SEC Filing - Merus

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10-Q

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 September 30, 2023


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

For the transition period from to

Commission File Number: 001-37773

MERUS N.V.

(Exact name of registrant as specified in its charter)

The Netherlands

Not Applicable

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

Uppsalalaan 17
3584 CT Utrecht
The Netherlands

Not Applicable

(Address of principal executive offices)

(Zip code)

+31 85 016 2500

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common shares, nominal value €0.09 per share

MRUS

The Nasdaq Stock Market LLC 
(Nasdaq Global Market)

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

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

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

As of October 30, 2023, the registrant had 57,732,814 common shares, nominal value €0.09 per share, outstanding.


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022	3

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	4

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	24

Item 4. Controls and Procedures	24

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	26

Item 1A. Risk Factors	26

Item 5. Other Information	78

Item 6. Exhibits	78

Signatures	80

Cautionary Note Regarding Forward-looking Statements

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

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

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

SUMMARY RISK FACTORS

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

•

We have incurred significant net losses since our inception and we expect to continue to incur significant expenses and operating losses for the foreseeable future.

•

We have a limited operating history, have not completed any registrational clinical trials, and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

•

We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce or eliminate one or more of our research and drug development programs or future commercialization efforts.

•

The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA or other comparable foreign regulatory authorities.

•

The clinical trial and regulatory approval processes are lengthy, time consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

•

Our antibody candidates may have serious adverse, undesirable or unacceptable side effects alone or in combinations being tested in clinical development, which may delay or prevent marketing approval. If such side effects are identified during the

development of our antibody candidates or following approval, if any, we may need to abandon our development of such antibody candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

•

We have never commercialized an antibody candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable future collaborators or partners.

•

We rely, and expect to continue to rely, on third parties, including independent clinical investigators and contract research organizations or CROs, to conduct our pre-clinical studies, clinical trials, chemistry, manufacturing and controls and potential development of a companion diagnostic. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or perform at reasonable cost, we may not be able to obtain regulatory approval for or commercialize our antibody candidates or we may be subject to other significant negative consequences following marketing approval, if any, and our business could be substantially harmed.

•

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain antibody candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.

•

The competition for qualified personnel is particularly intense in our industry. If we are unable to retain or hire key personnel, we may not be able to sustain or grow our business.

•

We operate in highly competitive and rapidly changing industries, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

•

Our success depends on our ability to protect our intellectual property and our proprietary technologies. If we are unable to adequately protect our intellectual property and our proprietary technologies or obtain and maintain issued patents which are sufficient to protect our product candidates and proprietary technologies, or if others do not respect our intellectual property rights and exclusivity, others could compete against us more directly, which would negatively impact our business.

•

Our existing collaboration agreements are important to our business and potential future collaborations and licenses may also be important to us, and if we are unable to maintain any of these collaborations or execute new collaborations or licenses, or if these arrangements are not successful, our business could be adversely affected.

•

The trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of disruptions and extreme volatility in the global economy, including rising inflation and interest rates, declines in economic growth, global instability, including the ongoing conflicts in Europe and the Middle East and the ongoing impacts of the COVID-19 pandemic, which have and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition, our ability to raise capital and results of operations.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MERUS N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except share and per share data)


	September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	241,868		$	147,749
Marketable securities		146,702			142,480
Accounts receivable		3,434			4,051
Prepaid expenses and other current assets		12,828			12,163
Total current assets		404,832			306,443
Marketable securities		57,259			36,457
Property and equipment, net		12,176			12,222
Operating lease right-of-use assets		11,323			12,618
Intangible assets, net		1,771			1,950
Deferred tax assets		702			2,041
Other assets		4,123			4,811
Total assets	$	492,186		$	376,542
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,843		$	9,834
Accrued expenses and other liabilities		35,712			35,590
Income taxes payable		137			2,400
Current portion of lease obligation		1,607			1,684
Current portion of deferred revenue		23,019			29,418
Total current liabilities		64,318			78,926
Lease obligation		10,506			11,790
Deferred revenue, net of current portion		23,974			38,771
Total liabilities		98,798			129,487
Commitments and contingencies - Note 6
Stockholders’ equity:
Common shares, €0.09 par value; 67,500,000 shares authorized at September 30, 2023 and December 31, 2022; 57,729,180 and 46,310,589 shares issued and outstanding as at September 30, 2023 and December 31, 2022, respectively		5,874			4,751
Additional paid-in capital		1,117,855			870,874
Accumulated other comprehensive income		(37,433	)		(30,448	)
Accumulated deficit		(692,908	)		(598,122	)
Total stockholders’ equity		393,388			247,055
Total liabilities and stockholders’ equity	$	492,186		$	376,542

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Collaboration revenue	$	11,033		$	6,581		$	35,008		$	30,920
Total revenue		11,033			6,581			35,008			30,920
Operating expenses:
Research and development		36,810			42,307			99,973			100,378
General and administrative		12,591			12,469			44,040			36,917
Total operating expenses		49,401			54,776			144,013			137,295
Operating loss		(38,368	)		(48,195	)		(109,005	)		(106,375	)
Other income, net:
Interest income, net		4,522			866			9,312			1,288
Foreign exchange gains (loss)		11,952			23,041			7,062			55,378
Other gains, net		—			—			—			1,059
Total other income (loss), net		16,474			23,907			16,374			57,725

Net loss before income taxes		(21,894	)		(24,288	)		(92,631	)		(48,650	)
Income tax expense		1,118			327			2,155			572
Net loss	$	(23,012	)	$	(24,615	)	$	(94,786	)	$	(49,222	)
Other comprehensive loss:
Currency translation adjustment		(10,722	)		(19,475	)		(6,985	)		(45,444	)
Comprehensive loss	$	(33,734	)	$	(44,090	)	$	(101,771	)	$	(94,666	)
Net loss per share attributable to common stockholders: Basic and diluted	$	(0.43	)	$	(0.53	)	$	(1.91	)	$	(1.11	)
Weighted-average common shares outstanding: Basic and diluted		53,869,762			46,056,719			49,532,722			44,451,997

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(94,786	)	$	(49,222	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		1,752			778
Amortization of intangible assets		170			195
Foreign exchange gain		(3,548	)		(68,654	)
Stock-based compensation expense		19,518			18,521
Amortization (accretion) of discount on investments		(3,899	)		243
Deferred tax expense (benefit)		1,340			(19	)
Changes in operating assets and liabilities:
Accounts receivable		602			3,031
Operating lease right-of-use assets and lease obligations		(62	)		846
Prepaid expenses and other current assets		(14	)		(8,987	)
Accounts payable		(4,482	)		(9,067	)
Accrued expenses and other liabilities		(1,273	)		12,514
Deferred revenue		(21,177	)		(19,566	)
Net cash used in operating activities		(105,859	)		(119,387	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		(204,087	)		(170,692	)
Proceeds from maturities of marketable securities		183,192			178,169
Purchases of property and equipment		(4,008	)		(5,531	)
Net cash provided by (used in) investing activities		(24,903	)		1,946
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net		225,945			57,972
Payments of offering costs		(443	)		(231	)
Proceeds from stock options exercised		3,084			1,213
Net cash provided by financing activities		228,586			58,954
Foreign exchange impact on cash, cash equivalents and restricted cash		(3,648	)		8,866
Net increase (decrease) in cash, cash equivalents and restricted cash		94,176			(49,621	)
Cash, cash equivalents, and restricted cash, beginning of period		148,439			241,749
Cash, cash equivalents, and restricted cash, end of period	$	242,615		$	192,128
SUPPLEMENTAL DISCLOSURES:
Lease liabilities arising from obtaining right-of-use assets	$	—		$	11,493
Income taxes paid	$	3,103		$	—
Non-cash purchases of property, equipment and intangibles	$	—		$	2
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	$	241,868		$	190,980
Restricted cash included in non-current other assets		747			1,148
	$	242,615		$	192,128

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(Amounts in thousands, except share data)


	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at January 1, 2022		43,467,052	$	4,481	$	787,869	$	(466,928	)	$	(9,221	)	$	316,201
Exercise of stock options and vesting of restricted stock units		82,273		8		871		—			—			879
Stock-based compensation		—		—		5,334		—			—			5,334
Currency translation adjustment		—		—		—		—			(6,048	)		(6,048	)
Net loss		—		—		—		(18,893	)		—			(18,893	)
Balance at March 31, 2022		43,549,325	$	4,489	$	794,074	$	(485,821	)	$	(15,269	)	$	297,473
Issuance of common stock in connection with public offerings, net of underwriting discounts and commissions and offering costs		2,298,906	$	220	$	47,705	$	—		$	—			47,925
Exercise of stock options and vesting of restricted stock units		18,589		2		182		—			—			184
Stock-based compensation		—		—		6,662		—			—			6,662
Currency translation adjustment		—		—		—		—			(19,921	)		(19,921	)
Net loss		—		—		—		(5,714	)		—			(5,714	)
Balance at June 30, 2022		45,866,820	$	4,711	$	848,623	$	(491,535	)	$	(35,190	)	$	326,609
Issuance of common stock in connection with public offerings, net of underwriting discounts and commissions and offering costs		421,940	$	38	$	9,545	$	—		$	—			9,583
Exercise of stock options and vesting of restricted stock units		14,117		1		149		—			—			150
Stock-based compensation		—		—		6,525		—			—			6,525
Currency translation adjustment		—		—		—		—			(19,475	)		(19,475	)
Net loss		—		—		—		(24,615	)		—			(24,615	)
Balance at September 30, 2022		46,302,877	$	4,750	$	864,842	$	(516,150	)	$	(54,665	)	$	298,777


Balance at January 1, 2023		46,310,589	$	4,751	$	870,874	$	(598,122	)	$	(30,448	)	$	247,055
Exercise of stock options and vesting of restricted stock units		30,592		3		214								217
Stock-based compensation		—		—		5,750		—			—			5,750
Currency translation adjustment		—		—		—		—			4,242			4,242
Net loss		—		—		—		(39,741	)		—			(39,741	)
Balance at March 31, 2023		46,341,181	$	4,754	$	876,838	$	(637,863	)	$	(26,206	)	$	217,523
Issuance of common stock in connection with public offerings, net of underwriting discounts and commissions and offering costs		3,272,280		322		63,397		—			—			63,719
Exercise of stock options and vesting of restricted stock units		240,198		23		2,225		—			—			2,248
Stock-based compensation		—		—		6,453		—			—			6,453
Currency translation adjustment		—		—		—		—			(505	)		(505	)
Net loss		—		—		—		(32,033	)		—			(32,033	)
Balance at June 30, 2023		49,853,659	$	5,099	$	948,913	$	(669,896	)	$	(26,711	)	$	257,405
Issuance of common stock in connection with public offerings, net of underwriting discounts and commissions and offering costs		7,840,909		771		161,012		—			—			161,783
Exercise of stock options and vesting of restricted stock units		34,612		4		615		—			—			619
Stock-based compensation		—		—		7,315		—			—			7,315
Currency translation adjustment		—		—		—		—			(10,722	)		(10,722	)
Net loss		—