Mirati Therapeutics, Inc. [MRTX] Filings

10-Q 1 mrtx-20230930.htm 10-Q mrtx-20230930

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

Commission File Number: 001-35921

______________________________________________________

Mirati Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________


Delaware			46-2693615
(State of Incorporation)			(I.R.S. Employer Identification No.)

3545 Cray Court,	San Diego,	California	92121
(Address of Principal Executive Offices)			(Zip Code)

(858) 332-3410

(Registrant’s Telephone Number, Including Area Code)

______________________________________________________

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


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	MRTX	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 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 November 1, 2023, there were 70,147,706 total shares of common stock outstanding.

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MIRATI THERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the 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	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION		39

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 5.	Other Information	71
Item 6.	Exhibits	73

SIGNATURES		75

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PART I. FINANCIAL INFORMATION


ITEM 1.			Financial Statements

MIRATI THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	September 30,		December 31,
	2023		2022
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	258,718	$	235,260
Short-term investments	717,716		848,577
Accounts receivable, net	14,651		865
Inventory	20,156		3,020
Other current assets	24,839		21,239
Total current assets	1,036,080		1,108,961
Property and equipment, net	16,046		17,540
Intangible asset, net	14,138		14,914
Long-term investment	3,559		3,465
Right-of-use asset	35,066		36,122
Other long-term assets	24,819		21,645
Total assets	$	1,129,708	$	1,202,647
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	37,961	$	38,861
Accrued liabilities	99,418		120,587

Total current liabilities	137,379		159,448
Lease liability	42,203		43,661
Other liabilities	3,661		3,022
Total liabilities	183,243		206,131
Commitments and contingencies (see Note 11)
Shareholders' equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued and outstanding at both September 30, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 100,000,000 authorized; 70,111,309 and 57,854,559 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	70		58
Additional paid-in capital	3,924,237		3,453,066
Accumulated other comprehensive loss	(1,550)		(3,719)
Accumulated deficit	(2,976,292)		(2,452,889)
Total shareholders' equity	946,465		996,516
Total liabilities and shareholders' equity	$	1,129,708	$	1,202,647

See accompanying notes

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MIRATI THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue
Product revenue, net	$	16,400	$	—	$	36,056	$	—
License and collaboration revenues	—		5,431		1,201		11,502
Total revenue	16,400		5,431		37,257		11,502
Operating expenses
Cost of product revenue	1,428		—		3,011		—
Cost of product revenue - intangible asset amortization	259		—		776		—
Research and development	114,766		131,076		365,636		390,391
Selling, general and administrative	72,001		60,798		220,981		168,977
Total operating expenses	188,454		191,874		590,404		559,368
Loss from operations	(172,054)		(186,443)		(553,147)		(547,866)
Other income, net	10,150		13,136		29,744		9,728
Loss before income taxes	(161,904)		(173,307)		(523,403)		(538,138)
Income tax expense	—		254		—		254
Net loss	$	(161,904)	$	(173,561)	$	(523,403)	$	(538,392)
Unrealized gain (loss) on available-for-sale investments	106		(1)		2,175		(5,712)
Foreign currency translation adjustment	59		(9,485)		(6)		(9,485)
Comprehensive loss	$	(161,739)	$	(183,047)	$	(521,234)	$	(553,589)
Net loss per share, basic and diluted	$	(2.49)	$	(3.09)	$	(8.66)	$	(9.66)

Weighted average common shares outstanding, basic and diluted	64,993,079		56,219,416		60,419,755		55,747,205

See accompanying notes

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MIRATI THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)


Three Months Ended September 30, 2023
	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total shareholders’ equity

	Shares	Amount
Balance at June 30, 2023	58,339,232	$	58	$	3,544,996	$	(1,715)	$	(2,814,388)	$	728,951
Net loss	—	—		—		—		(161,904)		(161,904)
Issuance of common stock and warrants, net of issuance costs	11,288,336	11		332,504		—		—		332,515
Share-based compensation expense	—	—		44,553		—		—		44,553

Issuance of common stock under equity incentive plans	483,741	1		2,184		—		—		2,185

Unrealized gain on investments	—	—		—		106		—		106
Foreign currency translation adjustment	—	—		—		59		—		59
Balance at September 30, 2023	70,111,309	$	70	$	3,924,237	$	(1,550)	$	(2,976,292)	$	946,465


Three Months Ended September 30, 2022
	Common Stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total shareholders’ equity

	Shares	Amount
Balance at June 30, 2022	55,592,631	$	56	$	3,185,444	$	3,357	$	(2,076,853)	$	1,112,004
Net loss	—	—		—		—		(173,561)		(173,561)
Issuance of common stock under ATM, net of issuance costs	1,880,097	2		155,009		—		—		155,011
Share-based compensation expense	—	—		42,992		—		—		42,992

Issuance of common stock under equity incentive plans	96,041	—		2,094		—		—		2,094

Unrealized loss on investments	—	—		—		(1)		—		(1)
Foreign currency translation adjustment	—	—		—		(9,485)		—		(9,485)
Balance at September 30, 2022	57,568,769	$	58	$	3,385,539	$	(6,129)	$	(2,250,414)	$	1,129,054

See accompanying notes

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MIRATI THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)


Nine Months Ended September 30, 2023
	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total shareholders’ equity

	Shares	Amount
Balance at December 31, 2022	57,854,559	$	58	$	3,453,066	$	(3,719)	$	(2,452,889)	$	996,516
Net loss	—	—		—		—		(523,403)		(523,403)
Issuance of common stock and warrants, net of issuance costs	11,288,336	11		332,504		—		—		332,515

Share-based compensation expense	—	—		130,913		—		—		130,913
Issuance of common stock from ESPP	105,352	—		3,328		—		—		3,328
Issuance of common stock under equity incentive plans	863,062	1		4,426		—		—		4,427

Unrealized gain on investments	—	—		—		2,175		—		2,175
Foreign currency translation adjustment	—	—		—		(6)		—		(6)
Balance at September 30, 2023	70,111,309	$	70	$	3,924,237	$	(1,550)	$	(2,976,292)	$	946,465


Nine Months Ended September 30, 2022
	Common Stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total shareholders' equity

	Shares	Amount
Balance at December 31, 2021	55,356,904	$	55	$	3,099,937	$	9,068	$	(1,712,022)	$	1,397,038
Net loss	—	—		—		—		(538,392)		(538,392)
Issuance of common stock under ATM, net of issuance costs	1,880,097	2		155,009		—		—		155,011
Share-based compensation expense	—	—		124,581		—		—		124,581
Issuance of common stock from ESPP	29,891	—		995		—		—		995
Issuance of common stock under equity incentive plans	301,877	1		5,017		—		—		5,018

Unrealized loss on investments	—	—		—		(5,712)		—		(5,712)
Foreign currency translation adjustment	—	—		—		(9,485)		—		(9,485)
Balance at September 30, 2022	57,568,769	$	58	$	3,385,539	$	(6,129)	$	(2,250,414)	$	1,129,054

See accompanying notes

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MIRATI THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net loss	$	(523,403)	$	(538,392)
Non-cash adjustments reconciling net loss to operating cash flows

Change in fair value on long-term investment	(94)		6,336
Depreciation and amortization expense	3,297		2,038
Amortization of premium and accretion of discounts on investments	(16,480)		(151)
Share-based compensation expense	130,913		124,581
Loss on disposal of property and equipment	—		294
Foreign currency adjustments	—		(9,485)
Changes in operating assets and liabilities:
Accounts receivable, net	(13,786)		—
Inventory	(17,136)		—
Other current assets	(3,600)		(8,149)
Other long-term assets	(3,174)		(2,009)
Right-of-use asset	1,056		1,220
Lease liability	(1,282)		4,039
Accounts payable, accrued liabilities and other liabilities	(21,606)		(22,092)
Cash flows used in operating activities	(465,295)		(441,770)
Investing activities:
Purchases of short-term investments	(705,418)		(719,371)
Sales and maturities of short-term investments	854,934		889,918
Purchases of property and equipment	(1,027)		(4,041)
Cash flows provided by investing activities	148,489		166,506
Financing activities:
Proceeds from issuance of common stock and warrants, net of issuance costs	332,515		155,011
Proceeds from issuance of common stock under equity incentive plans	4,427		5,018
Proceeds from issuance of common stock from employee stock purchase plan	3,328		995
Cash flows provided by financing activities	340,270		161,024
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(6)		—
Increase (decrease) in cash, cash equivalents and restricted cash	23,458		(114,240)
Cash, cash equivalents and restricted cash, beginning of period	235,880		413,703
Cash, cash equivalents and restricted cash, end of period	$	259,338	$	299,463

Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	$	258,718	$	298,843
Restricted cash included in other long-term assets	620		620
Total cash, cash equivalents and restricted cash	$	259,338	$	299,463

Supplemental disclosures of non-cash investing activities:
Accrued capital expenditures	$	—	$	367

See accompanying notes

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MIRATI THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Mirati Therapeutics, Inc. (“Mirati” or the “Company”) is a commercial-stage oncology company focused on the discovery, design and delivery of breakthrough therapies that address areas of high unmet need, including lung cancer, and advancing product candidates targeting the genetic and immunological drivers of cancer. The Company was incorporated under the laws of the State of Delaware on April 29, 2013 as Mirati Therapeutics, Inc. and is located in San Diego, California. The Company has a wholly-owned subsidiary, Mirati Therapeutics B.V. (“Mirati B.V.”), which was formed on August 3, 2021 in Amsterdam, Netherlands, and Mirati Therapeutics (Suisse) GmbH (“Mirati Suisse”), which was formed on May 24, 2022 in Zug, Switzerland, is a wholly-owned subsidiary of Mirati B.V. The Company’s former wholly-owned subsidiary in Canada, MethylGene, Inc., was formed on May 8, 2013 and was formally dissolved in the fourth quarter of 2022.

The Company operates as one business segment, primarily in the United States. The Company’s common stock has been listed on the Nasdaq Global Select Market since June 5, 2018, and was previously listed on the Nasdaq Capital Market since July 15, 2013, under the ticker symbol “MRTX.”

Agreement and Plan of Merger

On October 8, 2023, the Company announced it entered into an Agreement and Plan of Merger (“Merger Agreement”) with Bristol-Myers Squibb Company, a Delaware corporation (“BMS”), and Vineyard Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of BMS (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of BMS. Refer to footnote 12, Subsequent Events, for more information.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.

In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for the full year. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Reported amounts and footnote disclosures reflect the overall economic conditions that are most likely to occur and anticipated measures management intends to take. Actual results could differ materially from those estimates. Estimates and assumptions are reviewed quarterly. Any revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Cash, Cash Equivalents and Short-term Investments

Cash and cash equivalents consist of cash and highly liquid securities with original maturities at the date of acquisition of ninety days or less. Investments with an original maturity of more than ninety days are considered short-term investments

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and have been classified by management as available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current consolidated balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary. Such investments are carried at fair value, and the unrealized gains and losses are reported as a component of accumulated other comprehensive loss in shareholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis.

Concentration of Credit Risk

The Company invests its excess cash in accordance with its investment policy. The Company’s investments are comprised primarily of commercial paper and debt instruments of financial institutions, corporations, U.S. government-sponsored agencies and the U.S. Treasury. The Company mitigates credit risk by maintaining a diversified portfolio and limiting the amount of investment exposure as to institution, maturity and investment type. Financial instruments that potentially subject the Company to significant credit risk consist principally of cash equivalents and short-term investments.

Accounts Receivable, net

Accounts receivable, net consists of trade receivables which are amounts due from customers related to product sales. The Company records trade receivables net of chargebacks, invoice discounts, distribution service fees and any allowances for doubtful accounts for potential credit losses. An allowance for doubtful accounts is determined based on the financial condition and creditworthiness of customers and the Company considers economic factors and events or trends expected to affect future collections experience. Any allowance would reduce the net receivables to the amount that is expected to be collected. The payment history of the Company’s customers will be considered in future assessments of collectability as these patterns are established over a longer period. As of September 30, 2023 and December 31, 2022, the Company determined an allowance for doubtful accounts was not required.

Inventory

The Company began capitalizing inventory for KRAZATI, which received approval by the U.S. Food and Drug Administration (“FDA”) and launched commercially in the U.S. in December 2022. KRAZATI (adagrasib) is approved for the treatment of adult patients with KRAS G12C-mutated non-small cell lung cancer (“NSCLC”) who have received at least one prior systemic therapy. Prior to regulatory approval, all direct and indirect manufacturing costs were charged to research and development expense in the period incurred.

Inventory is comprised of raw materials, work-in-process and finished goods, and includes costs related to third-party contract manufacturing, packaging, freight-in and overhead. Inventory is stated at the lower of cost or net realizable value with cost based on the first-in-first-out method. The Company performs an assessment of recoverability of capitalized inventory during each reporting period based on an analysis of forecasted demand compared to quantities on hand and any firm purchase orders, as well as product shelf life, and writes down any excess, obsolete or unsaleable inventory to its estimated realizable value in the period which the impairment is first identified. Such write downs, should they occur, are charged to cost of product revenue in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2023 and December 31, 2022, the Company did not identify any impaired inventory.

Revenue Recognition

The Company recognizes revenue in accordance with the guidance of Revenue From Contracts With Customers, Accounting Standards Codification (“ASC”) Topic 606 (“Topic 606”). Under Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements the Company determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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Product revenue, net

The Company’s product revenue consists of sales of KRAZATI. The Company sells KRAZATI principally to specialty pharmacies and specialty distributors, which are referred to as the Company’s customers. These customers subsequently resell the product to healthcare providers and patients. Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer.

The Company records revenues from product sales at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established primarily from chargebacks, government and commercial rebates, incentives, product returns, trade discounts and other allowances that are offered in contracts between the Company and its customers, healthcare providers and other third-party payors relating to the sales of its product. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of trade receivables, if the amount is deductible by the customer from payments to the Company, which is included within accounts receivable, net on the condensed consolidated balance sheets, or a current liability, if the amount is payable by the Company to a customer or third-party, which is included within accrued liabilities on the condensed consolidated balance sheets. The Company estimates the amount of variable consideration to include in the transaction price using the expected value method. These estimates take into consideration relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, forecasted customer buying and payment patterns, and the Company’s historical experience that will develop over time as KRAZATI is the Company’s first commercial product. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts. The amount of variable consideration may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

From time to time, the Company may sell KRAZATI to other commercial customers conducting clinical trials. These sales are recorded as part of product revenue, net and reflected at the transaction price, which includes estimates of variable consideration for trade allowances as discussed below.

The following are the components of variable consideration related to product revenue:

Chargebacks. Chargebacks relate to contracts with various third-party payors, including governmental healthcare programs, managed care providers, group purchasing organizations and other organizations, that generally purchase the product from a specialty distributor at a discounted price. The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by its contracted customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales by the specialty distributor to its contracted customers. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and a reduction of trade receivables.

Government rebates. The Company is subject to discount obligations under Medicare, Medicaid, and other governmental healthcare programs in the U.S. The Company’s estimates of rebates are based on the government-mandated discounts, which are statutorily-defined and applicable to these government funded programs. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the accrual of an estimated liability. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program.

Commercial rebates. The Company contracts with various private payor organizations and group purchasing organizations for the payment of rebates with respect to the utilization of its product. The Company’s estimates for the expected utilization of rebates are based on customer and payor data received from the specialty pharmacies and specialty distributors and historical utilization rates that will develop over time as KRAZATI is the Company’s first commercial product. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the accrual of an estimated liability.

Incentives. The Company offers incentives such as co-payment assistance to commercially insured patients in the U.S. who meet certain eligibility requirements. The Company may provide financial assistance to participating patients with prescription drug co-payments required by the patients’ insurance provider, up to a specified dollar amount. These reserves are

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recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the accrual of an estimated liability.

Product returns. Generally, the Company’s customers have the right to return product for a limited time before and after its expiration date. Since the Company does not have its own returns experience, it estimates returns based on available industry data for comparable products in the market as well as other information, such as visibility into the inventory remaining in the distribution channel and expiration date. As the Company distributes its product and establishes historical sales over a longer period of time, the Company will be able to place more reliance on historical purchasing, demand and return patterns of its customers when evaluating its reserves for product returns. The estimate for product returns is recorded as an accrued liability and a reduction of revenue in the period the related product sales are recognized.

Trade allowances. The Company may provide invoice discounts on product sales to its customers for prompt payment based on contractual terms. These discounts are recorded as a reduction of revenue in the period the related product revenue is recognized. Trade receivables are recorded net of the allowance for these discounts. The Company also pays fees to its distributors for their services. The Company has determined such services are not distinct from the Company’s sale of product to its customers and therefore records these payments as a reduction of revenue and a reduction of trade receivables in the period the related product revenue is recognized. To the extent the services received are distinct from the Company’s sale of product to its customers, these payments will be recorded within selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

License and collaboration revenues

The Company’s license and collaboration revenues have been generated primarily through collaborative research, development, manufacture and commercialization agreements. The terms of these agreements generally include the license of intellectual property and associated know-how and the provision of other goods and services. Payments to the Company under these arrangements typically include one or more of the following: non-refundable, up-front license fees; manufacturing supply services; milestone payments; and royalties on future product sales.

License of Intellectual Property. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue associated with the bundled performance obligation.

Manufacturing Supply Services. The Company’s obligation under the agreements may include the initial supply of material for clinical development. If determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to this performance obligation when the collaborative partner obtains control of the goods. If determined not to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the combined performance obligation as the related performance obligations are satisfied.

Milestone Payments. At the inception of each arrangement that includes milestone payments based upon the achievement of specified clinical development, regulatory and/or sales milestones, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price. If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price. Milestone payments that are dependent on factors outside of the Company’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. These payments are fully constrained and therefore are not included in the transaction price. At the end of each reporting period, the Company re-evaluates the probability of achievement of each milestone and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of license and collaboration revenues in the period of adjustment.

Royalties. For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

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Intangible Asset, Net

The Company’s finite-lived intangible asset resulted from the capitalization of a milestone payment due under a license and collaboration agreement in connection with the first commercial sale of KRAZATI in the U.S. in December 2022. The intangible asset will be amortized on a straight-line basis over its remaining useful life, which is estimated to be the remaining patent life of KRAZATI. Amortization expense is recorded as cost of product revenue - intangible asset amortization in the condensed consolidated statements of operations and comprehensive loss.

Cost of Product Revenue

Cost of product revenue includes direct and indirect costs related to the manufacturing and distribution of KRAZATI, including materials, third-party contract manufacturing costs, packaging services, freight-in, overhead, royalties payable on net sales of KRAZATI and inventory reserves. All product costs incurred prior to FDA approval of KRAZATI in December 2022 were charged to research and development expense.

Leases

The Company determines if an arrangement is a lease at inception. Lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. For operating leases with an initial term greater than 12 months, the Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of lease payments over the lease term at the commencement date. Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives. Lease terms include options to renew or terminate the lease when the Company is reasonably certain that the renewal option will be exercised or when it is reasonably certain that the termination option will not be exercised. For the Company’s operating leases, if the interest rate used to determine the present value of future lease payments is not readily determinable, the Company estimates its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient to not separate lease and non-lease components.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents as they are anti-dilutive. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and common share equivalents outstanding for the period, as well as certain shares that are contingently issuable. Common share equivalents outstanding, determined using the treasury stock method, are comprised of shares that may be issued under the Company’s stock option and warrant agreements, as well as restricted stock units and performance stock units.

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The following table presents the weighted-average number of common share equivalents, calculated using the treasury stock method, as well as certain shares that are contingently issuable, not included in the calculation of diluted net loss per share due to the anti-dilutive effect of the securities:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Common stock options	470,042	1,178,854	584,908	1,260,178
Common stock warrants	8,227,412	7,605,708	7,815,174	7,605,716
Unvested restricted stock units and performance stock units	2,986,911	1,872,911	3,165,184	1,399,300
Total	11,684,365	10,657,473	11,565,266	10,265,194

Recently Issued and Recently Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.

3. Investments

The following tables summarize the Company’s short-term investments (in thousands):


		As of September 30, 2023
	Maturity	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Corporate debt securities	2 years or less	$	131,273	$	—	$	(387)	$	130,886
Commercial paper	1 year or less	275,067		2		(328)		274,741
U.S. Agency bonds	2 years or less	244,277		52		(689)		243,640
U.S. Treasury bills	2 years or less	68,606		—		(157)		68,449

		$	719,223	$	54	$	(1,561)	$	717,716


		As of December 31, 2022
	Maturity	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Corporate debt securities	2 years or less	$	95,195	$	—	$	(662)	$	94,533
Commercial paper	1 year or less	443,489		65		(811)		442,743
U.S. Agency bonds	2 years or less	90,351		22		(434)		89,939
U.S. Treasury bills	2 years or less	223,216		8		(1,862)		221,362

		$	852,251	$	95	$	(3,769)	$	848,577

The Company has classified all of its short-term investments as available-for-sale as the sale of such securities may be required prior to maturity to implement management strategies, and therefore, they are carried at fair value. As of September 30, 2023 and December 31, 2022, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments before recovery of their amortized cost basis, which may be at the time of maturity. As of September 30, 2023 and December 31, 2022, no allowance for credit losses was recorded. During the three and nine months ended September 30, 2023 and 2022, the Company did not recognize any impairment losses related to investments.

The long-term investment balance of $3.6 million and $3.5 million as of September 30, 2023 and December 31, 2022, respectively, is comprised of 588,235 shares of ORIC Pharmaceuticals, Inc. (“ORIC”) common stock which were acquired in 2020. As of September 30, 2023 and December 31, 2022, the investment is carried at fair value based on the closing price of ORIC’s common stock on the last trading day of the reporting period. The Company recorded a loss of $1.0 million and a gain of $0.1 million for the three and nine months ended September 30, 2023, respectively, and losses of $0.8 million and $6.3 million for the three and nine months ended September 30, 2022, respectively, within other income, net in the condensed

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consolidated statements of operations and comprehensive loss. The Company currently does not intend to sell ORIC shares within 12 months from September 30, 2023. See Note 4 for additional information related to the investment in ORIC.

4. Fair Value Measurements

The Company has certain financial assets and liabilities 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.

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:

•Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities;

•Level 2- Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

•Level 3- Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The following tables summarize the assets measured at fair value on a recurring basis (in thousands):


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash	$	36,038	$	36,038	$	—	$	—
Money market funds	155,536		155,536		—		—
U.S. Treasury bills	47,213		47,213		—		—
Commercial paper	19,931		—		19,931		—
Total cash and cash equivalents	258,718		238,787		19,931		—

Short-term investments:
U.S. Treasury bills	68,449		68,449		—		—
Corporate debt securities	130,886		—		130,886		—
Commercial paper	274,741		—		274,741		—
U.S. Agency bonds	243,640		—		243,640		—

Total short-term investments	717,716		68,449		649,267		—

Long-term investment:
ORIC Pharmaceuticals, Inc.	3,559		3,559		—		—

Total	$	979,993	$	310,795	$	669,198	$	—

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	December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash	$	53,033	$	53,033	$	—	$	—
Money market funds	174,262		174,262		—		—
U.S. Agency bonds	7,965		—		7,965		—
Total cash and cash equivalents	235,260		227,295		7,965		—

Short-term investments:
U.S. Treasury bills	221,362		221,362		—		—
Corporate debt securities	94,533		—		94,533		—
Commercial paper	442,743		—		442,743		—
U.S. Agency bonds	89,939		—		89,939		—

Total short-term investments	848,577		221,362		627,215		—

Long-term investment:
ORIC Pharmaceuticals, Inc.	3,465		3,465		—		—

Total	$	1,087,302	$	452,122	$	635,180	$	—

The Company’s investments in Level 1 assets are valued based on publicly available quoted market prices for identical securities as of September 30, 2023 and December 31, 2022. The Company determines the fair value of Level 2 related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers.

The Company’s long-term investment in ORIC was considered a Level 3 fair value measurement during an eighteen-month lock-up period which required an adjustment for a discount for lack of marketability. During the lock-up period, the fair value measurement utilized a combination of the Asian Protective Put Option and Finnerty Put Option fair value techniques to determine the discount for lack of marketability. During the three months ended March 31, 2022, the eighteen-month lock-up period expired, and because ORIC common stock is quoted in an active market, it met the criteria of a Level 1 investment. During the three months ended March 31, 2022, the Company transferred the investment in ORIC from a Level 3 fair value measurement to a Level 1 fair value measurement. See Note 9 for further details on the license agreement with ORIC.

The following table represents the change in estimated fair value of and transfer activity for the Company’s Level 3 investment (in thousands):



Balance as of December 31, 2021	$	8,218

Change in fair value at lock-up expiration	(3,100)
Transfer from Level 3 to Level 1 at lock-up expiration	(5,118)
Balance as of March 31, 2022	$	—

Other than the investment in ORIC described above, there were no transfers between fair value measurement levels during the three and nine months ended September 30, 2023 and 2022.

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5. Inventory

Inventory consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Raw materials	$	4,060	$	—
Work-in-process	15,046		2,994
Finished goods	1,050		26
Total inventory	$	20,156	$	3,020

The Company’s capitalized inventory consists of costs incurred subsequent to FDA approval of KRAZATI in December 2022. There were no inventory write downs during the three and nine months ended September 30, 2023.

6. Other Current Assets and Other Long-Term Assets

Other current assets and other long-term assets consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Other current assets:
Prepaid expenses	$	19,361	$	15,207
Deposits and other receivables	2,085		3,162
Interest receivables	3,393		2,870
Total other current assets	$	24,839	$	21,239

Other long-term assets:
Deposits and prepaid expenses	$	24,199	$	21,025
Restricted cash	620		620
Total other long-term assets	$	24,819	$	21,645

7. Intangible asset, net

Intangible asset, net consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Gross carrying value	$	15,000	$	15,000
Less: Accumulated amortization	(862)		(86)
Intangible asset, net	$	14,138	$	14,914

The Company has a finite-lived intangible asset, resulting from the capitalization of a milestone payment under the license and collaboration agreement with Array BioPharma, Inc. (“Array,” acquired by Pfizer Inc. (“Pfizer”) in July 2019), in connection with the Company’s first commercial sale of KRAZATI in the U.S. in December 2022 (see Note 9). The Company began amortizing the intangible asset in December 2022 over a 14.5-year period based on KRAZATI’s expected patent life, which is considered to be KRAZATI’s useful life. The Company incurred amortization expense of $0.3 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, which was included in cost of product revenue -

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intangible asset amortization in the condensed consolidated statements of operations and comprehensive loss. No amortization expense was recorded for the three and nine months ended September 30, 2022.

As of September 30, 2023, the estimated future amortization expense associated with the Company’s intangible asset is as follows (in thousands):


Remainder of 2023	$	258
2024	1,034
2025	1,034
2026	1,034
2027	1,034
Thereafter	9,744
Total	$	14,138

8. Accrued Liabilities and Other Liabilities

Accrued liabilities and other liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Accrued liabilities:
Accrued clinical expense	$	35,184	$	37,604
Accrued manufacturing expense	5,310		6,605
Accrued development expense	5,006		20,107
Accrued compensation and benefits	34,495		40,208
Accrued commercial expense	2,920		3,941
Accrued royalty expense	1,187		—
Accrued adjustments to product revenue	2,772		152
Lease liability (current)	8,020		7,844
Other accrued expenses	4,524		4,126
Total accrued liabilities	$	99,418	$	120,587

Other liabilities	$	3,661	$	3,022

Other liabilities as of September 30, 2023 and December 31, 2022 consisted primarily of clinical trial-related liabilities.

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9. Revenue

Product revenue, net

The Company’s product revenue is related to U.S. sales of KRAZATI. Revenue is reduced at the time of recognition for the Company’s best estimate of chargebacks, government and commercial rebates, incentives, returns, trade discounts and other allowances to which customers are entitled. These reductions are currently attributed to various commercial arrangements.

The Company recognized $1.3 million and $3.0 million of product revenue, net related to sales of KRAZATI to a third-party commercial customer for its clinical trials during the three and nine months ended September 30, 2023, respectively. This revenue is recognized net of the Company’s best estimate of trade allowances.

As of September 30, 2023 and December 31, 2022, the Company’s accounts receivable balances of $14.7 million and $0.9 million, respectively, on the condensed consolidated balance sheets consisted of KRAZATI product sales receivable, net of chargebacks, discounts and allowances of $1.0 million and $0.1 million, respectively.

As of September 30, 2023 and December 31, 2022, the Company’s government and commercial rebates, program incentives and provision for product returns totaled $2.8 million and $0.2 million, respectively, and are included in accrued liabilities on the condensed consolidated balance sheets.

License and Collaboration Agreements

BeiGene Agreement

Terms of Agreement

On January 7, 2018, the Company and BeiGene Ltd. (“BeiGene”) entered into a Collaboration and License Agreement (the “BeiGene Agreement”), pursuant to which the Company and BeiGene agreed to collaboratively develop sitravatinib in Asia (excluding Japan and certain other countries), Australia and New Zealand (collectively, the “BeiGene Licensed Territory”). Under the BeiGene Agreement, the Company granted BeiGene an exclusive license to develop, manufacture and commercialize sitravatinib in the BeiGene Licensed Territory, with the Company retaining exclusive rights for the development, manufacture and commercialization of sitravatinib outside the BeiGene Licensed Territory.

As consideration for the rights granted to BeiGene under the BeiGene Agreement, BeiGene paid the Company a non-refundable, non-creditable up-front fee of $10.0 million. BeiGene is also required to make milestone payments to the Company of up to an aggregate of $123.0 million upon the first achievement of specified clinical, regulatory and sales milestones. The BeiGene Agreement additionally provides that BeiGene is obligated to pay the Company royalties at tiered percentage rates ranging from mid-single digits to twenty percent on annual net sales of licensed products in the BeiGene Licensed Territory, subject to reduction under specified circumstances. The BeiGene Agreement also provides that the Company will supply BeiGene with sitravatinib for use in BeiGene’s development activities in the BeiGene Licensed Territory.

The BeiGene Agreement will terminate upon the expiration of the last royalty term for the licensed products, which is the latest of (i) the date of expiration of the last valid patent claim related to the licensed products under the BeiGene Agreement, (ii) ten years after the first commercial sale of a licensed product and (iii) the expiration of any regulatory exclusivity as to a licensed product. BeiGene may terminate the BeiGene Agreement at any time by providing 60 days prior written notice to the Company. Either party may terminate the BeiGene Agreement upon a material breach by the other party that remains uncured following 60 days after the date of written notice of such breach or upon certain bankruptcy events. In addition, the Company may terminate the BeiGene Agreement upon written notice to BeiGene under specified circumstances if BeiGene challenges the licensed patent rights.

Revenue Recognition

The Company evaluated the BeiGene Agreement under Topic 606. At the time it entered into the BeiGene Agreement, the Company determined the transaction price was equal to the up-front fee of $10.0 million. The transaction price was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies. As such, of the up-front fee, the Company allocated $9.5 million to the license of the Company’s intellectual property, bundled with the associated know-how, and the

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remaining $0.5 million to the initial obligation to supply sitravatinib for clinical development in the BeiGene Licensed Territory.

Licenses of Intellectual Property. The license to the Company’s intellectual property, bundled with the associated know-how, represents a distinct performance obligation and the Company recognized the full revenue amount of $9.5 million related to this performance obligation as license and collaboration revenues in 2018.

Manufacturing Supply Services. The Company’s initial obligation to supply sitravatinib for clinical development in the BeiGene Licensed Territory represents a distinct performance obligation, and the $0.5 million initial supply obligation was fully recognized as license and collaboration revenues as of December 31, 2020. Although the initial performance obligation was satisfied, BeiGene may request additional sitravatinib in the future for clinical development in the BeiGene Licensed Territory. No revenue related to this performance obligation was recognized for the three and nine months ended September 30, 2023 or 2022.

Milestone Payments. The Company is entitled to development milestones under the BeiGene Agreement and certain regulatory milestone payments which are paid upon receipt of regulatory approvals within the BeiGene Licensed Territory. No milestone payments were earned during the three and nine months ended September 30, 2023 or 2022. The Company evaluated whether the remaining milestones are considered probable of being reached and determined that their achievement is highly dependent on factors outside of the Company’s control. Therefore, these payments have been fully constrained and are not included in the transaction price. At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of license and collaboration revenues in the period of adjustment.

Royalties. As the license is deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur. No royalty revenue was recognized during the three and nine months ended September 30, 2023 or 2022.

Pfizer Agreement

In October 2014, the Company entered into a drug discovery collaboration and option agreement with Array BioPharma, Inc. (“Array,” acquired by Pfizer Inc. (“Pfizer”) in July 2019) whereby Array provided services to facilitate the discovery, optimization and development of small molecule compounds that bind and specifically inhibit KRAS G12C. In June 2017, the two parties entered into a second, separate discovery collaboration and option agreement whereby Array provided services to facilitate the discovery, optimization and development of small molecule compounds that bind and specifically inhibit KRAS G12D. Both agreements established an option mechanism which enabled the Company to elect an exclusive worldwide license under the technology for the development and commercialization of certain products based on these compounds.

Under these agreements, following the joint discovery periods, which have since concluded, the Company exercised its options to retain exclusive worldwide licenses to develop, manufacture and commercialize inhibitors of KRAS G12C and KRAS G12D, including, but not limited to, adagrasib and MRTX1133. Under each agreement, Pfizer is entitled to potential development milestone payments of up to $9.3 million from the Company, and tiered sales milestone payments of up to $337.0 million based upon worldwide net sales, and tiered royalties in the high single digits to mid-teens on worldwide net sales of products arising from the collaborations. Under the agreements, the Company has incurred an aggregate of $10.5 million in development milestone payments and a $15.0 million commercial milestone payment relating to the first sale of KRAZATI in the U.S. from inception through September 30, 2023. The $15.0 million milestone payment relating to the first commercial sale of KRAZATI in the U.S. was capitalized as an intangible asset as of December 31, 2022 (see Note 7).

During the three and nine months ended September 30, 2023, the Company incurred zero and $1.0 million, respectively, in development milestone payments, for initiation of the first Phase 1 trial for MRTX1133 which was recorded as a research and development expense in the condensed consolidated statement of operations and comprehensive loss. During the three and nine months ended September 30, 2023, the Company also incurred $1.2 million and $2.6 million, respectively, of royalties on net sales of KRAZATI which were recorded as cost of product revenue in the condensed consolidated statement of operations and comprehensive loss. No expenses were incurred under these agreements with Pfizer during the three and nine months ended September 30, 2022.

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The royalty term for each agreement is payable on a country-by-country and product-by-product basis, and separately will terminate at the later of (i) the date of expiration of the last valid patent claim within the collaboration patent rights or the Pfizer background technology covering such product in the country in which such product is sold at the time of such sale, or (ii) ten years after the first commercial sale of such product in such country. The Company may terminate each agreement at any time by providing 60 days prior written notice to Pfizer. Either party may terminate each agreement upon a material breach by the other party that remains uncured following 60 days after the date of written notice of such breach or upon certain bankruptcy events.

ORIC Pharmaceuticals Agreement

Terms of Agreement

On August 3, 2020, the Company entered into a license agreement with ORIC Pharmaceuticals, Inc. (“ORIC”) pursuant to which the Company granted to ORIC an exclusive, worldwide license to develop and commercialize the Company’s allosteric polycomb repressive complex 2 (“PRC2”) inhibitors for all indications (the “ORIC Agreement”). In accordance with the terms of the ORIC Agreement, in exchange for such license, ORIC issued 588,235 shares of its common stock (the “Shares”) to the Company on August 3, 2020. The Shares were issued under a stock issuance agreement entered into between ORIC and the Company, dated August 3, 2020. During the eighteen-month period following the date of the stock issuance agreement, the Company was subject to certain transfer restrictions. ORIC is not obligated to pay the Company milestone payments or royalty payments under the ORIC Agreement.

Unless terminated earlier, the ORIC Agreement will continue in effect on a country-by-country and licensed product-by-licensed product basis until the later of (a) the expiration of the last valid claim of a licensed patent covering such licensed product in such country or (b) ten years after the first commercial sale of such licensed product in such country. Following the expiration of the ORIC Agreement, ORIC will retain its licenses under the intellectual property the Company licensed to ORIC on a royalty-free basis. The Company and ORIC may each terminate the ORIC Agreement if the other party materially breaches the terms of such agreement, subject to specified notice and cure provisions, or enters into bankruptcy or insolvency proceedings. The Company may terminate the agreement if ORIC challenges any of the patent rights licensed to ORIC by the Company or if ORIC discontinues development of licensed products for a specified period of time. ORIC also has the right to terminate the ORIC Agreement without cause by providing prior written notice to the Company.

Revenue Recognition

The Company accounted for the ORIC Agreement under Topic 606 and identified the granting of an exclusive, worldwide license to develop and commercialize the Company’s allosteric PRC2 inhibitors for all indications as a distinct performance obligation since ORIC can benefit from the license on its own by developing and commercializing the underlying product using its own resources.

In determining the transaction price, the Company received the Shares as non-cash consideration. The Company allocated the entire transaction price to the distinct performance obligation described above, and the license and related know-how was transferred to ORIC during the third quarter of 2020. Therefore, the Company recognized the entire transaction price of $11.4 million during 2020 and classified the amount as license and collaboration revenues in its condensed consolidated statements of operations and comprehensive loss.

The Shares are carried at fair value and are recorded on the condensed consolidated balance sheet as a long-term investment. Any change in fair value is recorded within other income, net in the condensed consolidated statements of operations and comprehensive loss.

Zai Agreement

Terms of Agreement

On May 28, 2021, the Company and Zai Lab Ltd. (“Zai”) entered into a Collaboration and License Agreement (the “Zai Agreement”), pursuant to which the Company and Zai agreed to collaboratively develop adagrasib in China, Hong Kong, Macau and Taiwan (collectively, the “Zai Licensed Territory”). Under the Zai Agreement, the Company granted Zai the rights to research, develop, manufacture and exclusively commercialize adagrasib in all indications in the Zai Licensed Territory, with the Company retaining exclusive rights for the development, manufacture and commercialization of adagrasib outside the Zai Licensed Territory and certain co-commercialization, manufacture, and development rights in the Zai Licensed Territory. Zai is

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obligated to participate in selected global, registration-enabling clinical trials and enroll patients in the Zai Licensed Territory at Zai’s expense.

As consideration for the rights granted to Zai under the Zai Agreement, Zai agreed to pay the Company a non-refundable, non-creditable up-front fee of $65.0 million. Under the Zai Agreement, the Company is entitled to potential development and regulatory-based milestone payments of up to $93.0 million, and tiered sales milestone payments of up to $180.0 million based on net sales in the Zai Licensed Territory. The Zai Agreement additionally provides that Zai is obligated to pay to the Company royalties at tiered percentage rates ranging from the high-teens to the low-twenties on annual net sales of licensed products in the Zai Licensed Territory, subject to reduction under specified circumstances. The Zai Agreement also provides that the Company will supply Zai with adagrasib for use in Zai’s development activities in the Zai Licensed Territory at Zai's expense.

The Zai Agreement will terminate on a licensed product-by-licensed product basis and on a region-by-region basis in the Zai Licensed Territory, upon the later to occur of (i) the date of expiration of the last valid claim covering such licensed product in such region, (ii) the date that is ten years after the date of the first commercial sale in such region and (iii) the expiration date of any regulatory exclusivity for such licensed product in such region, or for a co-commercialized product on the date the parties agree to terminate such co-commercialization, or in its entirety upon the expiration of all payment obligations under the Zai Agreement. Zai may terminate the Zai Agreement at any time by providing 12 months’ notice to the Company. Either party may terminate the Zai Agreement upon a material breach by the other party that remains uncured or upon certain bankruptcy events. In addition, the Company may terminate the Zai Agreement if Zai challenges the licensed patent rights.

Revenue Recognition

The Company evaluated the Zai Agreement under Topic 606. The Company determined that two performance obligations existed: (1) the license to intellectual property, bundled with the associated know-how and (2) the Company's initial obligation to supply adagrasib for clinical development in the Zai Licensed Territory. At the time it entered into the Zai Agreement, the Company determined the transaction price was equal to $66.6 million, which includes the up-front fee and other incidental amounts. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success, forecasted costs for manufacturing clinical supplies and cost savings related to Zai's participation in selected trials. The Company allocated the full transaction price to the license to the Company’s intellectual property, bundled with the associated know-how. The Company concluded the variable payments related to the Company’s initial obligation to supply adagrasib for clinical development in the Zai Licensed Territory relate specifically to the Company’s efforts to satisfy this performance obligation and the obligation to provide the initial clinical supply approximates the stand-alone selling price. Payments under the Zai Agreement are subject to foreign tax withholdings.

Licenses of Intellectual Property. The license to the Company’s intellectual property, bundled with the associated know-how, represents a distinct performance obligation. The license and associated know-how was transferred to Zai during the third quarter of 2021 and, therefore during 2021, the Company recognized the full revenue amount of $66.6 million as license and collaboration revenues and $3.3 million as income tax expense in its condensed consolidated statements of operations and comprehensive loss.

Manufacturing Supply Services. The Company’s initial obligation to supply adagrasib for clinical development in the Zai Licensed Territory represents a distinct performance obligation. As such, the Company will recognize revenue when Zai obtains control of the goods. The Company recognized zero and $1.2 million of revenue related to this performance obligation for the three and nine months ended September 30, 2023, respectively. The Company recognized $0.3 million and $1.4 million of revenue related to this performance obligation for the three and nine months ended September 30, 2022, respectively. The Company may also become responsible for manufacturing adagrasib for commercial supply and will receive reimbursement that approximates stand-alone selling prices.

Milestone Payments. The Company is entitled to development milestone payments and certain regulatory and sales milestone payments which are paid upon achievement of the development milestones, upon receipt of regulatory approvals and annual net sales thresholds within the Zai Licensed Territory under the Zai Agreement. No milestone payments were earned during the three and nine months ended September 30, 2023. The Company earned a $5.0 million milestone payment related to the initiation of the first pivotal clinical trial of adagrasib for the second indication in China during the three months ended September 30, 2022. The Company earned a $5.0 million milestone payment related to the initiation of the first pivotal clinical trial of

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adagrasib for the first indication in China and a $5.0 million milestone payment related to the initiation of the first pivotal clinical trial of adagrasib for the second indication in China during the nine months ended September 30, 2022. The Company evaluated whether or not the milestones are considered probable of being reached and determined that their achievement is highly dependent on factors outside of the Company’s control. These payments have been fully constrained and therefore are not included in the transaction price. At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of each milestone and any related constraint and, if necessary, adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect the reported amount of license and collaboration revenues in the period of adjustment.

10. Shareholders’ Equity

Sale of Common Stock

In August 2023, the Company sold 11,288,336 shares of its common stock at a public offering price of $27.80 per share and sold warrants to purchase up to 1,121,736 shares of its common stock at a public offering price of $27.799 per warrant. After deducting underwriter discounts and offering expenses, the Company received net proceeds from the transaction of $332.5 million. These warrants were recorded as a component of stockholders’ equity within additional paid-in capital. Per their terms, the outstanding warrants to purchase shares of common stock may not be exercised if certain holders' ownership of the Company’s common stock would exceed 4.99 percent for certain holders, and 9.99 percent for other holders, following such exercise.

At the Market Facility

On July 2, 2020, the Company entered into a sales agreement pursuant to which the Company may, from time to time, sell shares of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $200.0 million. On July 2, 2021, the Company entered into an amended and restated sales agreement pursuant to which the Company may, from time to time, sell shares of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $500.0 million. During the three and nine months ended September 30, 2023, no shares of common stock were issued and sold under this sales agreement. As of September 30, 2023, the Company has issued and sold an aggregate of 1,880,097 shares of common stock pursuant to this sales agreement generating net proceeds of $155.0 million.

Share-based Compensation

Total share-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss consisted of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development expense	$	19,480	$	28,276	$	62,518	$	77,343
Selling, general and administrative expense	25,073		14,716		68,395		47,238
	$	44,553	$	42,992	$	130,913	$	124,581

Issuances Under Equity Incentive Plans

During the three and nine months ended September 30, 2023, 483,741 and 863,062 shares of common stock were issued under the Company’s equity incentive plans, generating net proceeds of $2.2 million and $4.4 million, respectively. During the three and nine months ended September 30, 2022, 96,041 and 301,877 shares of common stock were issued under the Company’s equity incentive plans, generating net proceeds of $2.1 million and $5.0 million, respectively.

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Issuances Under Employee Stock Purchase Plan

On May 11, 2023, an amendment to the Company’s 2013 Employee Stock Purchase Plan (“ESPP”) was approved by the Company’s shareholders, to increase the aggregate number of shares of common stock reserved for issuance under the ESPP by 750,000 shares. During the three and nine months ended September 30, 2023, zero and 105,352 shares of common stock were issued under the Company’s ESPP, generating net proceeds of zero and $3.3 million, respectively. During the three and nine months ended September 30, 2022, zero and 29,891 shares of common stock were issued under the Company’s ESPP, generating net proceeds of zero and $1.0 million, respectively.

Warrants

As of September 30, 2023, the following warrants for common stock were issued and outstanding:


Issue Date	Expiration Date	Exercise Price		Number of Warrants Outstanding
January 11, 2017	None	$	0.001	3,578,036
November 20, 2017	None	$	0.001	3,669,360
June 11, 2018	None	$	0.001	358,415
August 11, 2023	None	$	0.001	1,121,736
				8,727,547

No warrants were exercised during the three and nine months ended September 30, 2023 or 2022.

11. Commitments and Contingencies

On June 30, 2020, the Company entered into an amended and restated lease agreement (the “Amended and Restated Lease”) for office and laboratory space located in San Diego, California, for the Company’s current corporate headquarters, which supercedes the original lease agreement dated August 22, 2019. The Amended and Restated Lease has a lease term of 12 years (“Lease Term”), unless terminated earlier. The Lease Term has an initial abatement period, and the initial base rent payable will be approximately $0.6 million per month following the abatement period, which amount will increase by 3% per year over the Lease Term. The Company also received incentives from the landlord for tenant improvements. During 2020, the underlying asset was available for use by the Company to construct tenant improvements and therefore, the Lease Term was considered to have commenced.

The Amended and Restated Lease is considered to be an operating lease, and the Company used a discount rate of 12% to calculate the value of its lease payments over the Lease Term. As of September 30, 2023, the condensed consolidated balance sheet includes an operating right-of-use asset of $35.1 million and a total operating lease liability of $50.2 million, of which $8.0 million is a current lease liability and included in accrued liabilities, and $42.2 million is included in non-current lease liability. As of December 31, 2022, the condensed consolidated balance sheet includes an operating right-of-use asset of $36.1 million and a total operating lease liability of $51.5 million, of which $7.8 million is a current lease liability and included in accrued liabilities, and $43.7 million is included in non-current lease liability. For the three and nine months ended September 30, 2023, the Company recorded operating lease expense of $2.0 million and $5.9 million, respectively. For the three and nine months ended September 30, 2022, the Company recorded operating lease expense of $2.0 million and $5.7 million, respectively.

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As of September 30, 2023, the approximate future minimum lease payments under the Amended and Restated Lease are as follows (in thousands):


	Operating Lease
Remainder of 2023	$	1,975
2024	8,080
2025	8,322
2026	8,572
2027	8,829
Thereafter	50,857
Total operating lease payments(†)	86,635
Less: Amount representing interest	(36,412)
Total lease liability	$	50,223

____________________

†The Company has an early termination right in 2028 in which the total contractual obligation would be reduced by $41.1 million.

Legal Proceedings

The Company is subject to asserting or defending various claims, complaints and legal actions that arise from time to time in the normal course of business, including commercial insurance, product liability, intellectual property and employment related matters, and none of which the Company deems material.

12. Subsequent Events

Agreement and Plan of Merger

On October 8, 2023, we entered into the Merger Agreement with BMS and Merger Sub, providing for the Merger of Merger Sub with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of BMS.

At the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of the Company (“Company common stock”) issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) will automatically be converted into the right to receive (i) cash in an amount equal to $58.00, without interest and subject to any applicable tax withholdings (the “Closing Consideration”) and (ii) one contingent value right (a “CVR”) representing the right to receive $12.00 in cash, without interest and subject to any applicable tax withholdings, if a specified milestone is achieved, pursuant to the CVR Agreement (as defined in the Merger Agreement).

Consummation of the Merger is subject to customary closing conditions, including, without limitation, the absence of certain legal restraints preventing or otherwise making illegal the consummation of the Merger, no Material Adverse Effect with respect to the Company having occurred since the signing of the Merger Agreement, the expiration or termination of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) applicable to the Merger or of any commitments by the parties not to consummate the Merger before a certain date under a timing agreement, the obtainment of any clearance or affirmative approvals applicable to the Merger under the antitrust and foreign direct investment laws of other applicable jurisdictions, and the adoption of the Merger Agreement by holders of Company common stock representing at least a majority of the Company’s common stock entitled to vote thereon. Following completion of the Merger, the Company’s common stock will no longer be publicly listed.

The Merger Agreement contains certain termination rights for the Company and BMS. If the Merger Agreement is terminated under certain specified circumstances, the Company will be required to pay BMS a fee of $168 million. If the Merger Agreement is terminated under other specified circumstances, BMS will be required to pay the Company a fee of $240 million.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 1O-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed by us with the Securities and Exchange Commission (“SEC”).

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning 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. Such forward-looking statements, which represent our intent, belief, or current expectations, involve risks and uncertainties. We use words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements may include, but are not limited to, statements concerning projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. As a result of many factors, including without limitation those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

References in the following discussion to “we,” “our,” “us,” or “Mirati” refer to Mirati Therapeutics, Inc. and its subsidiaries.

Overview

Mirati Therapeutics, Inc. is a commercial-stage oncology company developing novel therapeutics to address the genetic and immunological promoters of cancer.

We have multiple KRAS inhibitor programs. KRAZATI is our first commercial product. KRAZATI was approved by the FDA in December 2022 and we commenced commercial sales in the U.S. at that time. KRAZATI is an oral targeted treatment option for adult patients with KRAS G12C-mutated locally advanced or metastatic NSCLC, as determined by an FDA-approved test, who have received at least one prior systemic therapy. Adagrasib (KRAZATI®) is in clinical development as a monotherapy and in combination with other agents. MRTX1133 is an investigational, selective, specific and potent KRAS G12D inhibitor. In January 2023, the FDA cleared our investigational new drug application (“IND”) for MRTX1133 for clinical evaluation.

Sitravatinib is an investigational spectrum-selective kinase inhibitor designed to potently inhibit receptor tyrosine kinases (“RTK”s) and enhance immune responses through the inhibition of immunosuppressive signaling. On May 24, 2023, we announced that the SAPPHIRE study did not meet its primary endpoint of overall survival at the final analysis. We do not currently have plans to pursue further clinical development of sitravatinib.

MRTX1719 is an investigational synthetic lethal PRMT5 inhibitor designed to specifically target the PRMT5/methylthioadensoine (MTA) complex and is in clinical development.

MRTX0902 is a potent, selective SOS1 inhibitor, designed to improve anti-tumor efficacy in combination with targeted mitogen-activated protein kinase (MAPK)-pathway inhibitors, and is in clinical development.

The Company also has additional discovery programs of potentially first-in-class and best-in-class product candidates specifically designed to address mutations and tumors where few treatment options exist. We approach all of our programs with a singular focus: to translate our deep understanding of the molecular drivers of cancer into better therapies and better outcomes for patients.

Plan of Merger

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At the Effective Time, each share of Company common stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) will automatically be converted into the right to receive (i) the $58.00 Closing Consideration and (ii) one CVR representing the right to receive $12.00 in cash, without interest and subject to any applicable tax withholdings, if a specified milestone is achieved, pursuant to the CVR Agreement.

Consummation of the Merger is subject to customary closing conditions, including, without limitation, the absence of certain legal restraints preventing or otherwise making illegal the consummation of the Merger, no Material Adverse Effect with respect to the Company having occurred since the signing of the Merger Agreement, the expiration or termination of any waiting periods under the HSR Act applicable to the Merger or of any commitments by the parties not to consummate the Merger before a certain date under a timing agreement, the obtainment of any clearance or affirmative approvals applicable to the Merger under the antitrust and foreign direct investment laws of other applicable jurisdictions, and the adoption of the Merger Agreement by holders of Company common stock representing at least a majority of the Company’s common stock entitled to vote thereon.

We anticipate the Merger and the other transactions contemplated by the Merger Agreement to close by the first half of 2024. Following completion of the Merger, the Company’s common stock will no longer be publicly listed.

The Merger Agreement contains certain termination rights for us and BMS. If the Merger Agreement is terminated under certain specified circumstances, we will be required to pay BMS a fee of $168 million. If the Merger Agreement is terminated under other specified circumstances, BMS will be required to pay us a fee of $240 million.

KRAS Inhibitor Programs

The RAS family of genes is the most commonly mutated oncogene and mutations in this gene family occur in up to approximately 25% of all human cancers. Among the RAS family members, mutations most frequently occur in KRAS (approximately 85% of all RAS family mutations). Tumors characterized by KRAS mutations are commonly associated with poor prognosis and resistance to therapy. Nonclinical studies have demonstrated that cancer cells exhibiting KRAS mutations are highly dependent on KRAS function for cell growth and survival. Our KRAS inhibitor programs are focused on the discovery and development of small molecule compounds that target various forms of KRAS, including KRAS G12C, KRAS G12D and other forms of spectrum-selective KRAS inhibitors. We are pursuing development of our KRAS G12C and KRAS G12D inhibitor programs in both single agent and rational combination approaches.

KRAZATI, a selective KRAS G12C inhibitor

KRAZATI is a commercially available, selective, specific, potent and orally available KRAS G12C inhibitor, designed to directly inhibit KRAS G12C mutations. Adagrasib also continues to be in clinical development varying from Phase 1 through Phase 3. KRAS G12C mutations are present in approximately 14% of NSCLC adenocarcinoma patients, 3-4% of colorectal cancer (“CRC”) patients, 2% of pancreatic cancer patients, as well as smaller percentages of several other difficult-to-treat cancers.

Approval of KRAZATI

On December 12, 2022, we received accelerated approval by the FDA for KRAZATI, a targeted treatment option for adult patients with KRAS G12C-mutated locally advanced or metastatic NSCLC, as determined by an FDA-approved test, who have received at least one prior systemic therapy. In connection with the accelerated approval, we are required to complete KRYSTAL-12 and other post-marketing commitments. The NDA was reviewed by the FDA for Accelerated Approval (Subpart H), which allows for the approval of drugs that treat serious conditions, and that fill an unmet medical need based on a surrogate endpoint. In addition, this application was reviewed under the FDA Real-Time Oncology Review pilot program, which aims to explore a more efficient review process that ensures safe and effective treatments are made available to patients as early as possible, and achieved Breakthrough Therapy Designation for patients with NSCLC who harbor the KRAS G12C mutation following prior systemic therapy, and Breakthrough Therapy Designation for patients with advanced CRC whose cancer has progressed following prior treatment with chemotherapy and an anti-VEGF therapy. In April 2022, we submitted a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for adagrasib for the treatment of patients with NSCLC harboring the KRAS G12C mutation who have received at least one prior systemic therapy. On July 21 2023, we announced that the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA adopted a negative

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opinion on the application for conditional marketing authorisation for KRAZATI, for the treatment of KRAS G12C-mutated advanced non-small cell lung cancer. The evaluation of the full MAA is not impacted and will be considered by the CHMP following the data from KRYSTAL-12, a Phase 3 clinical study of adagrasib versus docetaxel in second line NSCLC patients. On July 27, 2023, we submitted a request for re-examination to the CHMP. The Company also has an Expanded Access Program for KRAZATI for the treatment of eligible patients with KRAS G12C-mutated cancers regardless of tumor type in Europe. On November 3, 2023, the United Kingdom Medicines and Healthcare Products Regulatory Agency granted conditional marketing authorization approval for KRAZATI as a monotherapy for the treatment of adult patients with KRAS G12C-mutated advanced NSCLC and have progressive disease after prior therapy with, or intolerance to, platinum-based chemotherapy and/or anti-PD-1/PD-L1 immunotherapy.

KRYSTAL-1 Trial

We received FDA clearance of our IND for adagrasib in November 2018, and, in January 2019, we initiated the dose escalation phase of KRYSTAL-1, a Phase 1/2 multiple expansion cohort clinical trial evaluating adagrasib in patients with advanced solid tumors that harbor KRAS G12C mutations both in monotherapy and in combination with other anticancer therapies. Following single agent dose escalation, the KRYSTAL-1 trial was expanded into multiple cohorts in which adagrasib is being evaluated both in monotherapy and in combination with other compounds in patients with NSCLC, CRC and those with other tumors that carry the KRAS G12C mutation.

The KRYSTAL-1 trial is evaluating the combination of adagrasib and a PD-1 inhibitor (pembrolizumab) in patients with NSCLC, the combination of adagrasib and a pan-EGFR inhibitor (afatinib) in patients with advanced NSCLC, and the combination of adagrasib and an anti-EGFR antibody (cetuximab) in patients with CRC.

On December 21, 2022, adagrasib received Breakthrough Therapy Designation from the FDA for patients with advanced CRC harboring a KRAS G12C mutation, whose cancer has progressed following prior treatment with chemotherapy and an anti-VEGF therapy.

On September 7, 2022, we presented results from KRYSTAL-1, a multi-cohort Phase 1/2 study, evaluating adagrasib with or without cetuximab in patients with advanced CRC harboring a KRAS G12C mutation.

•In this analysis, 44 patients received adagrasib monotherapy (600mg twice daily (“BID”)) and 32 patients received the combination of adagrasib (600mg BID) with full dose cetuximab, with a follow up of 20.1 months and 17.5 months, respectively.

•Of the evaluable patients in the adagrasib monotherapy cohort (n=43), the investigator assessed confirmed objective response rate (“ORR”) was 19% (8/43) and the disease control rate (“DCR”) was 86% (37/43). The median duration of response was 4.3 months (95% CI, 2.3–8.3) and median progression-free survival (“PFS”) was 5.6 months (95% CI, 4.1–8.3).

•Of the evaluable patients in the adagrasib plus cetuximab combination cohort (n=28), the investigator assessed confirmed ORR was 46% (13/28) and the DCR was 100% (28/28). The median duration of response (“DOR”) was 7.6 months (95% CI 5.7–NE) and median PFS was 6.9 months (95% CI, 5.4–8.1).

•In the overall subset of patients with KRAS G12C-mutated CRC evaluated in this study, adagrasib was found to be well-tolerated as a monotherapy and in combination with cetuximab. The majority of observed treatment-related adverse events (“TRAEs”) were grade 1–2 (59%); no grade 5 TRAEs were observed.

On May 26, 2022, we presented results from the registration-enabling Phase 2 cohort of KRYSTAL-1 study, evaluating adagrasib at 600mg BID in patients with NSCLC harboring the KRAS G12C mutation who have received at least one prior systemic therapy.

•As of October 15, 2021, 116 patients were enrolled and treated in the study. Of the patients enrolled, 98% had prior treatment with a PD-1/L1 inhibitor following or in combination with chemotherapy. Median follow up was 12.9 months.

•Of the patients evaluable for response (n=112), initial results showed that the ORR by Blinded Independent Central Review (“BICR”) was 43%, the DCR was 80%, the median DOR was 8.5 months (95% confidence interval [CI]: 6.2 – 13.8), and the median PFS was 6.5 months (95% CI: 4.7 – 8.4).

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•With a January 15, 2022 data cutoff, the median overall survival (“OS”) was 12.6 months (95% CI: 9.2 – 19.2).

•The safety profile of adagrasib in this study was consistent with prior reports and no new safety signals were observed. The most frequent TRAEs included gastrointestinal events and fatigue. The majority of TRAEs were Grade 1–2 (53%) with Grade 3–4 TRAEs observed in 43% of patients. Two Grade 5 TRAEs were observed. TRAEs led to discontinuation of therapy in only 7% of patients.

In addition to these results, we reported findings from a pooled analysis in a total of 132 NSCLC patients from the KRYSTAL-1 study, including the registrational Phase 2 and Phase 1/1b cohorts evaluating adagrasib at a dose of 600mg BID.

•As of October 15, 2021, results from this pooled analysis showed an ORR of 44% and a DCR of 81% based on BICR. The median DOR was 12.5 months and the median PFS was 6.9 months.

•With a January 15, 2022 data cutoff and a median duration of follow-up of 15.9 months, the median OS was 14.1 months.

•The safety and tolerability observed in this pooled analysis was consistent with what was reported with the Phase 2 cohort of KRYSTAL-1 noted above.

On September 9, 2023, we presented two-year follow-up data from a pooled analysis of the Phase 1/1b Cohort and Phase 2 Cohort A from the KRYSTAL-1 study evaluating adagrasib in patients with NSCLC harboring a KRASG12C mutation.

•In the pooled analysis, adagrasib demonstrated durable efficacy with a median OS of 14.1 months and a 2-year OS rate of 31% in patients with previously treated KRASG12C-mutated NSCLC.

•Exploratory analyses suggested clinical benefit in patients with treated, stable CNS metastases at baseline with clinical benefit noted across most baseline co-mutations.

•The safety and tolerability observed in this pooled analysis was consistent with what was reported with the Phase 2 cohort of KRYSTAL-1 noted above.

•Hepatotoxicity was not observed in any patients who received adagrasib within 30 days of prior immunotherapy and, overall, there was a low rate of grade 3 or higher hepatoxicity.

On June 6, 2022, we announced results of a prospective analysis from the Phase 1b cohort of the KRYSTAL-1 study evaluating intracranial (IC) responses of adagrasib in patients with KRAS G12C-mutated NSCLC with active and untreated central nervous system (CNS) metastases. With a median follow up of 6.6 months, 25 patients with active, untreated CNS metastases were enrolled in the study and treated with adagrasib 600mg BID, as of data cutoff date of December 2021. Of the radiographically evaluable patients (n=19), results showed an IC ORR of 32% by modified response assessment in neuro-oncology-brain metastases (modified RANO-BM) by BICR. Three patients achieved a complete response and three patients achieved a partial response. The IC disease control rate was 84%, and concordance of disease control between systemic and IC responses was 88%.

On June 6, 2022, we also provided updated results from the Phase 1b cohort of the KRYSTAL-1 trial evaluating the combination of adagrasib and a PD-1 inhibitor (pembrolizumab) in eight patients with KRAS G12C-mutated first-line NSCLC. The Phase 1b data showed adagrasib 400mg BID plus pembrolizumab had a manageable tolerability profile with no TRAEs leading to dose discontinuation. Of the seven patients evaluable for a response as of January 15, 2022, four had a confirmed RECIST-defined partial response and one additional patient, who is still on study, experienced 49% tumor regression in the first scan, which allowed for tumor resection prior to achieving a RECIST-defined confirmed response. The DCR was 100%, with all seven patients exhibiting tumor regression ranging from 37% to 81%. With a median duration of treatment of 12.9 months, four of the seven patients remained on treatment, as of the data cutoff date, and neither the median DOR nor median PFS had been reached.

On October 9, 2021, we presented preliminary results from a cohort of the KRYSTAL-1 clinical trial evaluating adagrasib at 600mg BID as monotherapy for patients with pancreatic ductal adenocarcinoma harboring a KRAS G12C mutation arm (n=12). Of the evaluable patients (n=10), preliminary results showed an investigator assessed ORR of 50%, including an unconfirmed PR, and a DCR of 100%.

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Preliminary efficacy data was assessed as of August 30, 2020 in six patients with advanced solid tumors, other than NSCLC and CRC, treated with adagrasib as a monotherapy at 600mg BID dose from a Phase 1/1b cohort. One patient each with pancreatic, ovarian, endometrial and cholangiocarcinoma tumors were treated and had a confirmed PR to therapy. Two appendiceal cancer patients had stable disease and all six eligible patients remained on treatment.

KRYSTAL-7

In December 2020, we initiated KRYSTAL-7, the Phase 2 clinical trial includes the evaluation of the combination of adagrasib at 400mg BID with a PD-1 inhibitor (pembrolizumab) in patients with first-line NSCLC stratified by <1% Tumor Proportion Score (“TPS”) score and ≥1% TPS score. The study was fully enrolled in July 2023.

On December 7, 2022, we presented preliminary results from the KRYSTAL-7 Phase 2 trial and KRYSTAL-1 Phase 1b cohort evaluating adagrasib (400mg twice daily) concurrently combined with pembrolizumab in patients for the treatment of first-line NSCLC harboring a KRAS G12C mutation across all PD-L1 subgroups.

•Adagrasib in combination with pembrolizumab demonstrated favorable tolerability and promising preliminary efficacy in patients with first-line advanced/metastatic NSCLC harboring a KRAS G12C mutation.

•The KRYSTAL-7 and KRYSTAL-1 trials represented the largest dataset to date evaluating a KRAS G12C inhibitor in combination with a PD-1/L1 checkpoint inhibitor as a first-line treatment for patients with NSCLC harboring a KRAS G12C mutation.

•75 patients were enrolled and evaluable for safety with a median follow-up of 3.5 months (duration of treatment: two months). TRAEs were Grade 1-2 (39%), Grade 3 (40%) and Grade 4 (4%); there were no Grade 5 TRAEs observed. TRAEs led to discontinuation of both adagrasib and pembrolizumab in two patients and only pembrolizumab in two patients; there were no patients who discontinued only adagrasib due to a TRAE.

•Increases in alanine transaminase (“ALT”)/aspartate transaminase (“AST”) were consistent with either agent as a monotherapy with Grade 3 TRAEs being highest grade and total incidence of Grade 3 liver function test (“LFT”) increases of 9%. Median time from onset to an increase in ALT and AST was 26 and 37 days, respectively, and only one patient experienced new onset treatment-related ALT/AST increase after 3 months.

•Of patients who were clinically evaluable and received at least one on-study scan (n=53), adagrasib and pembrolizumab demonstrated promising preliminary clinical activity across all PD-L1 subgroups with an ORR of 49%.

•In a subset of response-evaluable patients enrolled at least six months prior to the data cutoff date, six of 26 clinical responses occurred at second on-study scan or later, and the ORR was 56%.

•Seven evaluable patients enrolled in the KRYSTAL-1 Phase 1b cohort (with a median follow-up of 19.3 months) reported an ORR of 57% and a DCR of 100%. The four patients who responded maintained response for over nine months while two continued to receive treatment and remain in response beyond 18 months.

•Safety in the KRYSTAL-1 Phase 1b cohort was consistent with what has been observed in KRYSTAL-7 and demonstrated a manageable safety profile with no Grade 4-5 TRAEs.

On August 8, 2023, we presented updated preliminary results from the KRYSTAL-7 Phase 2 trial and KRYSTAL-1 Phase 1b cohort evaluating adagrasib (400mg twice daily) concurrently combined with pembrolizumab in patients for the treatment of first-line NSCLC harboring a KRAS G12C mutation across all PD-L1 subgroups as of the data cutoff date of February 28, 2023.

•147 patients were enrolled and evaluable for safety with a median follow-up of 6.4 months. TRAEs were Grade 1 (12%), Grade-2 (18%), Grade 3 (52%) and Grade 4 (9%); there were no Grade 5 TRAEs observed. TRAEs led to discontinuation of either adagrasib or pembrolizumab in 18% of patients and both adagrasib and pembrolizumab in 4% of patients.

•The combination demonstrated low rates of clinically meaningful liver TRAEs. Liver-related TRAEs lead to discontinuation in just 2 patients. Median time from onset to an increase in ALT and AST was 32 and 42 days, respectively, and only 4 patients experienced new onset treatment-related ALT/AST increase after 3 months.

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•In patients with TPS scores of ≥50% (n=56), adagrasib plus pembrolizumab demonstrated promising preliminary clinical activity with an ORR in the full analysis set of 63%. Of patients who were clinically evaluable and received at least one on-study scan (n=49), adagrasib plus pembrolizumab demonstrated an ORR of 71%.

•As of the data cutoff date, neither the median DOR nor median PFS had been reached.

•In patients with TPS scores of <50%, these updated data showed clinical activity, but suggest that the adagrasib plus pembrolizumab regimen will not be sufficient to displace the existing standard of care (KEYNOTE-189 regimen of carboplatin, pemetrexed and pembrolizumab) for these patients.

On October 20, 2023, we presented updated preliminary results from the KRYSTAL-7 Phase 2 trial evaluating adagrasib (400mg twice daily) concurrently combined with pembrolizumab in patients for the treatment of first-line NSCLC harboring a KRAS G12C mutation across all PD-L1 subgroups as of the data cutoff date of June 19, 2023.

•148 patients were enrolled and evaluable for safety with a median follow-up of 8.7 months. There were two Grade 5 TRAEs, one each of pneumonitis and pneumonia. Immune-related TRAEs of any grade occurred in 18% of patients and grade ≥3 occurred in 5% of patients. TRAEs led to discontinuation of adagrasib in 6% of patients and pembrolizumab in 11% of patients. 4% of patients discontinued both drugs due to TRAEs.

•Treatment-related hepatic events occurred in <10% of patients, and no patient discontinued both adagrasib and pembrolizumab due to ALT/AST increase or hepatic TRAEs.

•In patients with TPS scores of ≥50% (n=51), adagrasib plus pembrolizumab demonstrated promising preliminary clinical activity with an ORR in the full analysis set of 63%. Of patients who experienced any grade hepatotoxicity, ORR was 70%.

•As of the data cutoff date, neither the median DOR nor median PFS had been reached.

KRYSTAL-17

In the second quarter of 2023, we initiated an additional cohort in KRYSTAL-17, a Phase 2 clinical trial, evaluating adagrasib in combination with pembrolizumab and chemotherapy in patients with advanced first line NSCLC with TPS < 50%. Safety and preliminary efficacy data from this study will inform further development plans in patients with TPS < 50%.

KRYSTAL-10, KRYSTAL-12 and KRYSTAL-21

In the first quarter of 2021, we initiated two registration-enabling Phase 3 clinical trials. KRYSTAL-10 is evaluating the combination of adagrasib and an anti-EGFR antibody (cetuximab) randomized against chemotherapy in patients with second-line CRC. KRYSTAL-12 is evaluating adagrasib as a monotherapy randomized against docetaxel in patients with second-line NSCLC. In the second quarter of 2023, we initiated KRYSTAL-21, a phase 2 clinical trial evaluating adagrasib as a monotherapy under two dosing regimens. The study will evaluate the efficacy of two dosing regimens of adagrasib (600 mg BID without regard to food versus 400 mg BID with food) in NSCLC patients with KRAS G12C mutation and who have received prior treatment with a platinum-based regimen and immune checkpoint inhibitor therapy.

Adagrasib Development in Collaboration with Zai Lab Ltd. (“Zai”)

In May 2021, we entered into a Collaboration and License Agreement with Zai (the “Zai Agreement”). Under the Zai Agreement, we granted Zai the right to research, develop, manufacture and exclusively commercialize adagrasib in all indications in China, Macau, Hong Kong and Taiwan (collectively, the “Zai Licensed Territory”), with Mirati retaining exclusive rights for the development, manufacture and commercialization of adagrasib outside the Zai Territory and certain co-commercialization, manufacture, and development rights in the Zai Licensed Territory. In June 2022, Zai initiated the first pivotal clinical trial of adagrasib for the first indication in China. In July 2022, Zai initiated the first pivotal clinical trial of adagrasib for the second indication in China.

Adagrasib Development in Collaboration with Others

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In 2020, we initiated KRYSTAL-2, a Phase 1/2 clinical trial evaluating the combination of adagrasib and a SHP-2 inhibitor (TNO-155) in patients with advanced NSCLC and advanced CRC. In 2021, we initiated KRYSTAL-14, a Phase 1/2 clinical trial evaluating the combination of adagrasib and a SOS1 inhibitor (BI 1701963) in patients with advanced NSCLC, and we initiated KRYSTAL-16, a Phase 1/1b clinical trial evaluating the combination of adagrasib and a CDK4/6 inhibitor (palbociclib) in patients with advanced solid tumors with KRAS G12C mutation. The KRYSTAL-2, KRYSTAL-14 and KRYSTAL-16 clinical trials are no longer enrolling patients. In October 2022, we entered into a clinical collaboration with Aadi Bioscience to evaluate the combination of adagrasib with nab-sirolimus, a small molecule mTOR inhibitor complexed with human albumin, in patients with KRAS G12C-mutant NSCLC and other solid tumors. In November 2022, we entered into a clinical collaboration with Incyte to evaluate the combination of adagrasib with INCB99280, a small molecule PD-L1 inhibitor, in patients with KRAS G12C-mutated solid tumors.

MRTX1133, a selective KRAS G12D inhibitor

MRTX1133, our lead KRAS G12D compound, is an investigational, selective, specific and potent inhibitor of KRAS G12D. On January 19, 2023, the FDA cleared the IND application of an oral formulation of MRTX1133 for clinical evaluation. We initiated a Phase 1 clinical trial evaluating MRTX1133 in patients with advanced solid tumor malignancy harboring a G12D mutation in the first quarter of 2023. KRAS G12D mutations have been detected in over 25 different types of cancer, including pancreatic, colon, lung and endometrial adenocarcinoma. The prevalence of cancers harboring KRAS G12D mutations exceeds the prevalence of KRAS G12C positive cancers by greater than two-fold and is an area of significant unmet medical need.

On October 25, 2020 we announced initial preclinical in vivo data from MRTX1133. Based on preclinical analyses, MRTX1133 has a projected human half-life of greater than 50 hours and exhibits a low propensity for drug interactions or off-target pharmacology. MRTX1133 demonstrated tumor regression in multiple in vivo tumor models, including pancreatic and colorectal cancers. MRTX1133 has a low predicted target plasma concentration based on its potency and high unbound fraction.

Sitravatinib

Sitravatinib is a spectrum-selective kinase inhibitor designed to potently inhibit receptor tyrosine kinases (“RTK”s), including TAM family receptors (TYRO3, Axl, Mer), split family receptors (VEGFR2, KIT) and RET. In April 2022, we completed enrollment in SAPPHIRE, a Phase 3 clinical trial in second-line non-squamous NSCLC patients whose tumors have progressed on prior therapy with platinum-chemotherapy in combination with a checkpoint inhibitor or third-line non-squamous NSCLC patients who have received chemotherapy followed by a checkpoint inhibitor. SAPPHIRE compared the combination of sitravatinib plus nivolumab randomized to docetaxel. On May 24, 2023, we announced that the SAPPHIRE study did not meet its primary endpoint of overall survival at the final analysis. We do not currently have plans to pursue further clinical development of sitravatinib.

Sitravatinib Development in Collaboration with BeiGene

In January 2018, we entered into a Collaboration and License Agreement with BeiGene (the “BeiGene Agreement”). Under the BeiGene Agreement, we granted BeiGene an exclusive license to develop, manufacture and commercialize sitravatinib in Asia (excluding Japan and certain other countries), Australia and New Zealand (the “BeiGene Licensed Territory”), and we retained exclusive rights for the development, manufacturing and commercialization of sitravatinib outside the BeiGene Licensed Territory.

In November 2018, we dosed the first patient under the BeiGene Agreement to assess the safety and tolerability, pharmacokinetics and preliminary anti-tumor activity of sitravatinib in combination with BeiGene’s investigational anti-PD-1 antibody, tislelizumab, in patients with advanced solid tumors. BeiGene’s clinical trials will evaluate the combination of sitravatinib and tislelizumab in patients with solid tumors including NSCLC, renal cell carcinoma, hepatocellular cancer, gastric cancer and ovarian cancer.

MRTX1719, a synthetic lethal MTA cooperative PRMT5 inhibitor

MRTX1719, our lead synthetic lethal MTA cooperative PRMT5 inhibitor is an investigational, selective, potent and orally available inhibitor targeting the PRMT5/MTA complex in methylthioadenosine phosphorylase (MTAP)-deleted cancers and is in Phase 1/2 clinical development. The MTAP deletion is present in approximately 10% of all cancers and is the most frequently observed gene deletion event (MTAP/CDKN2A) across several cancer types. Cancers with an MTAP deletion, such as pancreatic, lung, and bladder cancers, are associated with a poor prognosis, representing a significant unmet medical need.

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In preclinical studies, MRTX1719 has demonstrated a greater than 70-fold selectivity for MTAP-deleted cells relative to normal cells and demonstrated near complete and sustained inhibition of PRMT5 in tumor xenografts resulting in significant tumor growth inhibition or tumor regression in MTAP-deleted tumor models. The ability to target the PRMT5/MTA complex provides an opportunity to selectively target tumor cells harboring the MTAP gene deletion which exhibit an abnormally high level of MTA (methylthioadenosine) compared with normal cells. This is anticipated to provide an increased therapeutic index relative to first generation PRMT5 inhibitors that do not specifically target the PRMT5/MTA complex. In the first quarter of 2022, we initiated a Phase 1/2 multiple expansion cohort trial to evaluate MRTX1719 in patients with advanced, unresectable or metastatic solid tumor malignancy with homozygous deletion of the MTAP gene. In August 2022, the FDA granted Fast Track Designation to MRTX1719. In April 2023, MRTX1719 had been granted Orphan Drug Designation by the FDA for the treatment of mesothelioma.

On August 8, 2023, we presented preliminary results from a Phase 1/2 multiple expansion cohort trial to evaluate MRTX1719 in patients with advanced, unresectable or metastatic solid tumor malignancy with homozygous deletion of the MTAP gene.

• As of a June 13, 2023 data cut, 33 patients were evaluable for safety across 6 dose levels. 21 patients were evaluable for clinical response, including 18 patients at therapeutic dose levels, defined as doses ≥ 100 mg once daily (“QD”).

•Preliminary pharmacokinetic results were favorable and demonstrated roughly dose proportional increases in exposure among patients receiving therapeutic doses.

•All 3 tumor biopsies evaluated showed that SDMA was completely extinguished following treatment at a dose of 200 mg QD.

•Early signs of clinical activity have been achieved with 6 partial responses, including 5 confirmed responses and 1 unconfirmed response, out of the 18 patients evaluable for response at therapeutic dose levels. Responses were observed across multiple dose levels and tumor types including non-small cell lung cancer, mesothelioma, biliary tract tumors, melanoma, and malignant peripheral nerve sheathe tumor. The unconfirmed response was observed shortly after data cutoff date.

•MRTX1719 demonstrated a manageable safety profile. The most frequently reported treatment related adverse events were nausea, vomiting and fatigue and the vast majority were Grade 1 or 2. Grade 3 treatment related adverse events were observed in only 5/33 patients (15.2%). Dose-limiting bone marrow toxicities, which were associated with non-selective PRMT5 inhibitors, were not observed at any dose level.

MRTX0902, a selective SOS1 inhibitor

MRTX0902 is a potent, selective SOS1 inhibitor, designed to improve anti-tumor efficacy in combination with targeted RAS/mitogen-activated protein kinase (“MAPK”)-pathway and/or receptor tyrosine kinase (“RTK”) inhibitors. MRTX0902 disrupts the KRAS-SOS1 interaction and shifts the equilibrium of KRAS from an active to inactive state. The SOS protein is a guanine nucleotide exchange factor (“GEF”) that facilitates the ability of KRAS to turnover from its GDP-loaded “off” state to its GTP-loaded “on” state, a critical step to enable productive KRAS effector binding and activation of downstream signaling. MRTX0902 has the potential to limit cancer growth arising from a variety of mutations (e.g. KRAS or EGFR) that result in activation of the KRAS pathway. MRTX0902 exhibits favorable potency, selectivity and oral exposure characteristics and shows improved anti-tumor efficacy in combination with inhibitors of KRAS, MEK, and EGFR in pre-clinical models. We filed an IND with the FDA for MRTX0902 and received Notice to Proceed authorization from FDA in August 2022. In the fourth quarter of 2022, we initiated a Phase 1/2 multiple expansion cohort trial with MRTX0902. In December 2022, the FDA granted Fast Track Designation to MRTX0902. In July 2023, we initiated a cohort within the Phase 1/2 trial evaluating the combination of MRTX0902 plus adagrasib.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. On an ongoing basis, our actual results may differ significantly from our estimates.

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There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2022.

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

The following table summarizes the significant items within our results of operations for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
	2023		2022				2023		2022
Product revenue, net	$	16,400	$	—	$	16,400	$	36,056	$	—	$	36,056
License and collaboration revenues	—		5,431		(5,431)		1,201		11,502		(10,301)
Cost of product revenue	1,428		—		1,428		3,011		—		3,011
Cost of product revenue - intangible asset amortization	259		—		259		776		—		776
Research and development expenses	114,766		131,076		(16,310)		365,636		390,391		(24,755)
Selling, general and administrative expenses	72,001		60,798		11,203		220,981		168,977		52,004
Other income, net	10,150		13,136		(2,936)		29,744		9,728		20,016
Income tax expense	—		254		(254)		—		254		(254)

Product revenue, net

Product revenue, net relates to sales of KRAZATI, which received approval by the FDA and launched commercially in the U.S. in December 2022. Product revenue, net for the three and nine months ended September 30, 2023 was $16.4 million and $36.1 million, respectively. During the three and nine months ended September 30, 2023, $1.3 million and $3.0 million, respectively, of product revenue, net relates to sales of KRAZATI to a third-party commercial customer for its clinical trials. There was no product revenue for the three and nine months ended September 30, 2022.

License and collaboration revenues

License and collaboration revenues relate to the Zai Agreement under which Zai was granted an exclusive license to develop, manufacture and commercialize adagrasib in the Zai Licensed Territory, and the BeiGene Agreement under which BeiGene was granted an exclusive license to develop, manufacture and commercialize sitravatinib in the BeiGene Licensed Territory.

The Company earned zero and $1.2 million of license and collaboration revenue during the three and nine months ended September 30, 2023, respectively, related to clinical supply revenue under the Zai Agreement. The Company earned $5.0 million and $10.0 million in milestone payments under the Zai Agreement for the three and nine months ended September 30, 2022, respectively, and earned $0.3 million and $1.4 million related to clinical supply revenue under the Zai Agreement for the three and nine months ended September 30, 2022, respectively.

Cost of product revenue

Cost of product revenue for the three and nine months ended September 30, 2023 was $1.4 million and $3.0 million, respectively, and consisted of product manufacturing and distribution costs for KRAZATI and royalties incurred on net sales of KRAZATI owed to our collaborative partner. Product sold during the three and nine months ended September 30, 2023 generally consisted of drug product that was previously charged to research and development expense prior to FDA approval of KRAZATI, which favorably impacted our cost of product revenue for the three and nine months ended September 30, 2023. Had the previously expensed inventory been capitalized and recognized when sold, our total cost of product revenue with these manufacturing costs included for the three and nine months ended September 30, 2023 would have increased by approximately $1.7 million and $4.5 million, respectively. We will continue to have a lower cost of product revenue that excludes the cost of active pharmaceutical ingredient that was produced prior to FDA approval, which we expect to be the case for the near-term, and we do not expect our cost of product revenue for KRAZATI to increase significantly as a percentage of product revenue, net in future periods as we continue to produce inventory for future sales. As KRAZATI was approved in December 2022, there was no cost of product revenue for the three and nine months ended September 30, 2022.

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Cost of product revenue - intangible asset amortization

Cost of product revenue - intangible asset amortization for the three and nine months ended September 30, 2023 was $0.3 million and $0.8 million, respectively, and represents the amortization expense attributable to our finite-lived intangible asset, which resulted from the capitalization of a milestone payment due under a license and collaboration agreement relating to the first commercial sale of KRAZATI in the U.S. There was no cost of product revenue - intangible asset amortization for the three and nine months ended September 30, 2022.

Research and development expenses

Research and development expenses consist primarily of:

•salaries and related expenses for personnel, including share-based compensation;

•fees paid to external service providers such as Clinical Research Organizations (“CROs”) and contract manufacturing organizations related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, formulation of clinical drug supplies and manufacturing costs of commercial inventory prior to the approval of KRAZATI;

•fees paid to contract service providers related to drug discovery efforts including chemistry and biology services;

•license fees paid in connection with our early discovery efforts; and

•costs for allocated facilities and depreciation of equipment.

We record research and development expenses as incurred.

Our research and development efforts during the three and nine months ended September 30, 2023 and 2022 were focused on our clinical development programs and our preclinical programs. The following table summarizes our research and development expenses (in thousands):


	Three Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
	2023		2022				2023		2022
Third-party research and development expenses:
Clinical development programs:
Adagrasib	$	43,840	$	42,488	$	1,352	$	134,376	$	131,214	$	3,162
MRTX1719	3,768		2,071		1,697		7,985		5,718		2,267
MRTX0902	635		—		635		2,733		—		2,733
MRTX1133	4,136		—		4,136		10,780		—		10,780
Sitravatinib*	6,383		14,663		(8,280)		27,432		46,497		(19,065)
Pre-clinical development programs	5,752		9,441		(3,689)		16,214		26,496		(10,282)
Total third-party research and development expenses	64,514		68,663		(4,149)		199,520		209,925		(10,405)
Salaries and other employee related expense	22,415		26,511		(4,096)		77,832		75,289		2,543
Share-based compensation expense	19,480		28,276		(8,796)		62,518		77,343		(14,825)
Other research and development costs	8,357		7,626

Mirati Therapeutics, Inc. [MRTX] Filings
10-Q	[2023-11-06]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-03]
10-Q	[2022-05-04]
10-K	[2022-02-28]
10-Q	[2021-11-08]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-25]
10-Q	[2020-11-04]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-26]
10-Q	[2019-11-04]
10-Q	[2019-08-05]
10-Q	[2019-04-29]
10-K	[2019-02-28]
10-Q	[2018-11-06]
10-Q	[2018-08-01]
10-Q	[2018-05-07]
10-K	[2018-03-08]
10-Q	[2017-11-01]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-03-09]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-03-09]
10-Q	[2015-11-06]
10-Q	[2015-08-06]
10-Q	[2015-05-06]
10-K	[2015-03-11]
10-Q	[2014-11-10]
10-Q	[2014-08-08]
10-Q	[2014-05-15]
10-K	[2014-03-17]
10-Q	[2013-11-12]
S-1	[2013-10-03]
10-Q	[2013-08-13]