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Washington, D.C. 20549

FORM 10-Q

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

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

Commission file number 001-38129

(Exact name of registrant as specified in its charter)

Delaware			04-3562403
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading symbol(s)			Name of each exchange on which registered
Common Stock, $0.0001 par value			MRSN			The Nasdaq Global Select Market

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

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

•the initiation, cost, timing, progress and results of our current and future research and development activities, preclinical studies and clinical trials;

•the adequacy of our inventory of upifitamab rilsodotin, or UpRi, XMT-1660, XMT-2056 and our other product candidates to support our ongoing and planned clinical trials, as well as the outcome of planned manufacturing runs;

•the timing of, and our ability to obtain and maintain, regulatory approvals for our product candidates;

•unmet needs in ovarian cancer, breast cancer and other cancer treatment;

•our ability to quickly and efficiently identify and develop additional product candidates;

•our ability to advance any product candidate into, and successfully complete, clinical trials;

•our intellectual property position, including with respect to our trade secrets;

•the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnerships;

•our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing; and

•the potential impact of the ongoing COVID-19 pandemic.

•We have incurred net losses since our inception, we have no products approved for commercial sale and we anticipate that we will continue to incur substantial operating losses for the foreseeable future.

•We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•We have a credit facility that requires us to meet certain affirmative and negative covenants and places restrictions on our operating and financial flexibility.

•We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do.

•We only have a limited number of product candidates in current or planned clinical trials. A failure of any of our current or future product candidates in clinical development could adversely affect our business and may require us to discontinue development of other product candidates based on the same technology.

•We can provide no assurance that our product candidates will obtain regulatory approval or that the results of clinical trials will be favorable.

•Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure. We can provide no assurance of the successful and timely development of new antibody-drug conjugate, or ADC, products.

•If we fail to attract and retain senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•Our activities, including our interactions with healthcare providers, third party payors, patients and government officials, are, and will continue to be, subject to extensive regulation involving health care, anti-corruption, data privacy and security and consumer protection laws. Failure to comply with applicable laws could result in substantial penalties, contractual damages, reputational harm, diminished revenues and curtailment or restructuring of our operations.

•We rely upon patents and other intellectual property rights to protect our technology. We may be unable to protect our intellectual property rights, and we may be liable for infringing the intellectual property rights of others.

•Our business is subject to risks arising from the outbreaks of disease, such as epidemics or pandemics, including the ongoing COVID-19 pandemic.

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			6
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021			7
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021			8
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			42
PART II - OTHER INFORMATION			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			91
Item 6. Exhibits			92
Signatures			93

(unaudited)

			September 30, 2022						December 31, 2021
Assets
Current assets:
Cash and cash equivalents			$	184,082					$	177,947
Short-term marketable securities			106,044						—
Prepaid expenses and other current assets			9,911						10,951
Total current assets			300,037						188,898
Property and equipment, net			3,136						1,968
Operating lease right-of-use assets			11,061						12,889
Other assets, noncurrent			616						2,356
Total assets			$	314,850					$	206,111
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable			$	13,732					$	12,321
Accrued expenses			41,204						28,716
Deferred revenue			30,924						3,944
Operating lease liabilities			2,697						2,303
Other current liabilities			237						239
Total current liabilities			88,794						47,523
Operating lease liabilities, noncurrent			9,291						11,247
Long-term debt, net			24,853						24,626
Deferred revenue, noncurrent			101,417						—
Other liabilities, noncurrent			266						974
Total liabilities			224,621						84,370
Commitments (Note 11)
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively			—						—
Common stock, $0.0001 par value; 350,000,000 and 175,000,000 shares authorized at September 30, 2022 and December 31, 2021, respectively ; 98,582,583 and 73,709,056 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively			10						7
Additional paid-in capital			700,217						572,213
Accumulated other comprehensive (loss) income			(231)						—
Accumulated deficit			(609,767)						(450,479)
Total stockholders’ equity			90,229						121,741
Total liabilities and stockholders’ equity			$	314,850					$	206,111

(unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Collaboration revenue			$	5,573					$	11					$	11,893					$	32
Operating expenses:
Research and development			50,639						35,275						127,676						94,645
General and administrative			14,573						10,124						42,158						26,214
Total operating expenses			65,212						45,399						169,834						120,859
Other income (expense):
Interest income			708						15						1,017						36
Interest expense			(880)						(98)						(2,364)						(286)
Total other income (expense), net			(172)						(83)						(1,347)						(250)
Net loss			(59,811)						(45,471)						(159,288)						(121,077)
Other comprehensive loss
Unrealized loss on marketable securities			(105)						—						(231)						—
Comprehensive loss			$	(59,916)					$	(45,471)					$	(159,519)					$	(121,077)
Net loss attributable to common stockholders — basic and diluted			$	(59,811)					$	(45,471)					$	(159,288)					$	(121,077)
Net loss per share attributable to common stockholders — basic and diluted			$	(0.61)					$	(0.63)					$	(1.75)					$	(1.73)
Weighted-average number of shares of common stock used in net loss per share attributable to common stockholders — basic and diluted			97,641,936						71,753,004						91,173,989						70,129,236

			Common Stock												Additional Paid-in Capital						Accumulated Other Comprehensive Income (Loss)						Accumulated Deficit						Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2020			68,841,288						$	7					$	508,499					$	—					$	(280,419)					$	228,087
Exercise of stock options			148,472						—						764						—						—						764
Vesting of restricted stock units, net of employee tax obligations			61,678						—						(259)						—						—						(259)
Stock-based compensation expense			—						—						4,039						—						—						4,039
Net loss			—						—						—						—						(34,693)						(34,693)
Balance at March 31, 2021			69,051,438						$	7					$	513,043					$	—					$	(315,112)					$	197,938
Issuance of common stock from at-the-market transactions, net of issuance costs of $746			2,271,074						—						33,287						—						—						33,287
Exercise of stock options			42,506						—						202						—						—						202
Purchase of common stock under ESPP			36,198						—						417						—						—						417
Stock-based compensation expense			—						—						4,582						—						—						4,582
Net loss			—						—						—						—						(40,913)						(40,913)
Balance at June 30, 2021			71,401,216						$	7					$	551,531					$	—					$	(356,025)					$	195,513
Exercise of stock options			137,301						—						579						—						—						579
Vesting of restricted stock units			326,882						—						—						—						—						—
Stock-based compensation expense			—						—						4,928						—						—						4,928
Net loss			—						—						—						—						(45,471)						(45,471)
Balance at September 30, 2021			71,865,399						$	7					$	557,038					$	—					$	(401,496)					$	155,549
Balance at December 31, 2021			73,709,056						$	7					$	572,213					$	—					$	(450,479)					$	121,741
Issuance of common stock from at-the-market transactions, net of issuance costs of $1,322			13,169,903						2						60,460						—						—						60,462
Exercise of stock options			26,951						—						96						—						—						96
Vesting of restricted stock units			167,174						—						—						—						—						—
Stock-based compensation expense			—						—						5,485						—						—						5,485
Net loss			—						—						—						—						(47,258)						(47,258)
Balance at March 31, 2022			87,073,084						$	9					$	638,254					$	—					$	(497,737)					$	140,526
Issuance of common stock from at-the-market transactions, net of issuance costs of $941			9,904,964						1						39,898						—						—						39,899
Exercise of common stock warrant			16,654						—						—						—						—						—
Vesting of restricted stock units			17,417						—						—						—						—						—
Purchase of common stock under ESPP			154,235						—						606						—						—						606
Stock-based compensation expense			—						—						5,348						—						—						5,348
Other comprehensive loss			—						—						—						(126)						—						(126)
Net loss			—						—						—						—						(52,219)						(52,219)
Balance at June 30, 2022			97,166,354						$	10					$	684,106					$	(126)					$	(549,956)					$	134,034
Issuance of common stock from at-the-market transactions, net of issuance costs of $251			1,382,631						—						10,626						—						—						10,626
Exercise of stock options			27,348						—						110						—						—						110
Vesting of restricted stock units			6,250						—						—						—						—						—
Stock-based compensation expense			—						—						5,375						—						—						5,375
Other comprehensive loss			—						—						—						(105)						—						(105)
Net loss			—						—						—						—						(59,811)						(59,811)
Balance at September 30, 2022			98,582,583						$	10					$	700,217					$	(231)					$	(609,767)					$	90,229

(unaudited)

			Nine Months Ended September 30,
			2022						2021
Cash flows from operating activities
Net loss			$	(159,288)					$	(121,077)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			645						644
Net amortization of premiums and discounts on marketable securities			(396)						—
Stock-based compensation			16,208						13,549
Other non-cash items			574						119
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			2,459						(4,104)
Other assets			—						(617)
Accounts payable			1,153						(2,429)
Accrued expenses			11,848						16,047
Operating lease right-of-use assets			2,127						1,548
Operating lease liabilities			(1,861)						(1,236)
Deferred revenue			128,397						(32)
Net cash provided by (used in) operating activities			1,866						(97,588)
Cash flows from investing activities
Maturities of marketable securities			54,000						—
Purchase of marketable securities			(159,878)						—
Purchase of property and equipment			(1,412)						(493)
Net cash used in investing activities			(107,290)						(493)
Cash flows from financing activities
Net proceeds from at-the-market facilities			110,954						33,287
Proceeds from exercise of stock options			206						1,545
Proceeds from purchases of common stock under ESPP			606						417
Payment of employee tax obligations related to vesting of restricted stock units			—						(259)
Payments under finance lease obligations			(207)						(139)
Net cash provided by financing activities			111,559						34,851
Increase (decrease) in cash, cash equivalents and restricted cash			6,135						(63,230)
Cash, cash equivalents and restricted cash, beginning of period			178,425						255,415
Cash, cash equivalents and restricted cash, end of period			$	184,560					$	192,185
Supplemental disclosures of non-cash activities:
Purchases of property and equipment in accounts payable and accrued expenses			$	407					$	46
Cash paid for interest			$	1,746					$	187
Right-of-use assets obtained in exchange for operating lease liabilities			$	298					$	3,783
Right-of-use assets obtained in exchange for financing lease liabilities			$	—					$	609

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2022 are consistent with those discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC 820, Fair Value Measurement, establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

The Company assesses its available-for-sale debt securities under the available-for-sale debt security impairment model in ASC 326, Financial Instruments - Credit Losses, as of each reporting date in order to determine if a portion of any decline in fair value below carrying value recognized on its available-for-sale debt securities is the result of a credit loss. The Company records credit losses in the consolidated statements of operations and comprehensive loss as a component of other income (expense), net, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale debt securities.

The Company assessed the GSK Agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that the contract counterparty, GSK, is a customer. The Company identified the following two material performance obligations under the GSK Agreement: (i) development activities, including manufacturing, research and early clinical development activities, necessary to deliver the package of data, information and materials specified in the GSK agreement (the "Development Activities") and (ii) the Option to co-develop and to commercialize Licensed Products (the "License Option").

The Company is recognizing revenue related to the Development Activities performance obligation over the estimated period of the pre-option development using a proportional performance model as the underlying activities are performed. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.

(in thousands)			Balance at Beginning of Period						Additions						Deductions						Balance at End of Period
Nine months ended September 30, 2022
Contract liabilities:
Deferred revenue			$	—					$	100,000					$	655					$	99,345

			Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)			2022						2022
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period			$	—					$	—
Performance obligations satisfied in previous periods			$	—					$	—

(in thousands)			Balance at Beginning of Period						Additions						Deductions						Balance at End of Period
Nine months ended September 30, 2022
Contract liabilities:
Deferred revenue			$	—					$	40,000					$	10,916					$	29,084

			Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)			2022						2022
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period			$	4,908					$	—
Performance obligations satisfied in previous periods			$	—					$	—

(in thousands)			Balance at Beginning of Period						Additions						Deductions						Balance at End of Period
Nine months ended September 30, 2022
Contract liabilities:
Deferred revenue			$	3,944					$	—					$	32					$	3,912

(in thousands)			Balance at Beginning of Period						Additions						Deductions						Balance at End of Period
Nine months ended September 30, 2021
Contract liabilities:
Deferred revenue			$	3,987					$	—					$	32					$	3,955

			Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)			2022						2021						2022						2021
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period			$	11					$	11					$	32					$	32
Performance obligations satisfied in previous periods			$	—					$	—					$	—					$	—

			September 30, 2022
(in thousands)			Total						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds			$	29,509					$	29,509					$	—					$	—
Marketable securities
U.S. treasury securities			$	101,118					$	101,118					$	—					$	—
U.S. government agency securities			$	4,926					$	—					$	4,926					$	—

The carrying amounts reflected in the consolidated balance sheets for prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature.

As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s outstanding borrowing under the New Credit Facility (as defined in Note 7) approximated fair value (a Level 2 fair value measurement), reflecting interest rates currently available to the Company. The New Credit Facility is discussed in more detail in Note 7, Debt.

			Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2021
(in thousands)			Beginning of period						End of period						Beginning of period						End of period
Cash and cash equivalents			$	177,947					$	184,082					$	255,094					$	191,707
Restricted cash included in other assets, noncurrent			478						478						321						478
Total cash, cash equivalents and restricted cash per statement of cash flows			$	178,425					$	184,560					$	255,415					$	192,185

The following table summarizes the Company's marketable securities held at September 30, 2022. The Company had no marketable securities as of December 31, 2021.

			September 30, 2022
(in thousands)			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Marketable securities
U.S. treasury securities			$	101,342					$	4					$	(228)					$	101,118
U.S. government agency securities			$	4,933					$	—					$	(7)					$	4,926

(in thousands)			September 30, 2022						December 31, 2021
Accrued manufacturing expenses			$	13,230					$	8,476
Accrued clinical expenses			10,972						7,879
Accrued research and non-clinical expenses			5,811						3,848
Accrued payroll and related expenses			9,083						7,319
Accrued professional fees			1,822						909
Accrued other			286						285
			$	41,204					$	28,716

On May 8, 2019, the Company entered into a loan and security agreement (the "Prior Credit Facility") with Silicon Valley Bank ("SVB"), which was subsequently amended on June 29, 2019, August 28, 2020, and August 27, 2021. Refer to Note 7, Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding the Prior Credit Facility.

Refer to Note 7, Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding the New Credit Facility. As of September 30, 2022, the Company was in compliance with all covenants under the New Credit Facility. There are no events of default as of September 30, 2022.

(in thousands)			September 30, 2022
Total debt			$	25,000
Less: Current portion of long-term debt			—
Total debt, net of current portion			25,000
Debt financing costs, net of accretion			(345)
Accretion related to final payment			198
Long-term debt, net			$	24,853

			September 30, 2022						December 31, 2021
Stock options			10,524,780						8,342,429
Restricted stock units			1,870,682						817,609
Warrants			22,590						39,474
			12,418,052						9,199,512

A summary of stock option activity is as follows:

			Number of Shares						Weighted- Average Exercise Price
Outstanding at January 1, 2022			8,342,429						$	11.25
Granted			2,765,034						5.41
Exercised			(54,299)						3.81
Cancelled			(528,384)						13.33
Outstanding at September 30, 2022			10,524,780						$	9.65
Vested and expected to vest at September 30, 2022			10,524,780						$	9.65
Exercisable at September 30, 2022			5,339,351						$	8.96

A summary of the RSU activity is as follows:

			Number of Shares
Unvested at January 1, 2022			817,609
Granted			1,379,849
Vested			(190,841)
Forfeited			(135,935)
Unvested at September 30, 2022			1,870,682

The Company uses the provisions of ASC 718, Stock Compensation, to account for all stock-based awards to employees and non-employees.

The following table presents stock-based compensation expense by award type included within the Company’s condensed consolidated statements of operations and comprehensive loss:

			Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)			2022						2021						2022						2021
Stock options			$	3,901					$	3,986					$	11,952					$	10,617
Restricted stock units			1,365						881						3,832						2,636
Employee stock purchase plan			109						61						424						296
Stock-based compensation expense included in total operating expenses			$	5,375					$	4,928					$	16,208					$	13,549

The following table presents stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss:

			Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)			2022						2021						2022						2021
Research and development			$	2,890					$	2,607					$	8,569					$	7,410
General and administrative			2,485						2,321						7,639						6,139
Stock-based compensation expense included in total operating expenses			$	5,375					$	4,928					$	16,208					$	13,549

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Risk-free interest rate			2.9		%				1.0		%				2.0		%				0.8		%
Expected dividend yield			—		%				—		%				—		%				—		%
Expected term (years)			6.11						6.11						5.99						6.05
Expected stock price volatility			94		%				82		%				88		%				83		%

			Three and Nine Months Ended September 30, 2022						Three and Nine Months Ended September 30, 2021
Stock options			10,524,780												8,215,549
Unvested restricted stock units			1,870,682												800,466
Warrants			22,590												39,474
			12,418,052												9,055,489

Upifitamab rilsodotin, or UpRi, our first-in-class ADC targeting the sodium-dependent phosphate transport protein NaPi2b, utilizes the Dolaflexin platform to deliver approximately 10 DolaLock payload molecules per antibody. We believe the NaPi2b antigen is broadly expressed in ovarian cancer and other cancers with limited expression in healthy tissue. We are currently evaluating a 36 mg/m2 dose of UpRi every four weeks in platinum-resistant ovarian cancer in a single-arm registrational trial, which we refer to as UPLIFT. We completed enrollment of approximately 270 patients in UPLIFT in October 2022. The trial's primary endpoint is the objective response rate, or ORR, in the overall population, and secondary endpoints include the ORR in the overall population, as well as duration of objective response and incidence and severity of adverse events. While analysis of patient biopsies is ongoing, we have exceeded our minimum targeted number of NaPi2b positive patients necessary for the primary endpoint analysis. We expect to report top-line data from UPLIFT in mid-2023. If the data from UPLIFT is positive, we are targeting the submission of a potential biologics licensing application, or BLA, in platinum-resistant ovarian cancer to the U.S. Food and Drug Administration, or FDA, by the end of 2023.

We are also conducting a randomized, placebo-controlled Phase 3 clinical trial, referred to as UP-NEXT, to investigate a 30 mg/m2 dose of UpRi as a single-agent maintenance treatment in patients with recurrent platinum-sensitive ovarian cancer that have high NaPi2b expression. We believe the UP-NEXT trial, if successful, could serve as a post-approval confirmatory trial in the United States, support one or more applications for marketing approval outside of the United States, and support UpRi's expansion into earlier lines of therapy.

•continue clinical development activities for UpRi, XMT-1660 and XMT-2056;

•prepare for a potential BLA submission for UpRi by the end of 2023;

•continue diagnostic development efforts with respect to the NaPi2b biomarker;

•continue activities to discover, validate and develop additional product candidates, including XMT-2068 and XMT-2175;

•maintain, expand and protect our intellectual property portfolio; and

•hire additional research, development, general and administrative and commercial personnel.

•We are currently enrolling patients at clinical sites in different geographic areas around the world in our ongoing clinical trials, though staffing constraints have been an increasing challenge for the clinical sites with which we work. If staffing challenges persist, we may experience associated delays in trial enrollment. We are in the process of initiating additional clinical sites both inside and outside the United States to increase enrollment that we believe could also mitigate this potential risk. Consistent with FDA guidance, we allow for remote patient monitoring and remote testing, when reasonably possible.

•To the best of our knowledge, our contract research and manufacturing partners continue to operate their facilities at or near normal levels, though staffing constraints and sourcing of raw and other materials have been an increasing challenge for our vendors. If staffing and/or material sourcing challenges continue, we may experience associated delays in our laboratory, clinical or manufacturing services. We believe we currently have appropriate service support and sufficient inventory of UpRi, XMT-1660 and XMT-2056 to support our ongoing and planned clinical trials. We have planned research, clinical and manufacturing activities to address all currently anticipated future needs. We continue to monitor the research, clinical and manufacturing operations of our vendors.

•employee-related expenses, including salaries, benefits and stock-based compensation expense;

•costs of funding research and development performed by third parties that conduct research, preclinical activities, manufacturing and clinical trials on our behalf;

•laboratory supplies;

•facility costs, including rent, depreciation and maintenance expenses; and

•upfront and milestone payments under our third-party licensing agreements.

We incur significant external costs for manufacturing our product candidates and platforms and for clinical research organizations that conduct clinical trials on our behalf. We capture these external expenses for each product candidate in clinical development. Costs for our platforms with an associated product candidate in clinical development are typically allocated to our most clinically advanced product candidate based on that platform. In light of our decision to discontinue further clinical development of XMT-1592 in the second quarter of 2022, all costs associated with our Dolasynthen platform have been re-allocated to XMT-1660, which is now our lead Dolasynthen-based product candidate. All external research and development expenses not attributable to our product candidates in clinical development are captured within preclinical and discovery costs. These costs relate to our product candidates XMT-2068 and XMT-2175 and additional earlier discovery stage programs and certain unallocated costs. The following table summarizes our external research and development expenses, presented by program as described above, for each of the three and nine month periods ended September 30, 2022 and 2021.

			Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)			2022						2021						2022						2021
UpRi external costs			$	23,999					$	14,688					$	48,023					$	34,736
XMT-1592 external costs			409						2,905						3,198						7,049
XMT-1660 external costs			4,158						—						10,879						—
XMT-2056 external costs			2,334						—						2,334						—
Preclinical and discovery costs			2,040						5,220						13,265						17,079
Internal research and development costs			17,699						12,462						49,977						35,781
Total research and development costs			$	50,639					$	35,275					$	127,676					$	94,645

•successful completion of preclinical studies and IND-enabling studies;

•successful enrollment in and completion of clinical trials;

•receipt of marketing approvals from applicable regulatory authorities;

•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

•commercializing the product candidates, if and when approved, whether alone or in collaboration with others; and

•continued acceptable safety profile of the drugs following approval.

			Three Months Ended September 30,												Dollar Change
(in thousands)			2022						2021
Collaboration revenue			$	5,573					$	11					$	5,562
Operating expenses:
Research and development			50,639						35,275						15,364
General and administrative			14,573						10,124						4,449
Total operating expenses			65,212						45,399						19,813
Other income (expense):
Interest income			708						15						693
Interest expense			(880)						(98)						(782)
Total other income (expense), net			(172)						(83)						(89)
Net loss			$	(59,811)					$	(45,471)					$	(14,340)

•an increase of $9.4 million related to manufacturing and clinical development activities for UpRi;

•an increase of $4.2 million related to employee compensation (excluding stock-based compensation), primarily due to an increase in headcount supporting the growth of our research and development activities;

•an increase of $1.1 million related to manufacturing and development activities for XMT-2056;

•an increase of $1.0 million related to consulting and professional fees; and

•an increase of $0.7 million related to clinical development activities for XMT-1660.

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

			Nine Months Ended September 30,												Dollar Change
(in thousands)			2022						2021
Collaboration revenue			$	11,893					$	32					$	11,861
Operating expenses:
Research and development			127,676						94,645						33,031
General and administrative			42,158						26,214						15,944
Total operating expenses			169,834						120,859						48,975
Other income (expense):
Interest income			1,017						36						981
Interest expense			(2,364)						(286)						(2,078)
Total other income (expense), net			(1,347)						(250)						(1,097)
Net income (loss)			$	(159,288)					$	(121,077)					$	(38,211)

•an increase of $14.3 million related to manufacturing and clinical development activities for UpRi;

•an increase of $10.6 million related to employee compensation (excluding stock-based compensation), primarily due to an increase in headcount supporting the growth of our research and development activities;

•an increase of $2.5 million related to manufacturing and development activities for XMT-2056;

•an increase of $1.9 million related to clinical development activities for XMT-1660;

•an increase of $1.7 million related to manufacturing activities for XMT-1660 and the Dolasynthen platform; and

•an increase of $0.9 million related to consulting and professional fees.

The following table provides information regarding our cash flows for the nine months ended September 30, 2022 and 2021:

			Nine Months Ended September 30,
(in thousands)			2022						2021
Net cash provided by (used in) operating activities			$	1,866					$	(97,588)
Net cash used in investing activities			(107,290)						(493)
Net cash provided by financing activities			111,559						34,851
Increase (decrease) in cash, cash equivalents and restricted cash			$	6,135					$	(63,230)

•the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

•the scope, prioritization and number of our research and development programs;

•the costs, timing and outcome of regulatory review of our product candidates;

•our ability to establish and maintain collaborations on favorable terms, if at all;

•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we obtain;

•the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•the extent to which we acquire or in-license other product candidates and technologies;

•the costs of securing manufacturing arrangements for clinical and commercial production; and

•the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.

•delays in reaching a consensus with regulatory agencies on trial design;

•delays in reaching, or failing to reach, agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;

•difficulties in obtaining required Institutional Review Board, or IRB, or Ethics Committee, or EC, approval at each clinical trial site;

•challenges in recruiting and enrolling suitable patients to participate in clinical trials that meet the criteria of the protocol for the clinical trial;

•imposition of a clinical hold by regulatory agencies, IRBs or ECs for any reason, including safety concerns or after an inspection of clinical operations or trial sites;

•delays in necessary screenings caused by third parties with which we or any of our vendors or suppliers contract;

•failure by CROs, other third parties or us to adhere to clinical trial requirements;

•failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines in other countries;

•inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical trials, including, for example, delays in the testing, validation, manufacturing or delivery of the product candidates to the clinical sites;

•patients not completing participation in a trial or not returning for post-treatment follow-up, including as a result of the ongoing COVID-19 pandemic;

•expected or unexpected safety issues, including occurrence of SAEs, associated with any product candidate in clinical trials that are viewed as outweighing the product candidate’s potential benefits or reports that may arise from preclinical or clinical testing of other similar cancer therapies that raise safety or efficacy concerns about our product candidates;

•changes in regulatory requirements or guidance that require amending or submitting new clinical protocols or submitting additional data;

•lack of adequate funding to continue one or more clinical trials; or

•geopolitical or other events, including the ongoing COVID-19 pandemic and the current conflict between Russia and Ukraine, that unexpectedly disrupt, delay or generally interfere in regional or worldwide operations of our clinical trial sites or CROs or other operations applicable to the conduct of relevant development activities.

•the size and nature of the patient population;

•the severity of the disease under investigation;

•the nature and complexity of the trial protocol, including eligibility criteria for the trial;

•the design of the trial;

•the number of clinical trial sites and the proximity of patients to those sites;

•the standard of care in the diseases under investigation;

•the ability and commitment of clinical investigators to identify eligible patients;

•clinicians’ and patients’ perceptions of the potential advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

•the risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they are late-stage cancer patients, that they will not survive the full terms of the clinical trials;

•the ability of our clinical trial sites to continue key activities, such as clinical trial site data monitoring and patient visits, due to factors related to the ongoing COVID-19 pandemic or other worldwide events; and

•the risk that patients may be affected by COVID-19 or measures taken in response to the COVID-19 pandemic and may be unable to travel to our clinical trial sites.