Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a clinical stage biopharmaceutical company pioneering the discovery, development and commercialization of allogeneic, off-the-shelf invariant natural killer T (“iNKT”) cell therapies to treat cancer and other immune-mediated diseases. iNKT cells are a distinct T cell population that combine durable memory responses with the rapid cytolytic features of natural killer (“NK”) cells. iNKT cells offer distinct therapeutic advantages as a platform for allogeneic therapy in that the cells naturally home to tissues, aid clearance of tumors and infected cells and suppress Graft versus Host Disease (“GvHD”). Our proprietary platform is designed to facilitate scalable and reproducible manufacturing for off-the-shelf delivery. As such, we believe that our approach represents a highly versatile application for therapeutic development in cancer and immune diseases. We are leveraging our platform and manufacturing capabilities to develop a wholly owned or exclusively licensed pipeline of both native and engineered iNKT cells.
Our business activities include product research and development, manufacturing, regulatory and clinical development, corporate finance and support of our collaborations. To be successful, our product candidates require clinical trials and approvals from regulatory agencies, as well as acceptance in the marketplace. We are a party to an Intercompany General & Administrative Services Agreement and an Intellectual Property Assignment and License Agreement with Agenus. Under the Intercompany General & Administrative Services Agreement, Agenus provides us with administrative support, including, without limitation, financial, legal, information technology and human resources administrative support. Additional non-administrative services and use of certain facilities are available as may be agreed to between the parties from time to time. Under the Intellectual Property Assignment and License Agreement, Agenus exclusively assigned patent rights and know-how related to our technology to us. We also have a field-limited exclusive license under certain Agenus patents and know-how; and we retain the rights to expand a proprietary pipeline of products and technologies.
Our most advanced product cancer, AGENT-797, is an off-the-shelf, allogeneic, native iNKT cell therapy. We have commenced a Phase 1 clinical trial of AGENT-797 for the treatment of multiple myeloma, reported preliminary signals of activity, and expect to report data from this trial in the fourth quarter of 2022. In addition, we announced the initiation of our Phase 1 clinical trial for the study of solid tumor cancers with AGENT-797 as a monotherapy and in combination with checkpoint inhibitors, which we intend to advance as a priority. We currently expect to have preliminary readouts from this clinical trial in 2022 in indications that may lead to an accelerated path to marketing approval. We also intend to initiate a Phase 1 study of AGENT-797 in GvHD in 2022 and expect to report top-line data from this trial in the second half of 2022. Finally, with the unique circumstances of the COVID-19 pandemic, we were able to commence first-in-human studies of AGENT-797 in ARDS secondary to COVID-19 and reported encouraging survival benefit exceeding 75% presented at the Society of Immunotherapy for Cancer (“SITC”) in 2021. Later this year, we expect to present updated data of the clinical effect of AGENT-797 on viral ARDS where there are currently no effective therapies.
In addition, we are advancing a pipeline of next-generation allogeneic, engineered iNKT programs. Our two most advanced engineered programs are (1) a CAR-iNKT program targeting B-cell maturation antigen (“BCMA”), which we refer to as BCMA-CAR-iNKT, and (2) a tumor stromal targeting CAR-iNKT program, which we refer to as stromal target-CAR-iNKT. These programs are both in preclinical development and we expect to initiate our investigational new drug (“IND”) filings for these candidates in 2022.
Our research and development expenses for the years ended December 31, 2021 and 2020 were $14.0 million and $9.5 million, respectively. We have incurred losses since our inception. As of December 31, 2021, we had an accumulated deficit of $82.9 million.
Until the completion of our initial public offering, we were reliant on Agenus to finance our operations. We expect to continue to incur operating losses and negative cash flows for the foreseeable future. Based on our current plans and projections, we believe our year-end cash balance will be sufficient to satisfy our liquidity requirements for more than one year from when these financial statements were issued. Management continues to address our liquidity position and will adjust spending as needed in order to preserve liquidity. Our future liquidity needs will be determined primarily by the success of our operations with respect to the progress of our product candidates and key development and regulatory events in the future. Potential sources of additional funding include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for our portfolio programs and product candidates with one or more third parties, (2) securing additional debt financing and/or (3) selling equity securities.
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Historical Results of Operations
For the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Research and development (“R&D”) expense
R&D expense includes compensation and other direct costs plus an allocation of indirect costs, based on certain assumptions. R&D expense increased 47% to $14.0 million for the year ended December 31, 2021 from $9.5 million for the year ended December 31, 2020. This increase is primarily due to costs associated with an increase in preclinical activities, the initiation of our clinical trials late in 2020, increased costs associated with the allocation of Agenus services and the increased activity of our UK subsidiary.
General and administrative (“G&A”) expense
G&A expense consists primarily of personnel costs, facility expenses, and professional fees. G&A expense increased 260% to $4.6 million for the year ended December 31, 2021 from $1.3 million for the year ended December 31, 2020. This increase results primarily from increased professional fees, including increased legal and audit fees, increased stock-based compensation expense and increased costs associated with the allocation of Agenus services.
Change in fair value of convertible affiliated note
Change in fair value of convertible affiliated note reflects the result of our fair value measurement of our convertible affiliated note issued to Agenus (the “Note”) at the balance sheet date. In October 2021, in connection with our initial public offering, the Note was automatically converted into 5,451,958 shares of our common stock and was not outstanding as of December 31, 2021.
Interest expense
Interest expense related to the Note was $2.4 million for both of the years ended December 31, 2021 and 2020. In October 2021, in connection with our initial public offering, the Note was automatically converted into 5,451,958 shares of our common stock and was not outstanding as of December 31, 2021.
Research and Development Programs
R&D program costs include compensation and other direct costs plus an allocation of indirect costs, based on certain assumptions.
For the years ended December 31,
Our product candidates are in various stages of development and significant additional expenditures will be required if we start new clinical trials, encounter delays in our programs, apply for regulatory approvals, continue development of our technologies, expand our operations and/or bring our product candidates to market. The total cost of any particular clinical trial is dependent on a number of factors such as trial design, length of the trial, number of clinical sites, number of patients and trial sponsorship. The process of obtaining and maintaining regulatory approvals for new products is lengthy, expensive and uncertain. Because of the current stage of our product candidates, among other factors, we are unable to reliably estimate the cost of completing our research and development programs or the timing for bringing such programs to various markets or substantial partnering or out-licensing arrangements, and, therefore, when, if ever, material cash inflows are likely to commence.
Liquidity and Capital Resources
We have incurred annual operating losses since inception, and we had an accumulated deficit of $82.9 million as of December 31, 2021. We expect to incur losses over the next several years as we continue development of our technologies and product candidates, manage our regulatory processes, initiate and continue clinical trials, and prepare for potential commercialization of products.
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In October 2021, we completed an initial public offering of 3,333,334 shares of our common stock, at a public offering price of $12.00 per share. The gross proceeds from the offering, before deducting underwriting discounts, commissions and other offering expenses, were approximately $46.0 million, which includes the exercise of the underwriters option to acquire an additional 500,000 shares at the public offering price, which shares were delivered in November 2021. Underwriting discounts, commissions and other offering expenses, were approximately $6.2 million, resulting in net proceeds of approximately $39.8 million.
Prior to our initial public offering, we had been reliant on Agenus to finance our operations. From our inception through our initial public offering in October 2021, we received funding of $45.5 million from Agenus through the Note. The Note had a $45.5 million principal balance, plus accrued and unpaid interest of $6.8 million. In connection of the completion of our initial public offering, the Note was automatically converted into 5,451,958 shares of our common stock and was not outstanding as of December 31, 2021.
In December 2018, we entered into an agreement with the Belgium Walloon Region Government (the “Walloon Region”) in which the Walloon Region agreed to provide a grant of €1.3 million and a repayable advance of €8.3 million for the development of one of our research programs. As of December 31, 2021, we received $881,000 of the grant portion and $5.3 million of the repayable advance. During 2020, we discontinued research efforts related to this program and are evaluating our options in accordance with the terms of the agreement. We recognized the grant portion received as income during the years ended December 31, 2019 and 2020 and have included the repayable advance balance of $5.3 million in other current liabilities in our condensed consolidated balance sheet at December 31, 2021, while we finalize the termination of the agreement with the Walloon Region. We received a notice from the Walloon Region in February 2021 informing us that, pursuant to the terms of the agreement, they have assumed we plan to exploit the results of our research under the program and as such expect us to reimburse the repayable advance, and we have responded to the Walloon Region that we do not plan to exploit the results of such research. It is uncertain at this time if we will be obligated to repay any or all of this advance.
Our cash balance as of December 31, 2021 was $38.9 million. Based on our current plans and projections we believe this cash balance will be sufficient to satisfy our liquidity requirements for more than one year from when these financial statements were issued.
Management continues to address our liquidity position and will adjust spending as needed in order to preserve liquidity. Our future liquidity needs will be determined primarily by the success of our operations with respect to the progression of our product candidates and key development and regulatory events in the future. Potential sources of additional funding include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for our portfolio programs and product candidates with one or more third parties, (2) securing additional debt financing and/or (3) selling equity securities.
Net cash used in operating activities for the years ended December 31, 2021 and 2020 was $12.8 million and $8.3 million, respectively. Our future ability to generate cash from operations will depend on achieving regulatory approval and market acceptance of our product candidates, and our ability to enter into collaborations. Please see the “Note Regarding Forward-Looking Statements” of this Annual Report on Form 10-K and the risks highlighted under Part I-Item 1A. “Risk Factors” of this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
The SEC defines “critical accounting policies” as those that require the application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base those estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Our significant accounting policies are described in Note 2 of the notes to our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K. In many cases, the accounting treatment of a particular transaction is dictated by U.S. GAAP, with no need for our judgment in its application. There are also areas in which our judgment in selecting an available alternative would not produce a materially different result.
Recent Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements included within Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.
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JOBS Act
We qualify as an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company earlier if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. We may choose to take advantage of some, but not all, of the available exemptions.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This item is not required for smaller reporting companies.
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Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm 74
Consolidated Balance Sheet as of December 31, 2021 and 2020 75
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
MiNK Therapeutics, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of MiNK Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2020.
Boston, Massachusetts
March 18, 2022
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MiNK THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Other long-term liabilities — 383,058
Commitments and contingencies
Stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit) $ 40,241,505 $ 4,555,178
See accompanying notes to consolidated financial statements.
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MiNK THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For the Year Ended December 31,
Operating expenses:
Change in fair value of convertible affiliated note 9,752,295 3,840,475
Other expense, net:
Gain on extinguishment of debt 355,515 —
Per common share data:
Basic and diluted net loss per common share $ (1.16 ) $ (0.67 )
Other comprehensive gain (loss)
See accompanying notes to consolidated financial statements.
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MiNK THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2021
Common Stock
Grant and recognition of stock options — — 1,368 — — 1,368
Recognition of parent stock options — — 86,461 — — 86,461
Forfeiture of restricted stock (27,830 ) — (100 ) — — (100 )
See accompanying notes to consolidated financial statements.
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MiNK THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on extinguishment of debt (355,515 ) —
Change in fair value of convertible affiliated note 9,752,295 3,840,475
Changes in operating assets and liabilities:
Repayable advance received — 1,801,793
Cash flows from investing activities:
Net cash used in investing activities (248,983 ) (95,212 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt — 355,515
Proceeds from option exercises 150 900
Effect of exchange rate changes on cash 16,899 (281,176 )
Supplemental disclosures - non-cash activities:
Insurance financing agreement 643,000 —
See accompanying notes to consolidated financial statements.
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MiNK THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of Business
MiNK Therapeutics, Inc. (“MiNK” or the “Company”) is a clinical stage biopharmaceutical company focused on developing allogeneic invariant natural killer T (“iNKT”) cell therapies to treat cancer and other life-threatening illnesses.
The Company has incurred losses since inception and, as of December 31, 2021, had an accumulated deficit of $82.9 million. Since inception until the completion of the Company’s initial public offering (“IPO”), the Company financed its operations primarily through funding from Agenus Inc. (“Agenus”), its parent company. MiNK expects to continue incurring operating losses and negative cash flows for the foreseeable future. Based on the Company’s current plans and projections, MiNK believes its cash balance as of December 31, 2021 of $38.9 million will be sufficient to satisfy its liquidity requirements for more than one year from when these financial statements were issued.
Management continually addresses the Company’s liquidity position and adjusts spending as needed in order to preserve liquidity. The Company’s future liquidity needs will be determined primarily by the success of its operations with respect to the progression of the Company’s product candidates and key development and regulatory events in the future. Potential sources of additional funding for the Company include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for the Company’s portfolio programs and product candidates with one or more third parties, (2) securing additional debt financing and/or (3) selling equity securities.
MiNK’s product candidates are in various stages of development and significant additional expenditures will be required if the Company starts new trials, encounters delays in its programs, applies for regulatory approvals, continues development of its technologies, expands its operations, and/or brings its product candidates to market. The eventual total cost of each clinical trial is dependent on a number of factors such as trial design, length of the trial, number of clinical sites, and number of patients. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive, and uncertain. Because all of the Company’s programs are at an early stage of clinical development, the Company is unable to reliably estimate the cost of completing its research and development programs or the timing for bringing such programs to various markets or substantial partnering or out-licensing arrangements, and, therefore, when, if ever, material cash inflows are likely to commence.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of MiNK and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
(b) Segment Information
MiNK is managed and operated as one business segment. The entire business is managed by a single executive operating committee that reports to the chief executive officer. The Company does not operate separate lines of business with respect to any of its product candidates or geographic locations. Accordingly, the Company does not prepare discrete financial information with respect to separate product areas or by location and does not have separately reportable segments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting.
(c) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases those estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
(d) Equipment
Equipment is carried at cost, $607,000 and $458,000 at December 31, 2021, and 2020, respectively. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, typically 4-10 years. Additions are capitalized, while repairs and
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maintenance are charged to expense as incurred. Depreciation expense was $78,000 and $55,000, for the years ended December 31, 2021 and 2020, respectively.
(e) Fair Value Option
Under the Fair Value Option subsection of ASC Subtopic 825-10, Financial Instruments – Overall, the Company has the irrevocable option to report most financial assets and liabilities at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. The Company elected to report the convertible affiliated note it issued to Agenus on July 1, 2020 (the “Note”) at fair value. The fair value of the Note was determined on a scenario based present value methodology. In connection with the Company’s IPO, the Note was automatically converted into 5,451,958 shares of the Company’s common stock and was not outstanding as of December 31, 2021. The outstanding principal amount of the Note was $36.1 million at December 31, 2020.
(f) Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
The Company’s cash and the Note are carried at fair value (a Level 1 measurement and Level 2 measurement, respectively), determined according to the fair value hierarchy described above (see Note 12). The carrying values of the Company’s, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.
(g) Foreign Currency Transactions
Gains and losses from the Company’s foreign currency-based accounts and transactions, such as those resulting from the translation and settlement of receivables and payables denominated in foreign currencies, are included in the consolidated statements of operations within other income (expense). The Company does not currently use derivative financial instruments to manage the risks associated with foreign currency fluctuations. The Company recorded foreign currency losses of $407,000 for the year ended December 31, 2021 and foreign currency gains of $487,000 for the year ended December 31, 2020.
(h) Research and Development
Research and development expenses include the costs associated with the Company’s internal research and development activities, including salaries and benefits, share-based compensation, occupancy costs, clinical manufacturing costs, related administrative costs and research and development conducted for the Company by outside advisors. Research and development expenses also include the cost of clinical trial materials shipped to the Company’s research partners. Research and development costs are expensed as incurred.
(i) Share-Based Compensation
MiNK accounts for share-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation. Share-based compensation expense is recognized based on the estimated grant date fair value. Compensation cost is recognized on a straight-line basis over the requisite service period of the award. Forfeitures are recognized as they occur. See Note 8 for further discussion on share-based compensation.
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(j) Income Taxes
The Company’s operations were historically included in the consolidated U.S. Federal and state income tax returns of Agenus. The provision for income taxes has been determined based on the separate return method for the period presented. Income taxes are accounted for under the asset and liability method with deferred tax assets and liabilities recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which such items are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment date. Deferred tax assets are recognized when they are more likely than not expected to be realized.
(k) Net Loss Per Share
Basic income and loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding plus the dilutive effect of outstanding instruments such as stock options. Because the Company reported a net loss attributable to common stockholders for all periods presented, diluted loss per common share is the same as basic loss per common share, as the effect of utilizing the fully diluted share count would have reduced the net loss per common share. Therefore, the following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of December 31, 2021 and 2020, as they would be anti-dilutive:
(l) Recent Accounting Pronouncements
Recently Issued and Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): simplifying the Accounting for Income Taxes. This ASU enhances and simplifies multiple aspects of the income tax accounting guidance in ASC 740. The Company adopted the standard on January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.
No other new accounting pronouncement issued or effective during the year ended December 31, 2021 had or is expected to have a material impact on the Company’s consolidated financial statements or disclosures.
(3) Other Current Assets
Other current assets consist of the following as of December 31, 2021 and 2020 (in thousands):
December 31,
VAT receivable $ 23 $ 20
Insurance recovery — 234
Deferred offering costs — 539
(4) Equipment
Equipment, net, consist of the following as of December 31, 2021 and 2020 (in thousands):
December 31,
Less accumulated depreciation (169 ) (98 )
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(5) Income Taxes
The Company is subject to taxation in the United States and in various state, local and foreign jurisdictions. The Company remains subject to examination by U.S. Federal, state, local and foreign tax authorities for tax years 2018 through 2021. With few exceptions, the Company is no longer subject to U.S. Federal state, and foreign examinations by tax authorities for the tax year 2017. However, net operating losses from the tax year 2017 would be subject to examination if and when used in a future tax return to offset taxable income. The Company’s policy is to recognize income tax related penalties and interest, if any, in its provision for income taxes and, to the extent applicable, in the corresponding income tax assets and liabilities, including any amounts for uncertain tax positions.
As of December 31, 2021, the Company had available net operating loss carryforwards of $45.1 million for Federal and state income tax purposes, which are available to offset future Federal and state taxable income, if any. $44.9 million of these Federal net operating loss carryforwards do not expire, while the remaining net operating loss carryforwards expire in 2037. The Company’s ability to use these net operating losses is limited by change of control provisions under Internal Revenue Code Section 382 and may expire unused. The Company also has foreign net operating loss carryforwards, which do not expire, available to offset future foreign taxable income of $11.2 million generated in the United Kingdom and $11.8 million in Belgium. The potential impacts of such provisions are among the items considered and reflected in the Company’s assessment of its valuation allowance requirements.
The tax effect of temporary differences and net operating loss carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2021 and 2020 are presented below (in thousands).
December 31,
Deferred tax assets:
U.S. Federal and state net operating loss carryforwards $ 12,356 $ 6,923
Foreign net operating loss carryforwards 5,641 4,349
Share-based compensation 472 52
Net deferred tax assets $ — $ —
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss and tax credit carryforwards can be utilized or the temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. To fully realize the deferred tax asset, the Company will need to generate future taxable income sufficient to utilize net operating losses prior to their expiration. Based upon the Company’s history of not generating taxable income, the Company believes that it is more likely than not that deferred tax assets will not be realized through future earnings. Accordingly, a valuation allowance has been established for the full value of the deferred tax assets. The valuation allowance on the deferred tax assets increased by $7.3 million and $2.8 million during the years ended December 31, 2021 and 2020, respectively.
Income tax benefit was nil for the years ended December 31, 2021 and 2020. Income taxes recorded differed from the amounts computed by applying the U.S. Federal income tax rate of 21% in 2021 and 2020 to loss before income taxes as a result of the following (in thousands).
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December 31,
Computed “expected” Federal tax benefit $ (6,344 ) $ (3,410 )
(Increase) reduction in income taxes benefit resulting from:
Change in valuation allowance 6,404 2,836
Uncertain tax positions 68 (77 )
Change in fair value of convertible affiliated note 677 806
Foreign rate differential 88 (113 )
Other, net (9 ) 2
Income tax benefit $ — $ —
(6) Accrued Liabilities
Accrued liabilities consist of the following as of December 31, 2021 and 2020 (in thousands):
December 31,
(7) Equity
In September 2021, the Company effected a 2.783-for-one split of the Company’s common stock. All common share, per share and related information included in the accompanying financial statements have been adjusted retroactively, where applicable, to reflect the split.
In September 2021, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation, to increase the number of authorized shares of common stock to 35,000,000, with a par value $0.00001 per share. In connection with the Company’s IPO, the Company’s authorized capital stock increased to 155,000,000 shares, all with a par value of $0.00001 per share, of which:
• 150,000,000 shares are designated as common stock; and
• 5,000,000 shares are designated as preferred stock.
In October 2021, the Company completed an IPO of 3,333,334 shares of its common stock, at a public offering price of $12.00 per share. The gross proceeds from the offering, before deducting underwriting discounts, commissions and other offering expenses, were approximately $46.0 million, which includes the exercise of the underwriters option to acquire an additional 500,000 shares at the public offering price, which shares were delivered in November 2021. Underwriting discounts, commissions and other offering expenses, were approximately $6.2 million, resulting in net proceeds of approximately $39.8 million. Subsequent to the completed offering, the Company continues to be majority owned by Agenus.
In October 2021, in connection with the Company’s IPO, the Note was automatically converted into 5,451,958 shares of the Company’s common stock. Refer to Note 10 for additional detail.
(8) Share-based Compensation Plans
The Company’s 2018 Equity Incentive Plan (the “2018 Plan”) provided for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, nonstatutory stock options, restricted stock, unrestricted stock and other equity-based awards, such as stock appreciation rights, and stock units including restricted stock units for up to approximately 13.9 million shares
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of the Company’s common stock (subject to adjustment in the event of stock splits and other similar events). As of December 31, 2021, no shares remain available for issuance under the 2018 Plan.
In connection with the Company’s IPO, MiNK’s board of directors adopted the MiNK Therapeutics, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Code, nonstatutory stock options, restricted stock, unrestricted stock and other equity-based awards, for an initial share pool of approximately 6.1 million shares of the Company’s common stock (subject to adjustment in the event of stock splits and other similar events). The initial share pool will automatically increase on January 1st of each year from 2022 to 2031 by the lesser of (i) four percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31st and (ii) the number of shares determined by the Company’s board of directors on or prior to such date for such year.
In connection with the Company’s IPO, MiNK’s board of directors adopted the MiNK Therapeutics, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides eligible employees the opportunity to acquire the Company’s common stock in a program designed to comply with Section 423 of the Code. There are 375,000 shares reserved for issuance under the ESPP, plus an automatic annual increase, as of January 1st of each year beginning in 2022 and continuing through and including 2031, equal to the lesser of (i) one percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31st and (ii) the number of shares determined by the Company’s board of directors on or prior to such date for such year, up to a maximum of approximately 3.5 million shares in the aggregate.
The Company primarily uses the Black-Scholes option pricing model to value options granted to employees and non-employees, as well as options granted to members of the Company’s Board of Directors. All stock option grants have 10-year terms and generally vest ratably over a 3 or 4-year period.
The fair value of each option granted during the period was estimated on the date of grant using the following weighted average assumptions:
Expected volatility 67 % 65 %
Expected term in years 6 7
Risk-free interest rate 0.6 % 1.8 %
Dividend yield 0 % 0 %
The expected term of stock options granted is based on historical data and other factors and represents the period of time that stock options are expected to be outstanding prior to exercise. The risk-free interest rate is based on U.S. Treasury strips with maturities that match the expected term on the date of grant.
A summary of option activity for 2021 is presented below:
The weighted average grant-date fair values of options granted during the years ended December 31, 2021 and 2020, was $1.76 and $0.01, respectively. During both 2021 and 2020, all options were granted with exercise prices equal to the market value of the underlying shares of common stock on the grant date.
As of December 31, 2021, there was $2.6 million of unrecognized share-based compensation expense related to stock options granted to employees, consultants and directors which, if all milestones are achieved, will be recognized over a weighted average period of 2.2 years.
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A summary of non-vested stock activity for 2021 is presented below:
Nonvested Shares Weighted Average Grant Date Fair Value
As of December 31, 2021, there was $1.8 million of unrecognized share-based compensation expense related to these non-vested shares which will be recognized over a weighted average period of 1.7 years.
Stock based compensation expense also includes expense related to awards granted to employees of the Company from the Agenus 2019 Equity Incentive Plan. The impact on the Company’s results of operations from share-based compensation for the year ended December 31, 2021 and 2020, was as follows (in thousands):
Research and development $ 200 $ 56
General and administrative 1,545 32
Total share-based compensation expense $ 1,745 $ 88
(9) Research and Development Agreement
In December 2018, the Company entered into an agreement with the Belgium Walloon Region Government in which the Walloon Region agreed to provide a grant of €1.3 million and a repayable advance of €8.3 million for the development of one of the Company’s research programs. As of December 31, 2019, the Company received $881,000 of the grant portion and $3.4 million of the repayable advance. During the year ended December 31, 2019 the Company recognized grant revenue of $690,000 in accordance with ASC 958-605 and included in its consolidated balance sheet at December 31, 2019 deferred revenue of $191,000 related to the grant funds received and a long-term liability of $3.4 million related to the repayable advance received. During 2020, the Company discontinued research efforts related to this program and is evaluating its options in accordance with the terms of the agreement. Accordingly, in the year ended December 31, 2020, the Company recorded the balance of the deferred revenue as other income in its consolidated statement of operations. In addition, due to the uncertainty of the terms of the termination of the agreement, the Company has included the refundable advance balance of $5.3 million in other current liabilities in its consolidated balance sheet at December 31, 2021.
(10) Related Party Transactions
Until the completion of its IPO, the Company relied on Agenus for all of its working capital requirements. For the periods presented, certain of the Company’s operations were fully integrated with Agenus, including, but not limited to, corporate functions such as finance, human resources, information technology and legal functions. The Company’s consolidated financial statements reflect all costs of doing business related to these operations.
In September 2021, the Company entered into a new Intellectual Property Assignment and License Agreement with Agenus (the “New Assignment and License Agreement”), upon which the prior intercompany agreement between Agenus and MiNK was terminated. Pursuant to the New Assignment and License Agreement, Agenus assigned to the Company certain patent rights and know-how related to its iNKT product candidates and other patents and know-how related to its business. In addition to the patent rights assigned to the Company by Agenus, the Company also received an exclusive, royalty-free, sublicensable license to research, develop, manufacture and commercialize certain licensed technology in the field. The New Assignment and License Agreement further provides for the Company to grant Agenus a field-limited, non-exclusive, royalty-free license under the assigned patent rights, subject to MiNK’s discretion and provided such access would not reasonably result in a disruption of planned MiNK activities. Agenus has also agreed to provide the Company with Agenus’ biological material upon written request in order for the Company to use such material in its development activities of a combination therapy. Agenus may withhold the transfer of biological material, including, but not limited to, checkpoint modulating antibodies, for various reasons, including if such transfer would reasonably result in a disruption of planned Agenus activities. For any materials Agenus does share with the Company, the parties have agreed to enter into a separate agreement governing the transfer and providing for joint ownership of the data. Agenus has agreed that during the full term of the New Assignment and License Agreement, and for three years thereafter, it will not develop, manufacture or commercialize
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an iNKT cell therapy, directly or indirectly by transferring such technology. The Company has the sole responsibility to develop, manufacture and commercialize products under this New Assignment and License Agreement. The Company may terminate the New Assignment and License Agreement without cause upon 90 days’ prior written notice to Agenus. Either party may terminate if they believe there has been a material breach which has not been cured within 90 days (or 45 days for breach of payment obligations) of receiving such notice.
In September 2021, the Company entered into a new Intercompany General & Administrative Services Agreement with Agenus (the “New Intercompany Services Agreement”). Pursuant to the New Intercompany Services Agreement, Agenus provides MiNK with administrative support, including, without limitation, financial, legal, information technology and human resources administrative support and non-administrative services as may be agreed to between the parties from time to time. Agenus provides the services under the New Intercompany Services Agreement on a cost-plus basis and the Company is required to pay 105% of Agenus’ costs. Under the New Intercompany Services Agreement, the Company is also entitled to use Agenus’ business offices and laboratory space and equipment in exchange for the Company contributing a proportionate payment for the use of such facilities and equipment. Either party may terminate the New Intercompany Services Agreement upon 30 days’ prior written notice
Allocated Agenus services primarily include payroll related expenses, facility costs and stock-based compensation and are included in the accompanying financial statements based on certain estimates and allocations. The allocation methods primarily include time devoted to activities and headcount-based allocations. Agenus business services and occupancy costs are allocated to the Company based on the Company’s headcount as a percentage of Agenus’. Under the prior intercompany services agreement between Agenus and MiNK, research services were charged between the entities based on hours spent on specific projects applied to hourly wage rates. As such, these allocations may not be indicative of the actual amounts that would have been recorded had the Company operated as an independent, publicly traded company for the periods presented.
Allocation of Agenus Services, net, of $2.4 and $1.3 million for the periods ended December 31, 2021 and 2020, respectively, is included in Operating expenses in the Company’s statement of operations and comprehensive loss and Due to related parties in the Company’s consolidated balance sheet.
In February 2021, the Company entered into the Note with Agenus with terms identical to the convertible promissory note, as amended, issued to Agenus on April 1, 2019, increasing the amount of borrowing capacity to up to $50.0 million and extending the maturity to July 1, 2022. In September 2021, the Company entered into an amendment to the Note with Agenus to provide, among other things, that the Note would automatically convert into the Company’s common stock upon the completion of the Company’s IPO.
In accordance with the terms of the Note, interest was computed on the basis of a 360-day year at 8% and accrued but was not payable until converted or paid. The Note was automatically converted, at a rate equal to the quotient obtained by dividing (i) the amount due on the date of conversion by (ii) 80% of the per share price of the Company’s common stock sold in the Company’s IPO, into 5,451,958 shares of the Company’s common stock upon completion of the IPO in October 2021, and was not outstanding at December 31, 2021. The Note had a principal balance of $36.1 million at December 31, 2020.
(11) Other Long-Term Liabilities
In May 2020, the Company entered into a promissory note with Bank of America, NA for aggregate loan proceeds of $356,000 (the “Loan”) under the Small Business Administration Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act of 2020.In September 2021, the Company received notification that its forgiveness application was approved. As such, the Loan was extinguished, and for the year ending December 31, 2021, a $356,000 gain was recorded in the Company’s consolidated statements of operations and comprehensive loss.
(12) Fair Value Measurement
The Company measured the Note at fair value. In connection with the Company’s IPO, the Note was automatically converted into 5,451,958 shares of the Company’s common stock and was not outstanding as of December 31, 2021. The fair value of the Note at December 31, 2020 was $43.8 million, based on the Level 2 valuation hierarchy of the fair value measurements standard using a scenario based present value methodology that was derived by evaluating the nature and terms of each note and considering the prevailing economic and market conditions at the balance sheet date. The principal amount of the Note at December 31, 2020 was $36.1 million.
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(13) Contingencies
The Company may currently be, or may become, a party to legal proceedings. While the Company currently believes that the ultimate outcome of any of these proceedings will not have a material adverse effect on its financial position, results of operations, or liquidity, litigation is subject to inherent uncertainty. Furthermore, litigation consumes both cash and management attention.
(14) Benefit Plans
The Company’s employees are eligible to participate in the Agenus Inc. 401(k) Savings Plan in the United States and a defined contribution Group Personal Pension Plan in the United Kingdom (the “Plans”) for all eligible employees, as defined in the Plans. Participants may contribute a portion of their compensation, subject to a maximum annual amount, as established by the applicable taxing authority. Each participant is fully vested in his or her contributions and related earnings and losses. For the years ended December 31, 2021 and 2020, the Company expensed $86,000 and $84,000, respectively, related to the discretionary contribution to the Plans.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures were functioning effectively as of the end of the period covered by this Annual Report on Form 10-K to provide reasonable assurance that the Company can meet its disclosure obligations.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.
As a non-accelerated filer and an emerging growth company, management’s assessment of internal control over financial reporting was not subject to attestation by our independent registered public accounting firm.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
On March 14, 2022, our board of directors approved the transfer of the listing of our common stock from The Nasdaq Global Market to The Nasdaq Capital Market. Subsequently, The Nasdaq Stock Market LLC (“Nasdaq”) approved the listing transfer and it became effective on March 18, 2022. The Nasdaq Capital Market is a continuous trading market that operates in substantially the same manner as The Nasdaq Global Market and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements. Our common stock continues to trade under the symbol “INKT”.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2021.
Item 11. Executive Compensation.
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2021.
Item 14. Principal Accounting Fees and Services.
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2021.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(3) Exhibits:
Exhibit Number Description
4.2* Description of Securities.
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21.1* Subsidiaries of MiNK Therapeutics, Inc.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
+ Indicates management contract or compensatory plan.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MiNK Therapeutics, Inc.
Date: March 18, 2022 By: /s/ Jennifer S. Buell, Ph.D.
Jennifer S. Buell, Ph.D.
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name Title Date
Jennifer S. Buell, Ph.D. (Principal Executive Officer)
Christine M. Klaskin Accounting Officer)
/s/ Garo H. Armen, Ph.D. Chairman of the Board of Directors March 18, 2022
Garo H. Armen, Ph.D.
/s/ John Baldoni, Ph.D. Director March 18, 2022
John Baldoni, Ph.D.
/s/ Peter Behner Director March 18, 2022
Peter Behner
/s/ Brian Corvese Director March 18, 2022
Brian Corvese
/s/ Barbara Ryan Director March 18, 2022
Barbara Ryan
/s/ Ulf Wiinberg Director March 18, 2022
Ulf Wiinberg
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