SEC Filing | Talaris Therapeutics, Inc.

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tals-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2021

☐	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: 001-40384

TALARIS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	83-2377352
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
570 S. Preston St Louisville, KY	40202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (502) 398-9250

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

TALS

The 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, 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.

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 November 1, 2021, the registrant had 41,354,643 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	81
Signatures		82

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TALARIS THERAPEUTICS, INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	27,311		$	17,589
Marketable securities		227,423			131,899
Prepaid and other current assets		3,493			1,263
Total current assets		258,227			150,751
Property and equipment, net		2,994			2,013
Other assets		104			14
Total assets	$	261,325		$	152,778
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,182		$	767
Accrued expenses		3,800			2,637
Total current liabilities		4,982			3,404
Share repurchase liability		694			996
Contingent stock liability		—			373
Total liabilities		5,676			4,774
Commitments and contingencies (Note 8)
Convertible preferred stock
Series A convertible preferred stock, $0.0001 par value, no shares authorized, issued and outstanding as of September 30, 2021 and 40,000,000 shares authorized, issued and outstanding (liquidation preference of $40,000) as of December 31, 2020		—			37,383
Series A-1 convertible preferred stock, $0.0001 par value, no shares authorized, issued and outstanding as of September 30, 2021 and 28,000,000 shares authorized, issued and outstanding (liquidation preference of $35,000) as of December 31, 2020		—			34,272
Series B convertible preferred stock, $0.0001 par value, no shares authorized, issued and outstanding as of September 30, 2021 and 62,499,993 shares authorized, issued and outstanding (liquidation preference of $114,994) as of December 31, 2020		—			114,496
Total convertible preferred stock		—			186,151
Stockholders’ deficit
Common stock, $0.0001 par value, 140,000,000 voting shares authorized and 39,562,723 shares issued and outstanding and 10,000,000 non-voting shares authorized and 1,150,000 issued and outstanding as of September 30, 2021 and 36,366,101 shares authorized and 7,087,130 issued and outstanding as of December 31, 2020		4			1
Additional paid-in-capital		332,222			4,879
Accumulated deficit		(76,606	)		(43,014	)
Accumulated other comprehensive income (loss)		29			(13	)
Total stockholders’ equity (deficit)		255,649			(38,147	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	261,325		$	152,778

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

TALARIS THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Operating expenses
Research and development	$	9,183		$	3,956		$	23,655		$	10,896
General and administrative		3,874			2,182			9,464			4,953
Total operating expenses		13,057			6,138			33,119			15,849
Loss from operations		(13,057	)		(6,138	)		(33,119	)		(15,849	)
Interest and other income (expense), net		116			(279	)		(473	)		(79	)
Net loss	$	(12,941	)	$	(6,417	)	$	(33,592	)	$	(15,928	)
Unrealized (loss) gain on marketable securities		(5	)		(12	)		42			8
Total other comprehensive loss		(12,946	)		(6,429	)		(33,550	)		(15,920	)
Total comprehensive loss	$	(12,946	)	$	(6,429	)	$	(33,550	)	$	(15,920	)
Net loss attributable to common stockholders	$	(12,941	)	$	(6,417	)	$	(33,592	)	$	(15,928	)
Net loss per common share, basic and diluted	$	(0.32	)	$	(0.94	)	$	(1.33	)	$	(2.44	)
Weighted average number of common shares outstanding used in computation of net loss per common share, basic and diluted		40,669,412			6,823,163			25,190,479			6,537,820

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

TALARIS THERAPEUTICS, INC.

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

	Series A Convertible Preferred Stock						Series A-1 Convertible Preferred Stock						Series B Convertible Preferred Stock						Common Stock				Additional					Accumulated Other			Total
	Outstanding Shares			Amount			Outstanding Shares			Amount			Outstanding Shares			Amount			Outstanding Shares		Amount		Paid-in Capital		Accumulated Deficit			Comprehensive Income (Loss)			Stockholders’ Equity (Deficit)
Balance at December 31, 2019		40,000,000		$	37,383			16,000,000		$	19,307			—		$	—			6,390,137	$	1	$	3,204	$	(20,307	)	$	—		$	(17,102	)
Stock-based compensation expense		—			—			—			—			—			—			—		—		123		—			—			123
Net loss		—			—			—			—			—			—			—		—		—		(4,848	)		—			(4,848	)
Unrealized loss on marketable securities		—			—			—			—			—			—			—		—		—		—			13			13
Balance at March 31, 2020		40,000,000		$	37,383			16,000,000		$	19,307			—		$	—			6,390,137	$	1	$	3,327	$	(25,155	)	$	13		$	(21,814	)
Issuance of common stock upon exercise of stock options		—		$	—			—		$	—			—		$	—			26,530	$	—	$	25	$	—		$	—		$	25
Stock-based compensation expense		—			—			—			—			—			—			—		—		119		—			—			119
Net loss		—			—			—			—			—			—			—		—		—		(4,663	)		—			(4,663	)
Unrealized loss on marketable securities		—			—			—			—			—			—			—		—		—		—			7			7
Balance at June 30, 2020		40,000,000		$	37,383			16,000,000		$	19,307			—		$	—			6,416,667	$	1	$	3,471	$	(29,818	)	$	20		$	(26,326	)
Issuance of common stock upon exercise of stock options		—		$	—			—		$	—			—		$	—			569,261	$	—	$	526	$	—		$	—		$	526
Issuance of Preferred Stock A-1 upon exercise of stock options, net of issuance costs of $31		—			—			12,000,000			14,969			—			—			—		—		—		—			—			—
Issuance of Preferred Stock B upon exercise of stock options, net of issuance costs of $476		—			—			—			—			62,499,993			114,496			—		—		—		—			—			—
Stock-based compensation expense		—			—			—			—			—			—			—		—		187		—			—			187
Net loss		—			—			—			—			—			—			—		—		—		(6,417	)		—			(6,417	)
Unrealized loss on marketable securities		—			—			—			—			—			—			—		—		—		—			(12	)		(12	)
Balance at September 30, 2020		40,000,000		$	37,383			28,000,000		$	34,276			62,499,993		$	114,496			6,985,928	$	1	$	4,184	$	(36,235	)	$	8		$	(32,042	)

Balance at December 31, 2020		40,000,000		$	37,383			28,000,000		$	34,272			62,499,993		$	114,496			7,087,130	$	1	$	4,879	$	(43,014	)	$	(13	)	$	(38,147	)
Issuance of common stock upon exercise of stock options		—			—			—			—			—			—			117,181		—		123		—			—			123
Stock-based compensation expense		—			—			—			—			—			—			—		—		835		—			—			835
Net loss		—			—			—			—			—			—			—		—		—		(9,299	)		—			(9,299	)
Unrealized loss on marketable securities		—			—			—			—			—			—			—		—		—		—			22			22
Balance at March 31, 2021		40,000,000		$	37,383			28,000,000		$	34,272			62,499,993		$	114,496			7,204,311	$	1	$	5,837	$	(52,313	)	$	9		$	(46,466	)
Issuance of common stock, net of underwriting discounts and issuance costs of $12,858,764		—			—			—			—			—			—			8,825,000	$	1	$	137,165	$	—		$	—		$	137,166
Conversion of convertible preferred stock to common stock		(40,000,000	)		(37,383	)		(28,000,000	)		(34,272	)		(62,499,993	)		(114,496	)		24,392,498		2