mtem-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

☐	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: 001-32979

Molecular Templates, Inc.

(Exact name of registrant as specified in its charter)

Delaware

94-3409596

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9301 Amberglen Blvd

Suite 100

Austin, TX 78729

(Address of principal executive offices)

78729

(Zip Code)

(512) 869-1555

(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, $0.001 Par Value Per Share		MTEM		The Nasdaq Capital Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

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

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

On August 4, 2020, there were 49,919,267 shares of common stock, par value $0.001 per share, of Molecular Templates, Inc. outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements, other than statements of historical facts contained herein, regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. These forward-looking statements include, but are not limited to, statements about:

•

the implementation of our business strategies, including our ability to pursue development pathways and regulatory strategies for MT-3724 and other engineered toxin body (“ETB”) biologic candidates;

•

the timing and our ability to advance the development of our drug or biologic candidates;

•

our plans to pursue discussions with regulatory authorities, and the anticipated timing, scope and outcome of related regulatory actions or guidance;

•

our ability to establish and maintain potential new partnering or collaboration arrangements for the development and commercialization of ETB biologic candidates;

•

our financial condition, including our ability to obtain the funding necessary to advance the development of our drug or biologic candidates;

•

the anticipated progress of our drug or biologic candidate development programs, including whether our ongoing and potential future clinical trials will achieve clinically relevant results;

•

our ability to generate data and conduct analyses to support the regulatory approval of our drug or biologic candidates;

•

our ability to establish and maintain intellectual property rights for our drug or biologic candidates;

•

whether any drug or biologic candidates that we are able to commercialize are safer or more effective than other marketed products, treatments or therapies;

•

our ability to discover and develop additional drug or biologic candidates suitable for clinical testing;

•

our ability to identify, in-license or otherwise acquire additional drug or biologic candidates and development programs;

•

our anticipated research and development activities and projected expenditures;

•

our ability to complete preclinical and clinical testing successfully for new drug or biologic candidates that we may develop or license;

•

our ability to have manufactured active pharmaceutical ingredient, or API, and drug or biologic product that meet required release and stability specifications;

•

our ability to have manufactured sufficient supplies of drug product for clinical testing and commercialization;

•

our ability to obtain licenses to any necessary third-party intellectual property;

•

our anticipated use of proceeds from any financing activities;

•

our ability to retain and hire necessary employees and appropriately staff our development programs;

•

the extent to which COVID-19 will continue to impact our business operations or financial condition;

•

our projected financial performance; and

•

the sufficiency of our cash resources; and other risks and uncertainties, including those listed under Part I, Item 1A, “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future 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. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the incidence and prevalence of certain medical conditions. 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 reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data 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.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise indicates, references to “Molecular,” the “Company,” “we,” “our,” “us” or similar terms refer to Molecular Templates, Inc., and our wholly owned subsidiaries.

Molecular Templates, Inc.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION		4
Item 1.	Financial Statements		4
	Condensed Consolidated Balance Sheets (Unaudited)		4
	Condensed Consolidated Statements of Operations (Unaudited)		5
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited)		6
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)		7
	Condensed Consolidated Statements of Cash Flows (Unaudited)		8
	Notes to Condensed Consolidated Financial Statements (Unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		35
PART II.	OTHER INFORMATION		36
Item 1	Legal Proceedings		36
Item 1A.	Risk Factors		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		79
Item 3.	Defaults Upon Senior Securities		79
Item 4.	Mine Safety Disclosures		79
Item 5.	Other Information		79
Item 6.	Exhibits		80
SIGNATURES			81

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Molecular Templates, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	June 30, 2020 (unaudited)			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	27,645		$	85,451
Marketable securities, current		63,361			39,633
Prepaid expenses		3,347			2,318
Grants revenue receivable		5,900			7,100
Accounts receivable, related party		3,167			408
In-process research and development - held for sale		4,500			4,500
Other current assets		160			489
Total current assets		108,080			139,899
Marketable securities, non-current		—			1,510
Operating lease right-of-use assets, non-current		9,266			9,959
Property and equipment, net		20,224			18,158
Other assets		4,840			4,676
Total assets	$	142,410		$	174,202
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,660		$	1,465
Accrued liabilities		14,129			14,544
Deferred revenue, current		13,284			8,511
Deferred revenue, current, related party		5,218			8,780
Other current liabilities, related party		5,325			—
Other current liabilities		1,785			2,501
Total current liabilities		41,401			35,801
Deferred revenue, long-term		9,728			18,944
Deferred revenue, long-term, related party		1,849			441
Long-term debt, net		14,721			2,940
Operating lease liabilities, non-current		10,771			11,682
Other liabilities, related party		6,654			—
Other liabilities		1,427			1,366
Total liabilities		86,551			71,174
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.001 par value:
Authorized: 2,000,000 shares at June 30, 2020 and December 31, 2019; issued and outstanding: 250 shares at June 30, 2020 and December 31, 2019		—			—
Common stock, $0.001 par value:
Authorized: 150,000,000 shares at June 30, 2020 and December 31, 2019; issued and outstanding: 45,778,876 shares at June 30, 2020 and 45,589,157 shares at December 31, 2019		46			46
Additional paid-in capital		273,012			267,089
Accumulated other comprehensive income		172			18
Accumulated deficit		(217,371	)		(164,125	)
Total stockholders’ equity		55,859			103,028
Total liabilities and stockholders’ equity	$	142,410		$	174,202

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

Molecular Templates, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Research and development revenue, related party	$	3,063		$	5,211		$	3,396		$	11,624
Research and development revenue, other		2,977			—			4,444			—
Grant revenue		869			236			3,210			831
Total revenue		6,909			5,447			11,050			12,455
Operating expenses:
Research and development		30,414			10,243			51,045			18,697
General and administrative		6,412			4,605			12,059			9,540
Total operating expenses		36,826			14,848			63,104			28,237
Loss from operations		29,917			9,401			52,054			15,782
Interest and other income, net		286			543			758			1,053
Interest and other expense, net		(360	)		(301	)		(708	)		(594	)
Loss on extinguishment of debt		(1,237	)		—			(1,237	)		—
Change in fair value of warrant liabilities		—			6			—			2
Loss before provision for income taxes		31,228			9,153			53,241			15,321
Provision for income taxes		—			—			5			—
Net loss		31,228			9,153			53,246			15,321
Net loss attributable to common shareholders	$	31,228		$	9,153		$	53,246		$	15,321
Net loss per share attributable to common shareholders:
Basic and diluted	$	0.68		$	0.25		$	1.17		$	0.42
Weighted average number of shares used in net loss per share calculations:
Basic and diluted		45,725,481			36,819,846			45,687,278			36,779,638

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

Molecular Templates, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020		2019
Net loss	$	31,228		$	9,153	$	53,246	$	15,321
Other comprehensive income:
Unrealized gain on available-for-sale securities		(110	)		25		154		25
Comprehensive loss	$	31,338		$	9,128	$	53,092	$	15,296

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

MOLECULAR TEMPLATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Total Stockholders' Equity (Deficit), beginning balances	$	83,766		$	96,137		$	103,028		$	100,906

Preferred Stock:
Beginning balance		—			—			—			—
Issuance of preferred stock		—			—			—			—
Ending balance		—			—			—			—

Common Stock:
Beginning balance		46			37			46			37
Issuance of common stock pursuant to stock plans		—			—			—			—
Ending balance		46			37			46			37

Additional Paid-In Capital
Beginning balance		269,581			196,972			267,089			195,573
Issuance of common stock pursuant to stock plans		381			809			681			847
Stock-based compensation		3,050			1,442			5,242			2,803
Ending balance		273,012			199,223			273,012			199,223

Accumulated Other Comprehensive Income:
Beginning balance		282			—			18			—
Other comprehensive income		(110	)		25			154			25
Ending balance		172			25			172			25

Accumulated deficit:
Beginning balance		(186,143	)		(100,872	)		(164,125	)		(94,704	)
Net loss		(31,228	)		(9,153	)		(53,246	)		(15,321	)
Ending balance		(217,371	)		(110,025	)		(217,371	)		(110,025	)

Total Stockholders' Equity	$	55,859		$	89,260		$	55,859		$	89,260

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

Molecular Templates, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	53,246		$	15,321
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and other		1,318			301
Stock-based compensation expense		5,242			2,803
Amortization of debt discount and accretion related to debt		243			221
Change in common stock warrant fair value		—			(2	)
Accretion of asset retirement obligations		62			25
Loss on extinguishment of debt		1,237			—
Changes in operating assets and liabilities:
Prepaid expenses		(1,029	)		(14	)
Accounts receivable, related party		(2,759	)		240
Grants revenue receivable		1,200			—
Other assets		364			(763	)
Operating lease right-of-use assets and liabilities		(122	)		678
Accounts payable		149			862
Accrued liabilities		(514	)		1,098
Other liabilities		—			(330	)
Other liabilities, related party		11,979			—
Deferred revenue		(4,443	)		—
Deferred revenue, related party		(2,154	)		(12,676	)
Net cash used in operating activities		(42,473	)		(22,878	)
Cash flows from investing activities:
Purchases of property and equipment		(3,429	)		(1,121	)
Purchase of marketable securities		(60,171	)		(55,659	)
Sales of marketable securities		38,323			10,893
Net cash used in investing activities		(25,277	)		(45,887	)
Cash flows from financing activities:
Payments of capital and finance lease obligations		(13	)		(8	)
Proceeds from issuance of long-term debt and warrants, net		14,677			—
Repayment of long-term debt		(5,176	)		—
Proceeds from stock option exercises		681			847
Proceeds from issuance of common stock and warrants, net of offering expenses		—			—
Net cash provided by financing activities		10,169			839
Net (decrease) in cash, cash equivalents, and restricted cash		(57,581	)		(67,926	)
Cash, cash equivalents and restricted cash, beginning of period		88,451			87,721
Cash, cash equivalents and restricted cash, end of period	$	30,870		$	19,795
Reconciliation of cash, cash equivalents and restricted cash