morf-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended March 31, 2024


☐			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: 001-38940

MORPHIC HOLDING, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of Incorporation or Organization)			47-3878772 (I.R.S. Employer Identification No.)
35 Gatehouse Drive, A2 Waltham, MA (Address of Principal Executive Offices)			02451 (Zip Code)

Registrant’s telephone number, including area code: (781) 996-0955

Not Applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	MORF	The Nasdaq Stock Market LLC

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 (Section 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 Exchange Act Rule 12b-2). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock as of April 23, 2024 was 50,093,588.

Table of Contents

TABLE OF CONTENTS


			Page

Part I—Financial Information			2
Item 1—Condensed Consolidated Financial Statements (unaudited)			2
Condensed Consolidated Balance Sheets as of March 3 1 , 202 4 and December 31, 20 23			2
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 3 1 , 202 4 and 20 23			3
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 202 4 and 20 23			4
Condensed Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 4 and 20 23			5
Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3—Quantitative and Qualitative Disclosures about Market Risk			24
Item 4—Controls and Procedures			24

Part II—Other Information			25
Item 1—Legal Proceedings			25
Item 1A—Risk Factors			26
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds			73
Item 3—Defaults Upon Senior Securities			73
Item 4—Mine Safety Disclosures			73
Item 5—Other Information			73
Item 6—Exhibits			74
Signatures			75

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PART I—FINANCIAL INFORMATION


Item 1. Condensed Consolidated Financial Statements (unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share and per share data)


	March 31,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	44,410	$	58,577
Marketable securities	614,356		645,772

Prepaid expenses and other current assets	17,175		12,579
Total current assets	675,941		716,928
Operating lease right-of-use assets	3,101		2,133
Property and equipment, net	2,750		2,767
Restricted cash	616		560
Other assets	357		126
Total assets	$	682,765	$	722,514

Liabilities
Current liabilities:
Accounts payable	$	5,748	$	7,698
Accrued expenses	11,963		17,078

Total current liabilities	17,711		24,776

Long-term liabilities:
Operating lease liability, net of current portion	1,474		716

Total liabilities	19,185		25,492

Commitments and contingencies (Note 9)

Stockholders’ Equity
Preferred shares, $0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023	—		—
Common shares, $0.0001 par value, 400,000,000 shares authorized, 50,093,588 shares issued and outstanding as of March 31, 2024 and 49,747,286 shares issued and outstanding as of December 31, 2023	5		5
Additional paid‑in capital	1,158,290		1,143,919
Accumulated deficit	(494,484)		(449,190)
Accumulated other comprehensive (loss) income	(231)		2,288
Total stockholders’ equity	663,580		697,022
Total liabilities and stockholders’ equity	$	682,765	$	722,514

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

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MORPHIC HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (In thousands, except share and per share data)


	Three Months Ended March 31,
	2024		2023
Collaboration revenue	$	—	$	521
Operating expenses:
Research and development	42,441		30,449
General and administrative	11,163		9,277
Total operating expenses	53,604		39,726
Loss from operations	(53,604)		(39,205)
Other income:
Interest income, net	8,390		3,100
Other income, net	—		2
Total other income, net	8,390		3,102
Loss before provision for income taxes	(45,214)		(36,103)
Provision for income taxes	(80)		(32)
Net loss	$	(45,294)	$	(36,135)

Net loss per share, basic and diluted	$	(0.91)	$	(0.90)

Weighted average common shares outstanding, basic and dilutive	50,009,032		40,112,416

Comprehensive loss:
Net loss	$	(45,294)	$	(36,135)
Other comprehensive (loss) income :
Unrealized holding (losses) gains on marketable securities, net of tax	(2,519)		1,651
Total other comprehensive (loss) income	(2,519)		1,651
Comprehensive loss	$	(47,813)	$	(34,484)

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

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MORPHIC HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands, except share data)


	Common Shares			Additional Paid‑in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2023	49,747,286	$	5	$	1,143,919	$	(449,190)	$	2,288	$	697,022
Equity‑based compensation expense	—	—		13,375		—		—		13,375
Vesting of restricted shares	292,320	—		—		—		—		—
Issuance of common shares upon stock option exercises	34,721	—		391		—		—		391
Issuance of common shares under the Employee Stock Purchase Plan	19,261	—		605		—		—		605
Unrealized holding losses on marketable securities	—	—		—		—		(2,519)		(2,519)
Net loss	—	—		—		(45,294)		—		(45,294)
Balance at March 31, 2024	50,093,588	$	5	$	1,158,290	$	(494,484)	$	(231)	$	663,580


	Common Shares			Additional Paid‑in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	38,584,678	$	4	$	649,549	$	(297,095)	$	(3,339)	$	349,119
Equity‑based compensation expense	—	—		9,576		—		—		9,576
Vesting of restricted shares	60,060	—		—		—		—		—
Issuance of common shares upon stock option exercises	124,620	—		1,927		—		—		1,927
Issuance of common shares under the Employee Stock Purchase Plan	23,449	—		578		—		—		578
Issuance of pre-funded warrant shares through private placement, net of issuance costs of $0.1 million	—	—		69,859		—		—		69,859
Issuance of common shares through private placement, net of issuance costs of $0.1 million	848,655	—		29,940		—		—		29,940
Unrealized holding gains on marketable securities	—	—		—		—		1,651		1,651
Net loss	—	—		—		(36,135)		—		(36,135)
Balance at March 31, 2023	39,641,462	$	4	$	761,429	$	(333,230)	$	(1,688)	$	426,515

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

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MORPHIC HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net loss	$	(45,294)	$	(36,135)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	282		257
Discount accretion and premium amortization on marketable securities	(3,144)		(900)
Equity‑based compensation	13,375		9,576


Change in operating assets and liabilities:
Accounts receivable	—		(51)
Prepaid expenses and other current assets	(4,511)		(477)
Other assets	(231)		(11)
Operating lease right-of-use assets	409		336
Accounts payable	(1,276)		1,996
Accrued expenses	(5,559)		(5,215)
Deferred revenue	—		(470)
Operating lease liability	(440)		(360)
Net cash used in operating activities	(46,389)		(31,454)
Cash flows from investing activities:
Purchases of marketable securities	(80,459)		(167,201)
Proceeds from maturities of marketable securities	112,500		79,350

Purchases of property and equipment	(674)		(550)
Net cash provided by (used in) investing activities	31,367		(88,401)
Cash flows from financing activities:

Proceeds from issuance of common shares and pre-funded warrants through the private placement	—		99,983
Proceeds from issuance of common shares under Employee Stock Purchase Plan	605		578


Proceeds from issuance of common shares upon stock option exercises	306		1,923
Net cash provided by financing activities	911		102,484
Net decrease in cash, cash equivalents and restricted cash	(14,111)		(17,371)
Cash and cash equivalents and restricted cash, beginning of period	59,137		59,832
Cash and cash equivalents and restricted cash, end of period	$	45,026	$	42,461

Non-cash activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	1,377	$	—
Purchases of property and equipment included in accounts payable and accrued expenses	$	265	$	4
Amounts from exercise of stock options included in prepaid expenses and other current assets	$	85	$	—
Unpaid issuance costs for the private placement included in accounts payable and accrued expenses	$	—	$	184

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.Nature of the Business and Basis of Presentation

Organization and Liquidity

Morphic Holding, Inc. (the “Company”) was formed under the laws of the State of Delaware in August 2014. The Company is a biopharmaceutical company applying proprietary insights into integrin medicine to discover and develop potentially first-in-class oral small molecule integrin therapeutics. Integrins are a target class with multiple approved injectable blockbuster drugs for the treatment of serious chronic diseases, including autoimmune, cardiovascular and metabolic diseases, fibrosis and cancer. To date, no oral small molecule integrin therapies have been approved by the U.S. Food and Drug Administration (“FDA”). The Company believes its unique platform can unlock the potential to reliably generate high-quality oral molecules against specific integrin targets. The Morphic integrin technology platform (“MInT Platform”) was created by leveraging the Company’s unique understanding of integrin structure and function to develop novel product candidates designed to achieve the potency, high selectivity, and pharmaceutical properties required for oral administration.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company expects to continue to incur losses from operations for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months from the date these financial statements were issued.

In July 2020, the Company entered into an Open Market Sale Agreement (the “Original Agreement”) with Jefferies LLC (“Jefferies”) with respect to an at-the-market offering program (the “Previous ATM”) under which the Company could offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering amount of up to $75.0 million, referred to as Placement Shares, through Jefferies as sales agent. The Company paid Jefferies a commission on the gross sales proceeds of any Placement Shares sold through Jefferies under the Original Agreement, and also provided Jefferies with customary indemnification and contribution rights. On August 11, 2021, the Company entered into an Amendment No. 1 to the Original Agreement with Jefferies, establishing a new at-the-market offering (“New ATM”) with an aggregate offering amount of up to $150.0 million, also subject to a commission on the gross proceeds from sales of Placement Shares. The Company refers to the Previous ATM and the New ATM, collectively, as the ATM. The Company may not sell any Placement Shares under the Previous ATM. Under the New ATM, the Company may offer and sell, from time to time at its sole discretion, Placement Shares through Jefferies as its sales agent. During the three months ended March 31, 2024, no shares were issued under the New ATM. As of March 31, 2024, the Company had approximately $10.9 million of common stock remaining available for sale under the New ATM.

In February 2023, the Company entered into a securities purchase agreement with existing investors, consisting of a board member and holder of more than 5% of the Company’s common stock and a then holder of more than 5% of the Company’s common stock, pursuant to which the Company sold to the investors, in a private placement, 848,655 shares of common stock at a price of $35.35 per share (the “PIPE Shares”) and pre-funded warrants to purchase up to 1,980,198 shares of common stock at a purchase price of $35.3499 per pre-funded warrant where each pre-funded warrant has an exercise price of $0.0001 per share (the “Pre-Funded Warrants”). The Company received aggregate net proceeds of approximately $100.0 million, before deducting costs and offering expenses payable by the Company.

In May 2023, the Company completed an underwritten public offering of 6,133,334 shares of its common stock, which includes 800,000 shares sold upon the exercise in full of the underwriters’ option to purchase additional shares of common stock, at a price to the public of $45.00 per share. Gross proceeds from the secondary offering were approximately $276.0 million, before deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $16.9 million, resulting in net proceeds of approximately $259.1 million.

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2.Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed consolidated financial statements include the accounts of Morphic Holding, Inc. and its wholly owned subsidiaries, Morphic Therapeutic, Inc., Morphic Therapeutic UK Ltd and Morphic Security Corporation. All intercompany balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended March 31, 2024 and 2023.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024.

Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Significant estimates of accounting reflected in these consolidated financial statements include, but are not limited to, estimates related to accrued research and development expenses. Actual results could differ from those estimates.

Significant accounting policies

The significant accounting policies used in preparation of these condensed consolidated financial statements as of and for the three months ended March 31, 2024 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2023 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 22, 2024.

3.Fair Value of Financial Assets and Liabilities

The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

•Level 1 — Quoted market prices in active markets for identical assets or liabilities.

•Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

•Level 3 — Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.

At March 31, 2024, investments include U.S. Treasury securities and U.S. government-sponsored enterprise securities, which are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company believes that the carrying amounts of the Company’s consolidated financial instruments, including prepaid expenses and other current assets, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term nature of those instruments.

The tables below present information about the Company’s financial assets that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands) and indicate the level within the fair value hierarchy where each measurement is classified.



	Fair Value Measurements at March 31, 2024
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	43,819	$	28,958	$	14,861	$	—
Marketable securities:
U.S. Treasury securities	574,386		—		574,386		—
U.S. government-sponsored enterprise securities	39,970		—		39,970		—




Total assets	$	658,175	$	28,958	$	629,217	$	—



	Fair Value Measurements at December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	57,988	$	57,988	$	—	$	—
Marketable securities:
U.S. Treasury securities	573,394		—		573,394		—
U.S. government-sponsored enterprise securities	54,906		—		54,906		—
Corporate bonds	17,472		—		17,472		—
Total assets	$	703,760	$	57,988	$	645,772	$	—

Cash equivalents consist of money market funds and U.S. Treasury securities as of March 31, 2024 and money market funds as of December 31, 2023. The money market funds included in the tables above invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds are categorized as Level 1 as of March 31, 2024 and December 31, 2023. The U.S. Treasury securities included in cash equivalents as of March 31, 2024 are considered highly liquid investments and mature within three months from the date of purchase. Marketable securities included in the tables above consist of U.S. Treasury securities and U.S. government-sponsored enterprise securities as of March 31, 2024 and U.S. Treasury securities, U.S. government-sponsored enterprise securities and corporate bonds as of December 31, 2023, and these securities are categorized as Level 2 as of March 31, 2024 and December 31, 2023. The Company had no liabilities measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023.

4.Marketable securities

The following tables summarize the Company’s investments in marketable securities classified as available-for-sale (in thousands):


	As of March 31, 2024
	Maturity	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Aggregate estimated fair value
Marketable securities:
U.S. Treasury securities	within 3 years	$	574,563	$	355	$	(532)	$	574,386
U.S. government-sponsored enterprise securities	less than 1 year

SEC Form 10-Q filed by Morphic Holding Inc.