 or any of our discovery programs;
•our or our partners' ability to commercialize ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 or therapeutic candidates from any of our discovery programs, if approved, inside and outside of the U.S., either independently or working with third parties;
•our ability to establish and maintain collaborations, licensing or other arrangements;
•our ability to adequately support future growth;
•potential unforeseen business disruptions that increase our costs or expenses;
•future accounting pronouncements or changes in our accounting policies; and
•the changing and volatile United States and global economic and political environment.
The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.
Risks Related to the Discovery, Development and Regulatory Approval of Our Therapeutic Candidates
We are early in our development efforts and as a result it will be years before we commercialize a therapeutic candidate, if ever. If we are unable to identify and advance therapeutic candidates through preclinical studies and/or clinical trials, obtain marketing approval and ultimately commercialize them, or experience significant delays in doing so, our business will be materially harmed.
We are early in our development efforts and all our development programs, including our lead therapeutic candidate ENTR-601-44 and our partnered candidate VX-670, which are in the early clinical stage, and ENTR-601-45 and ENTR-601-50, which are in the preclinical or drug discovery stage. We have invested substantially all of our research efforts to date in developing our EEV Platform, identifying potential therapeutic candidates, conducting preclinical studies, and initiating early clinical studies. As an organization, the only clinical trial we have completed is our Phase 1 clinical trial of ENTR-601-44 in the UK, and we have not completed the clinical development of any therapeutic candidate nor have we submitted an application for regulatory approval, and we may be unable to do so for our therapeutic candidates. The IND for ENTR-601-44 has not yet been allowed to proceed in the United States, and other than our partnered candidate VX-670, we have not completed IND-enabling studies for our other candidates. We will need to complete these steps to support the progression of ENTR-601-44, ENTR-601-45 and ENTR-601-50 into and/or through clinical studies in the United States. In addition, we have a development portfolio of programs that are in earlier stages of development and have not yet initiated or completed IND-enabling studies. We may never advance any therapeutic candidates other than our partnered candidate VX-670 through IND-enabling studies and receive authorization from the FDA, to proceed under an IND prior to initiating their clinical-stage development. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our therapeutic candidates, which may never occur. We currently generate no revenue from sales of any product, and we may never be able to develop or commercialize a marketable product.
Commencing clinical trials in the United States is subject to acceptance by the FDA of an IND and finalizing the trial design based on discussions with the FDA and other regulatory authorities. For the FDA to accept an IND, we must complete Good Laboratory Practices ("GLP") studies, which may not be successful or may take longer than we expect. The FDA may require us to complete additional preclinical studies or we may be required to satisfy other FDA requests prior to commencing clinical trials in the United States, and such requests may not currently be known or anticipated, which may cause the start of our clinical trials to be delayed in the United States or prevent us from conducting clinical trials in the United States. For example, the FDA has placed ENTR-601-44 on clinical hold and requested that we gather and submit additional information regarding ENTR-601-44. Even after we receive and incorporate guidance from these regulatory authorities, the FDA or other regulatory authorities could disagree that we have satisfied their requirements to commence any clinical trial or change their position on the acceptability of our trial design or the clinical endpoints selected, including with respect to ENTR-601-44, which may require us to complete additional preclinical studies or clinical trials, impose stricter approval conditions than we currently expect or may prevent us from conducting clinical trials. There are equivalent processes and risks applicable to clinical trial applications in other countries, including countries in the European Union ("EU") and the United Kingdom ("UK").
Commercialization of any therapeutic candidates we may develop will require preclinical and clinical development; regulatory and marketing approval in multiple jurisdictions, including by the FDA, the EMA and the United Kingdom Medicines and Healthcare Products Regulatory Agency ("MHRA"); manufacturing supply, capacity and expertise; a commercial organization; and significant marketing efforts. The success of therapeutic candidates we may identify and develop will depend on many factors, including:
•timely and successful completion of preclinical studies, including toxicology studies, biodistribution studies and minimally efficacious dose studies in animals, where applicable;
•sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
•effective INDs or comparable foreign applications that allow commencement of our planned clinical trials or future clinical trials for any therapeutic candidates we may develop;
•successful enrollment and completion of clinical trials, including under the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use Guideline for Good Clinical Practice and the FDA’s current Good Clinical Practices ("GCPs"), GLPs and any additional regulatory requirements from foreign regulatory authorities;
•positive results from our current and future clinical trials that support a finding of safety and effectiveness and an acceptable risk-benefit profile in the intended populations;
•receipt of regulatory marketing approvals from applicable regulatory authorities;
•establishment of arrangements with third-party manufacturers for clinical supply and, where applicable, commercial manufacturing capabilities;
•establishment, maintenance, defense and enforcement of patent, trademark, trade secret and other intellectual property protection or regulatory exclusivity for any therapeutic candidates we may develop;
•patient recruitment and enrollment;
•commercial launch of any therapeutic candidates we may develop, if approved, whether alone or in collaboration with others;
•acceptance of the benefits and use of our therapeutic candidates we may develop, including method of administration, if and when approved, by patients, the medical community and third-party payors;
•our ability to compete effectively with other therapies and treatment options;
•maintenance of a continued acceptable safety, tolerability and efficacy profile of any therapeutic candidates we may develop following approval; and
•establishment and maintenance of healthcare coverage and adequate reimbursement by payors.
If we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize any therapeutic candidates we may develop, which would materially harm our business. If we are unable to advance our therapeutic candidates to clinical development, obtain regulatory approval and ultimately commercialize our therapeutic candidates, or experience significant delays in doing so, our business will be materially harmed.
The FDA has placed the IND for ENTR-601-44 for the potential treatment of DMD on clinical hold. Should our response to the clinical hold in the United States not be satisfactory to the FDA, the clinical hold may not be lifted on a timely basis, or at all.
The FDA has placed the IND for ENTR-601-44 for the potential treatment of DMD on clinical hold and requested that we gather and submit additional information regarding ENTR-601-44. We are actively working to resolve the clinical hold in the United States. Should we be delayed in submitting a response to the clinical hold in the United States or our response is not satisfactory to the FDA, the clinical hold may not be lifted on a timely basis, or at all.
In addition, we received authorization from the MHRA to initiate a healthy volunteer trial in the UK in 2023 and have since completed our Phase 1 clinical trial of ENTR-601-44. However, if our future efforts in the United States or the UK are not successful, we may not be able to initiate or complete a clinical development program that enables the approval and marketing of ENTR-601-44 as planned, or at all.
Our business is highly dependent on the clinical advancement of our programs and modalities and is especially dependent on the success of our lead EEV therapeutic candidates, ENTR-601-44, ENTR-601-45, ENTR-601-50 and our partnered candidate VX-670. Delay or failure to advance programs or modalities, including ENTR-601-44, ENTR-601-45, ENTR-601-50 and VX-670 could adversely impact our business.
Using our platform, we are developing product features for medicines based on EEVs. Over time, our platform work led to commonalities, where a specific combination of EEV technologies, delivery technologies, and manufacturing processes generated a set of product features shared by multiple programs, for example, oligonucleotide-, enzyme-, and antibody-conjugated EEVs. This is what we call a “modality.” We are utilizing early programs in a modality, such as ENTR-601-44 for oligonucleotide-conjugated EEVs, to understand the technology risks within the modality, including manufacturing and pharmaceutical properties. Our lead therapeutic candidate, ENTR-601-44, is being developed to address DMD and we are highly dependent on the success of the future clinical trials of ENTR-601-44, the outcomes of which are uncertain, to further develop ENTR-601-45, our lead therapeutic candidate for patients with DMD with exon 45 skipping amenable mutations as well as ENTR-601-50, our therapeutic candidate for patients with DMD who are exon 50 skipping amenable. Because ENTR-601-44 is our first EEV therapeutic candidate, if ENTR-601-44 encounters safety, efficacy, supply or manufacturing problems, developmental delays, regulatory or commercialization issues or other problems, the value of our EEV Platform, including our other therapeutic candidates such as ENTR-601-45, ENTR-601-50, and our partnered candidate VX-670, could be greatly diminished and our development plans and business would be significantly harmed.
Even if our earlier programs in a modality are successful in any phase of development any of such earlier programs may fail at a later phase of development, and other programs within the same modality may still fail at any phase of development including at phases where earlier programs in that modality were successful. This may be a result of technical challenges unique to that program or due to biology risk, which is unique to every program. As we progress our programs through clinical development, there may be new technical challenges that arise that cause an entire modality to fail.
Our EEV therapeutic candidates are based on a novel therapeutic approach, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.
Using EEV technology to develop therapeutic candidates is a new therapeutic approach and no products based on EEVs have been approved to date in the United States or the rest of the world. As such, it is difficult to accurately predict the developmental challenges we may face for our EEV therapeutic candidates as they proceed through development. In addition, because we have only completed a Phase 1 clinical trial for ENTR-601-44 and have not yet completed any clinical trials with our other EEV therapeutic candidates, we have not yet been able to assess safety in humans and there may be short-term or long-term effects from treatment with any therapeutic candidates that we develop that we cannot predict at this time. Also, animal models may not exist for some of the diseases we choose to pursue in our programs. As a result of these factors, it is more difficult for us to predict the time and cost of therapeutic candidate development and we cannot predict whether our EEV Platform, or any similar or competitive intracellular delivery technologies, will enable the identification, development and regulatory approval of any products. There can be no assurance that any development problems we experience in the future related to our EEV Platform or any of our research programs will not cause significant delays or unanticipated costs or that such development problems can be solved. Any of these factors may prevent us from completing our preclinical studies or any clinical trials that we have initiated or may initiate, or commercializing any therapeutic candidates we may develop on a timely or profitable basis, if at all.
The clinical trial requirements of the FDA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a therapeutic candidate vary substantially according to the type, complexity, novelty and intended use and market of the therapeutic candidate. No products based on EEVs have been approved to date by regulators. As a result, the regulatory approval process for therapeutic candidates such as ours is uncertain and may be more expensive and take longer than the approval process for therapeutic candidates based on other, better known or more extensively studied technologies. For example, the general approach for FDA approval of a new biologic or drug is for sponsors to seek licensure or approval based on dispositive data from well-controlled, Phase 3 clinical trials of the relevant therapeutic candidate in the relevant patient population. Phase 3 clinical trials typically involve hundreds of patients, have significant costs and take years to complete. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our therapeutic candidates in the U.S., the UK, or other regions of the world or how long it will take to commercialize our therapeutic candidates. Delay or failure to obtain or unexpected costs in obtaining the regulatory approvals necessary to bring a potential therapeutic candidate to market could decrease our ability to generate sufficient product revenue and our business, financial condition, results of operations and prospects may be harmed.
Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies are not necessarily predictive of the results of later preclinical studies and any clinical trials of our therapeutic candidates. We have not yet completed the testing of any of our therapeutic candidates in clinical trials and our therapeutic candidates may not have favorable results in clinical trials or receive regulatory approval on a timely basis, if at all.
Preclinical and clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. We cannot guarantee that any preclinical studies or clinical trials will be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the preclinical study or clinical trial process. Any positive results from our preclinical studies of our EEV therapeutic candidates may not necessarily be predictive of the results in later preclinical studies and clinical trials. Similarly, even if we are able to complete our current or planned preclinical studies or clinical trials of our therapeutic candidates according to our current development timeline, the positive results from such preclinical studies and clinical trials may not be replicated in our subsequent preclinical studies or later-stage clinical trials. Despite promising preclinical or clinical results, any therapeutic candidate can unexpectedly fail at any stage of preclinical or clinical development. The historical failure rate for therapeutic candidates in our industry is high.
The results from preclinical studies or clinical trials of a therapeutic candidate may not predict the results of later clinical trials of the therapeutic candidate, and interim, topline, or preliminary results of a clinical trial are not necessarily indicative of final results. Therapeutic candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. In particular, while we have conducted certain preclinical studies of ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 and other potential therapeutic candidates, we do not know whether ENTR-601-44, ENTR-601-45, ENTR-601-50, VX-670 or the other potential therapeutic candidates will perform in current or future clinical trials as they have performed in these prior studies. The positive results we have observed for our therapeutic candidates in early, non-GLP preclinical studies and animal models may not be predictive of our current or future clinical trials in humans. Furthermore, for some indications that we are pursuing there are no animal models that adequately mirror the human disease to predict any level of positive results. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, and many therapeutic candidates fail in clinical trials despite very promising early results. Unexpected observations or toxicities observed in our IND-enabling studies for example, could delay clinical trials for
ENTR-601-44, ENTR-601-45, ENTR-601-50 or our other development programs. Moreover, preclinical and clinical data may be susceptible to varying interpretations and analyses. A number of companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and companies that have believed their therapeutic candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA approval. Additionally, we may conduct clinical trials that utilize an “open-label” trial design. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational therapeutic candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational therapeutic candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results with any of our therapeutic candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control.
For the foregoing reasons, we cannot be certain that our ongoing and planned preclinical studies, and current and planned clinical trials will be successful. Any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our therapeutic candidates in those and other indications, which could have a material adverse effect on our business, financial condition and results of operations.
Substantial delays in the commencement, enrollment or completion of our planned clinical trials, or failure to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities could prevent us from commercializing any therapeutic candidates we determine to develop on a timely basis, if at all.
The risk of failure in developing therapeutic candidates is high. It is impossible to predict when or if any therapeutic candidate would prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any therapeutic candidate, we must complete preclinical development, submit an IND or foreign equivalent to permit initiation of clinical studies, and then conduct extensive clinical trials to demonstrate the safety and efficacy of therapeutic candidates in humans. As an organization, we submitted an IND for ENTR-601-44 in the fourth quarter of 2022, which was subsequently placed on clinical hold. We are advancing this program in a single ascending dose clinical trial in healthy volunteers in the UK and have completed our Phase 1 clinical trial. In parallel we are committed to resolving the clinical hold in the United States. We plan to advance ENTR-601-45, our EEV therapeutic candidate targeting exon 45, to CTA/IND submission in the fourth quarter of 2024 and ENTR-601-50 to CTA/IND submission in 2025. We have limited experience as a company in preparing, submitting and prosecuting regulatory filings and have not previously submitted a New Drug Application ("NDA"), Biologics License Application ("BLA") or other comparable foreign regulatory submission for any therapeutic candidate. In addition, we have had limited interactions with the FDA and cannot be certain how many clinical trials of ENTR-601-44, ENTR-601-45, ENTR-601-50, our partnered candidate VX-670 or any other therapeutic candidates will be required or how such trials should be designed. Consequently, we and our partner may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to regulatory submission and approval of any of our therapeutic candidates. Clinical trials may fail to demonstrate that our therapeutic candidates are safe for humans and effective for indicated uses. Even if the clinical trials are successful, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application.
Before we can commence clinical trials for a therapeutic candidate, we must complete extensive preclinical testing and studies that support our INDs and other regulatory filings. We cannot be certain of the timely identification of a therapeutic candidate or the completion or outcome of our preclinical testing and studies and cannot predict whether the FDA or other comparable regulatory authority will accept our proposed clinical programs or whether the outcome of our preclinical testing and studies will ultimately support the further development of any therapeutic candidates. Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time may vary substantially according to the type, complexity and novelty of the program, and often can be several years or more per program. As a result, we cannot be sure that we will be able to submit CTAs/INDs for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of CTAs/INDs will result in the FDA or other regulatory authority allowing clinical trials to begin. For example, the FDA has placed the IND for ENTR-601-44 for the potential treatment of DMD on clinical hold and requested that we gather and submit additional information regarding ENTR-601-44. We are actively working to resolve the clinical hold in the United States. Should our response to the clinical hold in the United States not be satisfactory to the FDA, the clinical hold may not be lifted on a timely basis, or at all. In addition, given the extraordinary unmet need, we initiated and completed a Phase 1 clinical trial with healthy volunteers in the UK. However,
if our efforts in the United States and elsewhere are not successful, we may not be able to complete a clinical development program that enables the approval and marketing of ENTR-601-44 as planned, or at all.
Furthermore, therapeutic candidates are subject to continued preclinical safety studies, which may be conducted concurrently with our clinical testing. The outcomes of these safety studies may delay the launch of or enrollment in future clinical trials and could impact our ability to continue to conduct our clinical trials.
Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, or at all. A failure of one or more clinical trials can occur at any stage of testing, which may result from a multitude of factors, including, but not limited to, flaws in trial design, dose selection issues, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits.
Other events that may prevent successful enrollment, initiation or timely completion of clinical development include:
•we may be unable to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of clinical trials;
•delays in reaching a consensus with regulatory authorities on trial design;
•delays in reaching agreement on acceptable terms with prospective clinical research organizations ("CROs") and clinical trial sites;
•delays in opening clinical trial sites or obtaining required institutional review board ("IRB") or independent ethics committee approval, or the equivalent review groups for sites outside the United States, at each clinical trial site;
•we may need to add new or additional clinical trial sites;
•imposition of a clinical hold by regulatory authorities as a result of a serious adverse event or after an inspection of our clinical trial operations or trial sites;
•negative or inconclusive results observed in clinical trials, including failure to demonstrate statistical significance, safety, purity or potency, which could lead us, or cause regulators to require us, to conduct additional clinical trials or abandon product development programs;
•positive results from our preclinical studies of our therapeutic candidates may not necessarily be predictive of the results from required later preclinical studies and clinical trials and positive results from such preclinical studies and clinical trials of our therapeutic candidates may not be replicated in subsequent preclinical studies or clinical trial results;
•failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements;
•failure to perform in accordance with applicable GCPs;
•failure by investigators to adhere to clinical trial protocols leading to variable results;
•delays in the testing, validation, manufacturing and delivery of any therapeutic candidates we may develop to the clinical sites, including delays by third parties with whom we have contracted to perform certain of those functions;
•failure of our third-party contractors to comply with regulatory requirements or to meet their contractual obligations to us in a timely manner, or at all;
•delays in having patients complete participation in a trial or return for post-treatment follow-up;
•clinical trial sites or patients dropping out of a trial;
•selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;
•occurrence of serious adverse events associated with the therapeutic candidate that are viewed to outweigh its potential benefits;
•occurrence of serious adverse events associated with a therapeutic candidate in development by another company, which are viewed to outweigh its potential benefits, and which may negatively impact the perception of our product due to a similarity in technology or approach;
•changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
•the FDA, other regulatory authorities, or ethics committees may require us to submit additional data such as long-term toxicology studies or impose other requirements before permitting us to initiate a clinical trial;
•changes in the legal or regulatory regimes domestically or internationally related to patient rights and privacy; or
•lack of adequate funding to continue the clinical trial.
After initiating a clinical trial, we could also encounter delays if the clinical trial is suspended, placed on clinical hold or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA or other regulatory authorities or recommended for suspension or termination by the Data Safety Monitoring Board ("DSMB") for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our therapeutic candidates. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from preclinical studies, clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their therapeutic candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain regulatory approval.
Any inability to successfully complete preclinical studies and clinical trials could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, manufacturing or formulation changes to any therapeutic candidates we may develop may require us to conduct additional studies or trials to bridge our modified therapeutic candidates to earlier versions. Clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize any therapeutic candidates we may develop or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize any therapeutic candidates we may develop and may harm our business, financial condition, results of operations and prospects.
Additionally, if the results of future clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with any therapeutic candidates we may develop, we may:
•be delayed in obtaining marketing approval for therapeutic candidates, if at all;
•obtain approval for indications or patient populations that are not as broad as intended or desired;
•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
•be subject to changes in the way the product is administered;
•be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;
•have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy;
•be subject to the addition of labeling statements, such as warnings or contraindications;
•be sued; or
•experience damage to our reputation.
Delays or difficulties in the enrollment of patients in clinical trials could delay or prevent our receipt of necessary regulatory approvals.
Failure to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the U.S. may delay or prevent us from initiating or continuing clinical trials for our therapeutic candidates. Because the target patient populations for some of our therapeutic candidates are relatively small, it may be difficult to successfully identify patients. Although we may enter into agreements with third parties to develop companion diagnostic tests for use in some of our future clinical trials in order to help identify eligible patients in certain indications, we may experience delays in reaching, or fail to reach, agreement on acceptable terms to develop such companion diagnostic tests. Any third parties whom we engage to develop companion diagnostic tests may experience delays or may not be successful in developing such companion diagnostic tests, furthering the difficulty in identifying
patients for our clinical trials. In addition, current commercially available diagnostic tests to identify appropriate patients for our clinical trials or any approved therapeutic candidates may become unavailable in the future.
Furthermore, some of our competitors have ongoing clinical trials for therapeutic candidates that treat the same indications as our therapeutic candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ therapeutic candidates.
In addition, the pediatric population is an important patient population for certain of the indications we are targeting, including DMD, and our addressable patient population estimates include pediatric populations. However, it may be more challenging to conduct studies in this population, and to locate and enroll pediatric patients. Additionally, it may be challenging to ensure that pediatric or adolescent patients adhere to clinical trial protocols. Patient enrollment and trial competition may be affected by other factors including:
•clinicians’ and patients’ perceived risks and benefits of the therapeutic candidate under trial, particularly therapeutic candidates developed using a novel and unproven therapeutic approach, like our EEV therapeutic candidates in relation to available or investigational drugs;
•