Filed Pursuant to Rule 424(b)(3)

Registration No. 333-271917

 

 

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

 

 

To the Stockholders of Magenta Therapeutics, Inc. and Dianthus Therapeutics, Inc.,

Magenta Therapeutics, Inc., a Delaware corporation (“Magenta”), and Dianthus Therapeutics, Inc., a Delaware corporation (“Dianthus”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) on May 2, 2023, pursuant to which, among other matters, Dio Merger Sub, Inc., a direct, wholly owned subsidiary of Magenta (“Merger Sub”), will merge with and into Dianthus, with Dianthus surviving as a wholly owned subsidiary of Magenta, and Magenta being the surviving corporation of the merger (such transaction, the “merger”). After the completion of the merger, Magenta will change its corporate name to “Dianthus Therapeutics, Inc.” Magenta following the merger is referred to herein as the “combined company.”

At the effective time of the merger (the “effective time”), each share of Dianthus common stock (after giving effect to the conversion of each share of Dianthus’ preferred stock into Dianthus common stock and including all such shares that are converted into Dianthus common stock) will be converted into the right to receive a number of shares of Magenta common stock equal to the exchange ratio described in more detail in the section titled “The Merger Agreement—Exchange Ratio” beginning on page 181 of the accompanying proxy statement/prospectus. The final exchange ratio is subject to adjustment prior to closing of the merger (the “closing”) based upon Magenta’s net cash (as defined in the Merger Agreement) (“Magenta’s net cash”) at closing and the aggregate proceeds from the sale of Dianthus common stock and Dianthus pre-funded warrants in the Dianthus pre-closing financing (as defined below). As a result, Magenta securityholders could own more, and Dianthus securityholders (including, for this purpose, investors in the Dianthus pre-closing financing) could own less, or vice versa, of the combined company. Based on Magenta’s and Dianthus’ capitalization as of May 2, 2023, the date the Merger Agreement was executed, and taking into account Magenta’s current cash position, the exchange ratio is currently estimated to be equal to approximately 3.64x shares of Magenta common stock for each share of Dianthus capital stock, which estimated exchange ratio did not give effect to the expected Magenta reverse stock split. The exchange ratio is subject to adjustment as described below, including if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates that Magenta’s net cash as of closing will be approximately $65.0 million and therefore the exchange ratio is currently estimated to be equal to approximately 3.64x.

In connection with the merger, Magenta will assume Dianthus’ 2019 Plan (as defined below). Each outstanding and unexercised option to purchase shares of Dianthus common stock immediately prior to the effective time will be assumed by Magenta and will be converted into an option to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio. Each outstanding and unexercised warrant to purchase shares of Dianthus common stock immediately prior to the effective time will be converted into a warrant to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio.

Certain investors have agreed to purchase shares of Dianthus common stock and Dianthus pre-funded warrants at a purchase price currently estimated at $5.0878 per share or warrant, for an aggregate purchase price of approximately $70.0 million, referred to herein as the “Dianthus pre-closing financing,” immediately prior to the closing of the merger. The shares of Dianthus common stock and Dianthus pre-funded warrants that are issued in the Dianthus pre-closing financing will be converted into the right to receive a number of shares of Magenta common stock or warrants to purchase shares of Magenta common stock equal to the exchange ratio

described in more detail in the section titled “The Merger Agreement—Exchange Ratio” beginning on page 181 of the accompanying proxy statement/prospectus. Magenta, Dianthus and the investors participating in the Dianthus pre-closing financing have also agreed to enter into a registration rights agreement (the “registration rights agreement”) at the closing of the Dianthus pre-closing financing, pursuant to which, among other things, the combined company will agree to provide for the registration and resale of certain shares of Magenta common stock that are held by the investors participating in the Dianthus pre-closing financing from time to time pursuant to Rule 415 under the Securities Act (“Rule 415”). The closing of the Dianthus pre-closing financing is conditioned upon the satisfaction or waiver of the conditions to the closing of the merger as well as certain other conditions. The Dianthus pre-closing financing is more fully described in the accompanying proxy statement/prospectus.

Each share of Magenta common stock, each option to purchase Magenta common stock and each award of restricted stock units (“RSUs”) over Magenta common stock that is issued and outstanding at the effective time will remain issued and outstanding in accordance with its terms and such shares, options and RSUs, subject to the proposed reverse stock split and any extension to the expiration time provided for in connection with the merger, will be unaffected by the merger. Immediately after the merger, Magenta securityholders as of immediately prior to the merger are expected to own approximately 22.4% of the outstanding shares of capital stock of the combined company, former Dianthus securityholders, excluding shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 59.2% of the outstanding shares of capital stock of the combined company and shares of Dianthus common stock and Dianthus pre-funded warrants issued in the Dianthus pre-closing financing are expected to represent approximately 18.4% of the outstanding shares of capital stock of the combined company, subject to certain assumptions. Under certain circumstances further described in the Merger Agreement, the ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection.

Shares of Magenta common stock are currently listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “MGTA.” Magenta has filed an initial listing application for the combined company with Nasdaq. After completion of the merger, Magenta will be renamed “Dianthus Therapeutics, Inc.” and it is expected that the common stock of the combined company will trade on Nasdaq under the symbol “DNTH.” On July 31, 2023, the last trading day before the date of the accompanying proxy statement/prospectus, the closing sale price of Magenta common stock was $0.80 per share.

Magenta stockholders are cordially invited to attend the special meeting in lieu of the annual meeting of Magenta stockholders. Magenta is holding its special meeting in lieu of annual meeting of stockholders (the “Magenta special meeting”) on Friday, September 8, 2023, at 8:00 a.m. Eastern Time, unless postponed or adjourned to a later date, in order to obtain the stockholder approvals necessary to complete the merger and related matters. The Magenta special meeting will be held entirely online. Magenta stockholders will be able to attend and participate in the Magenta special meeting online by visiting www.proxydocs.com/MGTA, where they will be able to listen to the meeting live, submit questions and vote. At the Magenta special meeting, Magenta will ask its stockholders to:

 

1.

Approve (i) the issuance of shares of common stock of Magenta, which will represent more than 20% of the shares of Magenta common stock outstanding immediately prior to the merger, to stockholders of Dianthus, pursuant to the terms of the Merger Agreement, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus, and (ii) the change of control of Magenta resulting from the merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively (the “Nasdaq Stock Issuance Proposal” or “Proposal No. 1”);

 

2.

Approve an amendment to the amended and restated certificate of incorporation of Magenta (“Magenta’s charter”) to effect a reverse stock split of Magenta’s issued and outstanding common stock at a ratio in the range between 1:10 to 1:18, inclusive, with the final ratio and effectiveness of such amendment and the abandonment of such amendment to be mutually agreed by the Magenta board of directors and the Dianthus board of directors prior to the effective time or, if the Nasdaq Stock Issuance Proposal is not approved by Magenta stockholders, determined solely by the Magenta board

of directors, in the form attached as Annex G to the accompanying proxy statement/prospectus (the “Reverse Stock Split Proposal” or “Proposal No. 2”);

 

3.

Approve an amendment to Magenta’s charter to provide for the exculpation of officers, in the form attached as Annex H to the accompanying proxy statement/prospectus (the “Officer Exculpation Proposal” or “Proposal No. 3”);

 

4.

Elect three Class II director nominees named in the accompanying proxy statement/prospectus to Magenta’s board of directors, to serve until Magenta’s 2026 annual meeting of stockholders and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal (the “Director Election Proposal” or “Proposal No. 4”);

 

5.

Ratify the selection of KPMG LLP as Magenta’s independent registered public accounting firm for the fiscal year ending December 31, 2023, provided that Deloitte & Touche LLP is expected to be appointed for that fiscal year if the merger is completed (the “Auditor Ratification Proposal” or “Proposal No. 5”);

 

6.

Approve an adjournment of the Magenta special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Nasdaq Stock Issuance Proposal and/or the Reverse Stock Split Proposal (the “Adjournment Proposal” or “Proposal No. 6”); and

 

7.

Transact such other business as may properly come before the stockholders at the Magenta special meeting or any adjournment or postponement thereof.

As described in the accompanying proxy statement/prospectus, certain Magenta stockholders who in the aggregate owned approximately 6.9% of the outstanding shares of capital stock of Magenta as of June 30, 2023, and certain Dianthus stockholders who in the aggregate owned approximately 65.7% of the outstanding shares of Dianthus capital stock as of June 30, 2023, are parties to stockholder support agreements with Magenta and Dianthus, respectively, whereby such stockholders have agreed to vote in favor of the adoption of the Merger Agreement and the approval of the merger and related transactions contemplated by the Merger Agreement, subject to the terms of the support agreements. Following the effectiveness of the registration statement on Form S-4 of which the accompanying proxy statement/prospectus is a part and pursuant to the Merger Agreement, Dianthus stockholders holding a sufficient number of shares of Dianthus capital stock to adopt the Merger Agreement and approve the merger and related transactions will be asked to execute written consents providing for such adoption and approval.

After careful consideration, each of the Magenta and Dianthus boards of directors have approved the Merger Agreement and have determined that it is advisable to consummate the merger. Magenta’s board of directors has approved the proposals described in the accompanying proxy statement/prospectus and unanimously recommends that its stockholders vote “FOR” the proposals described in the accompanying proxy statement/prospectus.

More information about Magenta, Dianthus, the Merger Agreement and transactions contemplated thereby and the foregoing proposals is contained in the accompanying proxy statement/prospectus. Magenta urges you to read the accompanying proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 29 OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.

Magenta and Dianthus are excited about the opportunities the merger brings to Magenta’s and Dianthus’ stockholders and thank you for your consideration and continued support.

 

Stephen Mahoney		Marino Garcia
President, Chief Financial and Operating Officer		President and Chief Executive Officer
Magenta Therapeutics, Inc.		Dianthus Therapeutics, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the accompanying proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated August 1, 2023, and is first being mailed to Magenta’s stockholders on or about August 1, 2023.

MAGENTA THERAPEUTICS, INC.

300 Technology Square, 8^th Floor

Cambridge, MA 02139

NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS

To the stockholders of Magenta Therapeutics, Inc.:

NOTICE IS HEREBY GIVEN that a virtual special meeting in lieu of annual meeting of stockholders (the “Magenta special meeting”) will be held on Friday, September 8, 2023 at 8:00 a.m. Eastern Time, unless postponed or adjourned to a later date. The Magenta special meeting will be held entirely online. You will be able to attend and participate in the Magenta special meeting online by visiting www.proxydocs.com/MGTA, where you will be able to listen to the meeting live, submit questions and vote.

The Magenta special meeting will be held for the following purposes:

 

1.

To approve (i) the issuance of shares of common stock of Magenta, which will represent more than 20% of the shares of Magenta common stock outstanding immediately prior to the merger, to stockholders of Dianthus, pursuant to the terms of the Merger Agreement, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus, and (ii) the change of control of Magenta resulting from the merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively;

 

2.

To approve an amendment to the amended and restated certificate of incorporation of Magenta (“Magenta’s charter”) to effect a reverse stock split of Magenta’s issued and outstanding common stock at a ratio in the range between 1:10 to 1:18, inclusive, with the final ratio and effectiveness of such amendment and the abandonment of such amendment to be mutually agreed by the Magenta board of directors and the Dianthus board of directors prior to the effective time or, if the Proposal No. 1 is not approved by Magenta stockholders, determined solely by the Magenta board of directors, in the form attached as Annex G to the accompanying proxy statement/prospectus;

 

3.

To approve an amendment to Magenta’s charter to provide for the exculpation of officers, in the form attached as Annex H to the accompanying proxy statement/prospectus;

 

4.

To elect three Class II director nominees named in the accompanying proxy statement/prospectus to Magenta’s board of directors, to serve until Magenta’s 2026 annual meeting of stockholders and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal;

 

5.

To ratify the selection of KPMG LLP as Magenta’s independent registered public accounting firm for the fiscal year ending December 31, 2023, provided that Deloitte & Touche LLP is expected to be appointed for that fiscal year if the merger is completed;

 

6.

To approve an adjournment of the Magenta special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Nasdaq Stock Issuance Proposal and/or the Reverse Stock Split Proposal; and

 

7.

To transact such other business as may properly come before the stockholders at the Magenta special meeting or any adjournment or postponement thereof.

These proposals are collectively referred to as the “Proposals.”

Magenta’s board of directors has fixed July 18, 2023 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Magenta special meeting and any adjournment or postponement thereof. Only holders of record of shares of Magenta common stock at the close of business on the record date are entitled to notice of, and to vote at, the Magenta special meeting. At the close of business on the record date, Magenta had 60,652,197 shares of common stock outstanding and entitled to vote.

Your vote is important. The affirmative vote of a majority of the votes properly cast by the holders of Magenta common stock at the Magenta special meeting, assuming a quorum is present, is required for approval of Proposal Nos. 1, 5 and 6. The affirmative vote of a majority of the outstanding shares of Magenta common stock entitled to vote at the Magenta special meeting is required for approval of Proposal Nos. 2 and 3. With respect to Proposal No. 4, directors are elected by a plurality of the votes properly cast at the Magenta special meeting, and the three nominees for director receiving the highest number of affirmative votes properly cast will be elected. No Proposal is conditioned upon any other Proposal. However, approval of each of Proposal No. 1 and Proposal No. 2 is a condition to the completion of the merger. Therefore, the merger cannot be consummated without the approval of Proposal Nos. 1 and 2.

Even if you plan to virtually attend the Magenta special meeting, Magenta requests that you sign and return the enclosed proxy or vote by mail or online to ensure that your shares will be represented at the Magenta special meeting if you are unable to virtually attend. You may change or revoke your proxy at any time before it is voted at the Magenta special meeting.

MAGENTA’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS FAIR TO, IN THE BEST INTERESTS OF, AND ADVISABLE TO MAGENTA AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. MAGENTA’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT MAGENTA STOCKHOLDERS VOTE “FOR” EACH NOMINEE AND “FOR” EACH SUCH PROPOSAL.

Important Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting to Be Held on Friday, September 8, 2023 at 8:00 a.m. Eastern Time via the internet

The proxy statement/prospectus and annual report to stockholders are available at www.proxydocs.com/MGTA

By Order of Magenta’s Board of Directors,

/s/ Stephen Mahoney

Stephen Mahoney

President, Chief Financial and Operating Officer

August 1, 2023

EXPLANATORY NOTE

The issuance of all shares of Magenta common stock in exchange for each share of Dianthus common stock (including all shares of Dianthus preferred stock converted into common stock), other than shares of Magenta common stock issued in exchange for shares of Dianthus common stock sold in the Dianthus pre-closing financing, is intended to be covered by this registration statement on Form S-4 of which the accompanying proxy statement/prospectus is a part. There is no difference between the Magenta common stock that will be issued in exchange for each share of Dianthus common stock issued in the pre-closing financing and the Magenta common stock that will be issued in exchange for each other share of Dianthus common stock, except that the shares of Magenta common stock that will be issued as transaction consideration in exchange for each share of Dianthus common stock issued in the pre-closing financing will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) and will be subject to restrictions on resale.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Magenta Therapeutics, Inc. that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission (“SEC”) website (www.sec.gov) or upon your written or oral request by contacting the Corporate Secretary of Magenta Therapeutics, Inc. by calling (857) 242-0170 or via email to investor@magentatx.com.

To ensure timely delivery of these documents, any request should be made no later than                 , 2023 to receive them before the Magenta special meeting.

For additional details about where you can find information about Magenta, please see the section titled “Where You Can Find More Information” beginning on page 412 of this proxy statement/prospectus.

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER			1
PROSPECTUS SUMMARY			10
MARKET PRICE AND DIVIDEND INFORMATION			28
RISK FACTORS			29
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			128
THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF MAGENTA STOCKHOLDERS			130
THE MERGER			135
THE MERGER AGREEMENT			180
AGREEMENTS RELATED TO THE MERGER			202
MAGENTA DIRECTORS, OFFICERS AND CORPORATE GOVERNANCE			213
MAGENTA EXECUTIVE COMPENSATION			224
MAGENTA DIRECTOR COMPENSATION			232
MAGENTA EQUITY COMPENSATION PLAN INFORMATION			234
DIANTHUS EXECUTIVE COMPENSATION			235
DIANTHUS DIRECTOR COMPENSATION			240
MATTERS BEING SUBMITTED TO A VOTE OF MAGENTA STOCKHOLDERS			241
PROPOSAL NO. 1—THE NASDAQ STOCK ISSUANCE PROPOSAL			241
PROPOSAL NO. 2—THE REVERSE STOCK SPLIT PROPOSAL			243
PROPOSAL NO. 3—THE OFFICER EXCULPATION PROPOSAL			250
PROPOSAL NO. 4—THE DIRECTOR ELECTION PROPOSAL			252
PROPOSAL NO. 5—THE AUDITOR RATIFICATION PROPOSAL			254
PROPOSAL NO. 6—THE ADJOURNMENT PROPOSAL			255
MAGENTA’S BUSINESS			256
DIANTHUS’ BUSINESS			285
MAGENTA’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			325
DIANTHUS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			339
MANAGEMENT FOLLOWING THE MERGER			359
SELECTED HISTORICAL FINANCIAL DATA AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			371
DESCRIPTION OF MAGENTA CAPITAL STOCK			387
COMPARISON OF RIGHTS OF HOLDERS OF MAGENTA CAPITAL STOCK AND DIANTHUS CAPITAL STOCK			390
PRINCIPAL STOCKHOLDERS OF MAGENTA			401
PRINCIPAL STOCKHOLDERS OF DIANTHUS			404
PRINCIPAL STOCKHOLDERS OF THE COMBINED COMPANY			408
LEGAL MATTERS			412
EXPERTS			412
WHERE YOU CAN FIND MORE INFORMATION			412
INDEX TO MAGENTA’S CONSOLIDATED FINANCIAL STATEMENTS			F-1
INDEX TO DIANTHUS’ FINANCIAL STATEMENTS			F-1
Annex A – Agreement and Plan of Merger			A-1
Annex B – Opinion of Houlihan Lokey Capital, Inc.			B-1
Annex C – Form of Dianthus Support Agreement			C-1
Annex D – Form of Magenta Support Agreement			D-1
Annex E – Form of Lock-Up Agreement			E-1
Annex F – Form of Contingent Value Rights Agreement			F-1
Annex G – Certificate of Amendment for the Reverse Stock Split			G-1
Annex H – Certificate of Amendment for the Officer Exculpation			H-1
Annex I – Appraisal Rights (Section 262 of the Delaware General Corporation Law)			I-1

QUESTIONS AND ANSWERS ABOUT THE MERGER

Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to the proposed reverse stock split described in Proposal No. 2 of this proxy statement/prospectus.

The following section provides answers to frequently asked questions about the merger. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

 

Q:	What is the merger?

 

A:

On May 2, 2023, Magenta, Dianthus and Merger Sub entered into the Merger Agreement, a copy of which is attached as Annex A. The Merger Agreement contains the terms and conditions of the proposed merger. Pursuant to the Merger Agreement, Merger Sub will merge with and into Dianthus, with Dianthus surviving as a wholly owned subsidiary of Magenta. This transaction is referred to in this proxy statement/prospectus as the merger. After the completion of the merger, Magenta will change its corporate name to “Dianthus Therapeutics, Inc.” Magenta following the merger is referred to herein as the “combined company.”

At the effective time, each share of Dianthus common stock (after giving effect to the conversion of each share of Dianthus’ preferred stock into Dianthus common stock and including all such shares that are converted into Dianthus common stock) will be converted into the right to receive a number of shares of Magenta common stock equal to the exchange ratio described in more detail in the section titled “The Merger Agreement—Exchange Ratio” beginning on page 181 of this proxy statement/prospectus.

In connection with the merger, Magenta will assume Dianthus’ 2019 Plan. Each outstanding and unexercised option to purchase shares of Dianthus common stock immediately prior to the effective time will be assumed by Magenta and will be converted into an option to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio. Each outstanding and unexercised warrant to purchase shares of Dianthus common stock immediately prior to the effective time will be converted into a warrant to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio.

Each share of Magenta common stock, each option to purchase Magenta common stock and each award of restricted stock units over Magenta common stock that is issued and outstanding at the effective time will remain issued and outstanding in accordance with its terms and such shares, options and restricted stock units, subject to the proposed reverse stock split and any extension to the expiration time provided for in connection with the merger, will be unaffected by the merger. Immediately after the merger, Magenta securityholders as of immediately prior to the merger are expected to own approximately 22.4% of the outstanding shares of capital stock of the combined company, former Dianthus securityholders, excluding shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 59.2% of the outstanding shares of capital stock of the combined company and shares of Dianthus common stock and Dianthus pre-funded warrants issued in the Dianthus pre-closing financing are expected to represent approximately 18.4% of the outstanding shares of capital stock of the combined company, subject to certain assumptions. Under certain circumstances further described in the Merger Agreement, the ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection.

 

Q:	Why are the two companies proposing to merge?

 

A:	Magenta and Dianthus believe that combining the two companies will result in a company with a promising pipeline, a strong leadership team and substantial capital resources, focused on developing next generation

 

1

complement therapeutics for patients with severe autoimmune diseases who are underserved by current treatment options. For a more complete description of the reasons for the merger, please see the sections titled “The Merger—Magenta’s Reasons for the Merger” and “The Merger—Dianthus’ Reasons for the Merger” beginning on pages 149 and 154, respectively, of this proxy statement/prospectus.

 

Q:	Why am I receiving this proxy statement/prospectus?

 

A:	You are receiving this proxy statement/prospectus because you have been identified as a stockholder of Magenta and/or Dianthus as of the applicable record date, and you are entitled to vote to approve the matters set forth herein. This document serves as:

 

•

a proxy statement of Magenta used to solicit proxies for the Magenta special meeting to vote on the matters set forth herein; and

 

•

a prospectus of Magenta used to offer shares of Magenta common stock in exchange for shares of Dianthus common stock (including shares of Dianthus common stock issued upon conversion of Dianthus preferred stock, but excluding shares of Dianthus common stock issued in the Dianthus pre-closing financing) in the merger.

 

Q:	What is the Dianthus pre-closing financing?

 

A:

On May 2, 2023, concurrently with the execution and delivery of the Merger Agreement, Dianthus entered into a subscription agreement (the “subscription agreement”) with certain investors named therein, including Fidelity Management & Research Company, Catalio Capital Management, 5AM Ventures, Avidity Partners, Wedbush Healthcare Partners, Fairmount, Tellus BioVentures and Venrock Health Capital Partners, pursuant to which such investors agreed to purchase shares of Dianthus common stock and Dianthus pre-funded warrants, at a purchase price currently estimated at $5.0878 per share or warrant for an aggregate purchase price of approximately $70 million. The aggregate purchase price of $70 million is fixed, while the purchase price per share or warrant and the aggregate number of shares and warrants to be purchased is subject to change pursuant to the terms of the subscription agreement. Immediately after the merger, the shares of Dianthus common stock and Dianthus pre-funded warrants issued in the Dianthus pre-closing financing are expected to represent approximately 18.4% of the outstanding shares of capital stock of the combined company. Magenta, Dianthus and the investors participating in the Dianthus pre-closing financing have also agreed to enter into the registration rights agreement at the closing of the Dianthus pre-closing financing, pursuant to which, among other things, the combined company will agree to provide for the registration and resale of certain shares of Magenta common stock that are held by the investors participating in the Dianthus pre-closing financing from time to time pursuant to Rule 415. The closing of the Dianthus pre-closing financing is conditioned upon the satisfaction or waiver of the conditions to the closing of the merger as well as certain other conditions.

For a more complete description of the Dianthus pre-closing financing, please see the sections titled “Agreements Related to the Merger—Subscription Agreement” and “—Registration Rights Agreement” beginning on pages 203 and 204 of this proxy statement/prospectus.

 

Q:	What proposals will be voted on at the Magenta special meeting in connection with the merger?

 

A:	Pursuant to the terms of the Merger Agreement, the following proposals must be approved by the requisite stockholder vote at the Magenta special meeting in order for the merger to close:

 

•

Proposal No. 1—The Nasdaq Stock Issuance Proposal to approve (i) the issuance of shares of common stock of Magenta, which will represent more than 20% of the shares of Magenta common stock outstanding immediately prior to the merger, to stockholders of Dianthus, pursuant to the terms of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus, and (ii) the change of control of Magenta resulting from the merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively; and

 

•

Proposal No. 2—The Reverse Stock Split Proposal to approve an amendment to Magenta’s charter to effect a reverse stock split of Magenta’s issued and outstanding common stock at a ratio in the range

 

2

between 1:10 to 1:18, inclusive, with the final ratio and effectiveness of such amendment and the abandonment of such amendment to be mutually agreed by the Magenta board of directors and the Dianthus board of directors prior to the effective time or, if the Nasdaq Stock Issuance Proposal is not approved by Magenta stockholders, determined solely by the Magenta board of directors, in the form attached as Annex G to this proxy statement/prospectus.

Each of Proposal Nos. 1 and 2 is a condition to completion of the merger. The issuance of Magenta common stock in connection with the merger and the change of control of Magenta resulting from the merger will not take place unless Proposal No. 1 is approved by Magenta stockholders and the merger is consummated. The amendment to the Magenta charter to effect a reverse stock split of Magenta’s issued and outstanding common stock will not take place unless Proposal No. 2 is approved by the requisite Magenta stockholders. The Magenta board of directors may determine to effect the reverse stock split if it is approved and Proposal No. 1 is not approved by Magenta stockholders, following the special meeting.

In addition to the requirement of obtaining Magenta stockholder approval of Proposal Nos. 1 and 2, the closing of the merger is subject to the satisfaction or waiver of each of the other closing conditions set forth in the Merger Agreement. For a more complete description of the closing conditions under the Merger Agreement, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 196 of this proxy statement/prospectus.

The presence, by accessing online or being represented by proxy, at the Magenta special meeting of the holders of a majority of the shares of Magenta common stock outstanding and entitled to vote at the Magenta special meeting is necessary to constitute a quorum at the meeting for the Proposals.

 

Q:	What proposals are to be voted on at the Magenta special meeting, other than the Nasdaq Stock Issuance Proposal and the Reverse Stock Split Proposal?

 

A:	At the Magenta special meeting, the holders of Magenta common stock will also be asked to consider the following proposals:

 

•

Proposal No. 3—The Officer Exculpation Proposal to approve an amendment to Magenta’s charter to provide for the exculpation of officers, in the form attached as Annex H to this proxy statement/prospectus;

 

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Proposal No. 4—The Director Election Proposal to elect three Class II director nominees named in this proxy statement/prospectus to Magenta’s board of directors, to serve until Magenta’s 2026 annual meeting of stockholders and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal;

 

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Proposal No. 5—The Auditor Ratification Proposal to ratify the selection of KPMG LLP as Magenta’s independent registered public accounting firm for the fiscal year ending December 31, 2023, provided that Deloitte & Touche LLP is expected to be appointed for that fiscal year if the merger is completed; and

 

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Proposal No. 6—The Adjournment Proposal to approve an adjournment of the Magenta special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Nasdaq Stock Issuance Proposal and/or the Reverse Stock Split Proposal.

The approval of Proposal Nos. 3, 4, 5 and 6 are not a condition to the merger. Magenta does not expect that any matter other than the Proposals will be brought before the Magenta special meeting.

The presence, by accessing online or being represented by proxy, at the Magenta special meeting of the holders of a majority of the shares of Magenta common stock outstanding and entitled to vote at the Magenta special meeting is necessary to constitute a quorum at the meeting for the purpose of approving the Proposals.

 

Q:	What stockholder votes are required to approve the Proposals at the Magenta special meeting?

 

A:	The affirmative vote of a majority of the votes properly cast by the holders of Magenta common stock at the Magenta special meeting, assuming a quorum is present, is required for approval of Proposal Nos. 1, 5 and

 

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6. The affirmative vote of a majority of the outstanding shares of Magenta common stock entitled to vote at the Magenta special meeting is required for approval of Proposal Nos. 2 and 3. With respect to Proposal No. 4, directors are elected by a plurality of the votes properly cast at the Magenta special meeting, and the three nominees for director receiving the highest number of affirmative votes properly cast will be elected. No Proposal is conditioned upon any other Proposal.

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR,” “AGAINST” and “WITHHOLD” votes, abstentions and broker non-votes, if any, as applicable to each proposal. Abstentions and broker non-votes, if any, will also be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the special meeting. Abstentions will be counted towards the vote totals for each proposal, and will have the same effect of a vote “AGAINST” Proposal Nos. 2 and 3. Broker non-votes, if any, will not be counted as “votes properly cast” and will therefore have no effect on Proposal Nos. 1, 4, 5 and 6, but will be counted as “shares entitled to vote” and will therefore have the same effect of a vote “AGAINST” Proposal Nos. 2 and 3.

 

Q:	What are contingent value rights (“CVRs”)?

 

A:

At or prior to the effective time, Magenta and a rights agent will enter into a Contingent Value Rights Agreement (the “CVR Agreement”), pursuant to which Magenta’s stockholders of record as of immediately prior to the effective time will receive one non-transferable CVR for each outstanding share of Magenta common stock held by such stockholder on such date. A copy of the form of CVR Agreement is included as Annex F to this proxy statement/prospectus. Pursuant to the CVR Agreement, each CVR holder is entitled to certain rights to receive a pro rata portion of the proceeds, if any, received by Magenta as a result of (i) contingent payments made to Magenta, such as milestone, royalty or earnout, when received under any pre-merger disposition agreements related to Magenta’s pre-merger assets (which includes milestone payments under the April 2023 asset purchase agreements pertaining to Magenta’s MGTA-145 and MGTA-45 programs and the CD117 antibodies including the clinical antibody that was used with MGTA-117) and (ii) a Magenta asset sale after the effective date of the merger and prior to December 31, 2023, received within a three-year period following the closing of the merger. Such proceeds are subject to certain permitted deductions, including for applicable tax payments, certain expenses incurred by Magenta or its affiliates, losses incurred or reasonably expected to be incurred by Magenta or its affiliates due to a third party proceeding in connection with a disposition and certain wind-down costs. The contingent payments under the CVR Agreement, if they become payable, will become payable to the rights agent for subsequent distribution to the holders of the CVRs. In the event that no proceeds are received, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that any holders of CVRs will receive payments with respect thereto.

The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in Magenta or the combined company or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.

For a more detailed description of the CVRs and the CVR Agreement, see “Agreements Related to the Merger—Contingent Value Rights Agreement” elsewhere in this proxy statement/prospectus.

 

Q:	What will Dianthus stockholders, participants in Dianthus’ 2019 Plan, option holders and warrant holders receive in the merger?

 

A:

Dianthus stockholders will receive shares of Magenta common stock. Magenta will assume Dianthus’ 2019 Plan, as amended. Dianthus option holders’ outstanding and unexercised options to purchase shares of Dianthus common stock immediately prior to the effective time will be assumed by Magenta and each outstanding and

 

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unexercised option will be converted into an option to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio. Dianthus warrant holders’ outstanding and unexercised warrants to purchase shares of Dianthus common stock immediately prior to the effective time will be assumed by Magenta and each outstanding and unexercised warrant will be converted into a warrant to purchase shares of Magenta’s common stock, with necessary adjustments to the number of shares and exercise price to reflect the exchange ratio. Applying the exchange ratio, the former Dianthus securityholders immediately before the merger, excluding shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 59.2% of the aggregate number of shares of the combined company’s capital stock following the merger, Magenta securityholders immediately before the merger are expected to own approximately 22.4% of the aggregate number of shares of the combined company capital stock following the merger and shares of Dianthus common stock and Dianthus pre-funded warrants issued in the Dianthus pre-closing financing are expected to represent approximately 18.4% of the outstanding shares of capital stock of the combined company following the merger, in each case subject to certain assumptions. Under certain circumstances further described in the Merger Agreement, the ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection.

For a more complete description of the treatment of Dianthus common stock, Dianthus options and Dianthus warrants and Dianthus’ 2019 Plan in the merger, please see the sections titled “The Merger Agreement—Merger Consideration” and “The Merger Agreement—Exchange Ratio” beginning on pages 180 and 181, respectively, of this proxy statement/prospectus. For a description of the effect of the Dianthus pre-closing financing on Magenta’s and Dianthus’ current securityholders, please see the section titled “Agreements Related to the Merger—Subscription Agreement” beginning on page 203 of this proxy statement/prospectus.

 

Q:	Will the common stock of the combined company trade on an exchange?

 

A:

Shares of Magenta common stock are currently listed on Nasdaq under the symbol “MGTA.” Magenta has filed an initial listing application for the common stock of the combined company with Nasdaq. After completion of the merger, Magenta will be renamed “Dianthus Therapeutics, Inc.” and it is expected that the common stock of the combined company will trade on Nasdaq under the symbol “DNTH.” On July 31, 2023, the last trading day before the date of this proxy statement/prospectus, the closing sale price of Magenta common stock was $0.80 per share.

 

Q:	Who will be the directors of the combined company following the merger?

 

A:

Immediately following the merger, the combined company’s board of directors will be composed of eight members, two of whom will be designated by Magenta and six of whom will be designated by Dianthus. The staggered structure of three classes of directors of the Magenta board of directors will remain in place for the combined company following the completion of the merger. All of Magenta’s current directors, other than Alison F. Lawton and Anne McGeorge, are expected to resign from their positions as directors of Magenta, effective as of the effective time.

 

Q:	Who will be the executive officers of the combined company immediately following the merger?

 

A:	Immediately following the merger, the executive management team of the combined company is expected to consist of members of the Dianthus executive management team prior to the merger, including:

 

		Name		Title
		Marino Garcia		President and Chief Executive Officer
		Ryan Savitz		Chief Financial Officer
		Simrat Randhawa, M.D.		Chief Medical Officer
		Adam Veness		Senior Vice President, General Counsel and Secretary
		Edward Carr		Chief Accounting Officer

 

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Q:	As a Magenta stockholder, how does Magenta’s board of directors recommend that I vote?

 

A:

The Magenta board of directors, in consultation with financial and legal advisors and management, evaluated the terms of the Merger Agreement and the related transactions contemplated thereby and unanimously: (i) determined that the merger and the related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Magenta and its stockholders; (ii) approved and declared advisable the Merger Agreement and the related transactions contemplated by the Merger Agreement, including the issuance of shares of Magenta common stock in connection with the merger; and (iii) recommends that Magenta’s stockholders vote “FOR” all of the Proposals.

 

Q:	What risks should I consider in deciding whether to vote in favor of the merger?

 

A:

You should carefully review the section titled “Risk Factors” beginning on page 29 of this proxy statement/prospectus and the documents incorporated by reference herein, which set forth certain risks and uncertainties related to the merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Magenta and Dianthus, as independent companies, are subject.

 

Q:	When do you expect the merger to be consummated?

 

A:	The merger is anticipated to close in the third quarter of 2023, but the exact timing cannot be predicted. For more information, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 196 of this proxy statement/prospectus.

 

Q:	What do I need to do now?

 

A:	Magenta urges you to read this proxy statement/prospectus carefully, including the annexes and the documents incorporated by reference, and to consider how the merger affects you.

If you are a Magenta stockholder of record, you may provide your proxy instructions in one of four different ways:

 

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You can vote using the proxy card. Simply complete, sign and date the accompanying proxy card and return it promptly in the envelope provided. If you return your signed proxy card before the Magenta special meeting, Magenta will vote your shares in accordance with the proxy card.

 

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You can vote by proxy over the internet by following the instructions provided on the proxy card.

 

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You can vote by telephone by calling the toll-free number found on the proxy card.

 

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You may attend the Magenta special meeting online and vote during the meeting by following the instructions at www.proxydocs.com/MGTA. Simply attending the Magenta special meeting will not, by itself, revoke your proxy and/or change your vote.

Your signed proxy card, telephonic proxy instructions, or internet proxy instructions must be received by Thursday, September 7, 2023 at 11:59 p.m. Eastern Time to be counted.

If you hold your shares in “street name” (as described below), you may provide your proxy instructions via telephone or the internet by following the instructions on your vote instruction form provided by your bank, broker or other nominee, referred to herein as “broker.” Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Magenta special meeting.

 

Q:	What happens if I do not return a proxy card or otherwise vote or provide proxy instructions, as applicable?

 

A:	If you are a Magenta stockholder, the failure to return your proxy card or otherwise vote or provide proxy instructions will have no effect on Proposal Nos. 1, 4, 5 and 6 and will have the same effect as a vote “AGAINST” Proposal Nos. 2 and 3.

 

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Q:	May I attend the Magenta special meeting and vote in person?

 

A:

Stockholders of record as of July 18, 2023 will be able to attend and participate in the Magenta special meeting online by accessing www.proxydocs.com/MGTA. To join the Magenta special meeting, you will need to have your control number which is included on your Notice of Internet Availability of Proxy Materials and your proxy card. If your shares are held in “street name,” you should contact your broker if you did not receive a control number.

 

Q:	Who counts the votes?

 

A:

Mediant Communications, LLC (“Mediant”) has been engaged as Magenta’s inspector of election. If you are a stockholder of record, your executed proxy card is returned directly to Mediant for tabulation. If you hold your shares through a broker, your broker returns one proxy card to Mediant on behalf of all its clients.

 

Q:	If my Magenta shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A:

If you hold shares beneficially in street name and do not provide your broker or other agent with voting instructions, your shares may constitute “broker non-votes.” A “broker non-vote” occurs when shares held by a broker that are represented at the meeting are not voted with respect to a particular proposal because the broker has not received voting instructions from its client(s) with respect to such shares on how to vote and does not have or did not exercise discretionary authority to vote on the matter.

Broker non-votes, if any, will be treated as shares that are present at the Magenta special meeting for purposes of determining whether a quorum exists but will not have any effect for the purpose of voting on Proposal Nos. 1, 4, 5 and 6. Broker non-votes, if any, will have the same effect as “AGAINST” votes for Proposal Nos. 2 and 3.

If a Magenta stockholder does not return voting instructions to their broker on how to vote their shares of Magenta common stock, such broker may be prevented from voting, or may otherwise choose not to vote, such shares held by such broker, resulting in broker non-votes with respect to such shares. To make sure that your vote is counted, you should instruct your broker to vote your shares of Magenta common stock, following the procedures provided by your broker.

 

Q:	What are broker non-votes and do they count for determining a quorum?

 

A:

Generally, a “broker non-vote” occurs when shares held by a broker are not voted with respect to a particular proposal because the broker has not received voting instructions from its client(s) with respect to such shares on how to vote and does not have or did not exercise discretionary authority to vote on the matter.

Broker non-votes, if any, will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Magenta special meeting. Broker non-votes, if any, will not be counted as “votes properly cast” and will therefore have no effect on Proposal Nos. 1, 4, 5 and 6 but will be counted as “shares entitled to vote” and will therefore have the same effect of a vote “AGAINST” Proposal Nos. 2 and 3.

 

Q:	May I revoke and/or change my vote after I have submitted a proxy or provided proxy instructions?

 

A:	Magenta stockholders of record, unless such stockholder’s vote is subject to a support agreement, may revoke and/or change their vote at any time before their proxy is voted at the Magenta special meeting in one of four ways:

 

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You may submit another properly completed proxy with a later date by mail or via the internet.

 

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You can provide your proxy instructions via telephone at a later date.

 

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You may send a notice that you are revoking your proxy over the internet, following the instructions provided on your proxy card.

 

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You may attend the Magenta special meeting online and vote during the meeting by following the instructions at www.proxydocs.com/MGTA. Simply attending the Magenta special meeting will not, by itself, revoke your proxy and/or change your vote.

Your signed proxy card, telephonic proxy instructions, internet proxy instructions, or written notice must be received by Thursday, September 7, 2023, 11:59 p.m. Eastern Time to be counted.

If a Magenta stockholder who owns Magenta shares in “street name” has instructed a broker to vote its shares of Magenta common stock, the stockholder must follow directions received from its broker to change those instructions.

 

Q:	Who is paying for this proxy solicitation?

 

A:

Magenta and Dianthus will share equally the cost of printing and filing of this proxy statement/prospectus and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Magenta common stock for the forwarding of solicitation materials to the beneficial owners of Magenta common stock. Magenta will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. Magenta has retained Innisfree M&A Incorporated (“Innisfree”), to assist it in soliciting proxies using the means referred to above. Magenta will pay the fees of Innisfree, which Magenta expects to be up to $50,000, plus reimbursement of out-of-pocket expenses.

 

Q:	What are the material U.S. federal income tax consequences of the merger to U.S. holders of Dianthus common stock?

 

A:

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes. However, it is not a condition to Dianthus’ obligation or Magenta’s obligation to complete the merger that the merger so qualifies. Nevertheless, assuming that the merger so qualifies, U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 173) of shares of Dianthus common stock will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their shares of Dianthus common stock for shares of Magenta common stock in the merger. Dianthus and Magenta have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”) regarding any matters relating to the transactions and, as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein.

For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 173.

 

Q:	What are the material U.S. federal income tax consequences of the issuance of the CVRs, including any distributions of Magenta common stock under the CVRs?

 

A:

Although the U.S. federal income tax treatment of the CVRs is uncertain and the matter is not free from doubt, Magenta intends to treat a holder’s receipt of the CVRs as a distribution of property with respect to the holder’s existing shares of Magenta common stock for U.S. federal income tax purposes. Please review the information in the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs to Holders of Magenta Common Stock” for a discussion of the material U.S. federal income tax consequences of the CVRs to holders of Magenta common stock.

 

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Q:	What are the material U.S. federal income tax consequences of the reverse stock split to holders of Magenta common stock?

 

A:

A holder of Magenta common stock should not recognize gain or loss upon the reverse stock split, except to the extent such holder receives cash in lieu of a fractional share of Magenta common stock, and subject to the discussion in the section titled “Proposal No. 2—The Reverse Stock Split Proposal.” Please review the information in the section titled “Proposal No. 2—The Reverse Stock Split Proposal—Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” for a more complete description of the material U.S. federal income tax consequences of the reverse stock split to holders of Magenta common stock.

 

Q:	Who can help answer my questions?

 

A:	If you are a Magenta stockholder and would like additional copies of this proxy statement/prospectus without charge or if you have questions about the merger or related matters, including the procedures for voting your shares, you should contact:

Magenta Therapeutics, Inc.

300 Technology Square, 8^th Floor

Cambridge, MA 02139

Telephone: (857) 242-0170

Attention: Corporate Secretary

Email: investor@magentatx.com

 

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MARKET PRICE AND DIVIDEND INFORMATION

The Magenta common stock is currently listed on The Nasdaq Global Market under the symbol “MGTA,” although it has applied to transfer its listing to The Nasdaq Capital Market.

The closing price of the Magenta common stock on May 2, 2023, the last day of trading prior to the announcement of the merger, as reported on The Nasdaq Global Market, was $0.77 per share. The closing price of the Magenta common stock on July 31, 2023, the last practicable date before the date of this proxy statement/prospectus, as reported on Nasdaq, was $0.80 per share.

Because the market price of the Magenta common stock is subject to fluctuation, the market value of the shares of the Magenta common stock that the Dianthus stockholders will be entitled to receive in the merger may increase or decrease.

Assuming approval of Proposal Nos. 1 and 2 and successful application for initial listing with Nasdaq, following the consummation of the merger, the Magenta common stock will trade on Nasdaq under Magenta’s new name, “Dianthus Therapeutics, Inc.,” and new trading symbol “DNTH.”

As of July 18, 2023, the Record Date for the Special Meeting, there were approximately four registered holders of record of the Magenta common stock. As of July 18, 2023, Dianthus had two holders of record of Dianthus common stock and 26 holders of record of Dianthus preferred stock. For detailed information regarding the beneficial ownership of certain Magenta and Dianthus stockholders, see the sections of this proxy statement/prospectus titled “Principal Stockholders of Magenta” and “Principal Stockholders of Dianthus.”

Dividends

Magenta has never declared or paid any cash dividends on the Magenta common stock and does not anticipate paying cash dividends on the Magenta common stock for the foreseeable future, except pursuant to the CVR Agreement. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the merger will be at the discretion of the combined organization’s then-current board of directors and will depend upon a number of factors, including the combined organization’s results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the then-current board of directors deems relevant.

Dianthus has never paid or declared any cash dividends on the Dianthus capital stock. If the merger does not occur, Dianthus does not anticipate paying any cash dividends on the Dianthus capital stock in the foreseeable future, and Dianthus intends to retain all available funds and any future earnings to fund the development and expansion of its business. Any future determination to pay dividends will be at the discretion of the Dianthus board of directors and will depend upon a number of factors, including its results of operations, financial condition, future prospects, contractual restrictions, and restrictions imposed by applicable laws and other factors the Dianthus board of directors deems relevant.

 

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RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained or incorporated by reference in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Magenta common stock. You should also read and consider the other information in this proxy statement/prospectus. Please see the section titled “Where You Can Find More Information” beginning on page 412 of this proxy statement/prospectus for further information.

Risks Related to the Merger

The exchange ratio will not change or otherwise be adjusted based on the market price of Magenta common stock as the exchange ratio depends on the Magenta net cash at the closing and not the market price of Magenta common stock, so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

On May 2, 2023, Magenta entered into the Merger Agreement with Dianthus, pursuant to which a wholly-owned subsidiary of Magenta will merge with and into Dianthus, with Dianthus surviving as a wholly-owned subsidiary of Magenta. At the effective time, as described in the Merger Agreement, outstanding shares of Dianthus capital stock will be converted into shares of Magenta common stock. Applying the exchange ratio, the former Dianthus securityholders immediately before the merger, including shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 77.6% of the aggregate number of shares of Magenta capital stock and Magenta securityholders immediately before the merger are expected to own approximately 22.4% of the aggregate number of shares of Magenta capital stock, subject to certain assumptions. Under certain circumstances further described in the Merger Agreement, the ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection. In the event Magenta’s net cash is below $65.0 million, the exchange ratio will be adjusted such that the number of shares issued to the pre-merger Dianthus securityholders will be increased, and Magenta stockholders will own a smaller percentage of the combined company following the merger.

Any changes in the market price of Magenta stock before the completion of the merger will not affect the number of shares Dianthus stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the merger, the market price of Magenta common stock increases from the market price on the date of the Merger Agreement, then Dianthus stockholders could receive merger consideration with substantially more value for their shares of Dianthus capital stock than the parties had negotiated when they established the exchange ratio. Similarly, if before the completion of the merger the market price of Magenta common stock declines from the market price on the date of the Merger Agreement, then Dianthus stockholders could receive merger consideration with substantially lower value. The Merger Agreement does not include a price-based termination right.

Failure to complete the merger may result in either Magenta or Dianthus paying a termination fee to the other party, and could harm the common stock price of Magenta and future business and operations of each company.

If the merger is not completed, Magenta and Dianthus are subject to the following risks:

 

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if the Merger Agreement is terminated under specified circumstances, Magenta could be required to pay Dianthus a termination fee of $13.3 million, or Dianthus could be required to pay Magenta a termination fee of $13.3 million, plus, in each case, up to $1.5 million in expense reimbursements;

 

•

the price of Magenta common stock may decline and could fluctuate significantly; and

 

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•

costs related to the merger, such as financial advisor, legal and accounting fees, a majority of which must be paid even if the merger is not completed.

If the Merger Agreement is terminated and the board of directors of Magenta or Dianthus determines to seek another business combination, there can be no assurance that either Magenta or Dianthus will be able to find another third party to transact a business combination with, yielding comparable or greater benefits.

If the conditions to the merger are not satisfied or waived, the merger may not occur.

Even if the merger is approved by the stockholders of Dianthus and Proposal Nos. 1 and 2 as described in this proxy statement/prospectus are approved by the Magenta stockholders, specified conditions must be satisfied or, to the extent permitted by applicable law, waived to complete the merger. These conditions are set forth in the Merger Agreement and each material condition to the completion of the merger is described in the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 196 of this proxy statement/prospectus. Magenta and Dianthus cannot assure you that all of the conditions to the consummation of the merger will be satisfied or waived. If the conditions are not satisfied or waived, the merger may not occur or the closing may be delayed.

The merger may be completed even though a material adverse effect may result from the announcement of the merger, industry-wide changes or other causes.

In general, neither Magenta nor Dianthus is obligated to complete the merger if there is a material adverse effect affecting the other party between May 2, 2023, the date of the Merger Agreement, and the closing of the merger. However, certain types of causes are excluded from the concept of a “material adverse effect.” Such exclusions include but are not limited to changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the merger, natural disasters, pandemics (including the coronavirus (“COVID-19”) pandemic), other force majeure events, acts or threat of terrorism or war and changes in GAAP. Therefore, if any of these events were to occur and adversely affect Magenta or Dianthus, the other party would still be obliged to consummate the closing of the merger notwithstanding such material adverse effect. If any such adverse effects occur and Magenta and Dianthus consummate the closing of the merger, the stock price of the combined company may suffer. This in turn may reduce the value of the merger to the stockholders of Magenta, Dianthus or both. For a more complete discussion of what constitutes a material adverse effect on Magenta or Dianthus, see the section titled “The Merger Agreement—Representations and Warranties” beginning on page 186 of this proxy statement/prospectus.

If Magenta and Dianthus complete the merger, the combined company will need to raise additional capital by issuing equity securities or additional debt or through licensing arrangements, which may cause significant dilution to the combined company’s stockholders or restrict the combined company’s operations.

On May 2, 2023, Dianthus entered into the subscription agreements with certain investors, including existing investors of Dianthus, pursuant to which the investors agreed to purchase, in the aggregate, $70.0 million in shares of common stock and pre-funded warrants of Dianthus immediately prior to the closing of the merger, referred to as the Dianthus pre-closing financing. The closing of the Dianthus pre-closing financing is conditioned upon the satisfaction or waiver of the conditions to the closing of the merger as well as certain other conditions. The shares of Dianthus common stock and Dianthus pre-funded warrants issued in the Dianthus pre-closing financing will result in dilution to all securityholders of the combined company (i.e., both the pre-merger Magenta securityholders and former Dianthus securityholders). The Dianthus pre-closing financing is more fully described under the section titled “Agreements Related to the Merger—Subscription Agreement” beginning on page 203 of this proxy statement/prospectus.

Additional financing may not be available to the combined company when it is needed or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity

 

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securities, such financing will cause additional dilution to all securityholders of the combined company, including Magenta’s pre-merger securityholders and Dianthus’ former securityholders. It is also possible that the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.

Some Magenta and Dianthus directors and executive officers have interests in the merger that are different from yours and that may influence them to support or approve the merger without regard to your interests.

Directors and executive officers of Magenta and Dianthus may have interests in the merger that are different from, or in addition to, the interests of other Magenta stockholders generally. These interests with respect to Magenta’s directors and executive officers may include, among others, acceleration of stock option or restricted stock unit vesting, retention bonus payments, extension of exercisability periods of previously issued stock option grants, severance payments if employment is terminated in a qualifying termination in connection with the merger and rights to continued indemnification, expense advancement and insurance coverage. Two members of the Magenta board of directors will continue as directors of the combined company after the effective time, and, following the closing of the merger, will be eligible to be compensated as non-employee directors of the combined company. These interests with respect to Dianthus’ directors and executive officers may include, among others, certain of Dianthus’ directors and executive officers have options, subject to vesting, to purchase shares of Dianthus common stock which, after the effective time, will be converted into and become options to purchase shares of the common stock of the combined company; Dianthus’ executive officers are expected to continue as executive officers of the combined company after the effective time; and all of Dianthus’ directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement.

In addition, Dianthus’ directors Leon O. Moulder, Jr., Tomas Kiselak, Jonathan Violin and Lei Meng are affiliated with or employed by Tellus BioVentures, LLC (“Tellus” or “Tellus BioVentures”), Fairmount Funds Management LLC (“Fairmount”) and Avidity Partners, which hold or are affiliated with entities that hold an interest in Dianthus and are participating in the Dianthus pre-closing financing. Further, 5AM Ventures is affiliated with entities that hold an interest in Dianthus and are participating in the Dianthus pre-closing financing. Dianthus’ director Paula Soteropoulos is a part-time employee of 5AM Ventures. Current members of Dianthus’ board of directors are expected to continue as directors of the combined company after the effective time, and, following the closing of the merger, will be eligible to be compensated as non-employee directors of the combined company pursuant to the combined company’s non-employee director compensation policy.

The Magenta and Dianthus boards of directors were aware of and considered those interests, among other matters, in reaching their decisions to approve and adopt the Merger Agreement, approve the merger, and recommend the approval of the Merger Agreement to Magenta and Dianthus stockholders. These interests, among other factors, may have influenced the directors and executive officers of Magenta and Dianthus to support or approve the merger.

For more information regarding the interests of Magenta and Dianthus directors and executive officers in the merger, please see the sections titled “The Merger—Interests of Magenta’s Directors and Executive Officers in the Merger” beginning on page 165 and “The Merger—Interests of Dianthus’ Directors and Executive Officers in the Merger” beginning on page 169 of this proxy statement/prospectus.

 

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Magenta stockholders and Dianthus stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger, including the conversion of Dianthus common stock issued in the Dianthus pre-closing financing.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Magenta stockholders and Dianthus stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger.

If the merger is not completed, Magenta’s stock price may decline significantly.

The market price of Magenta common stock is subject to significant fluctuations. Market prices for securities of pharmaceutical, biotechnology and other life science companies have historically been particularly volatile. In addition, the market price of Magenta common stock will likely be volatile based on whether stockholders and other investors believe that Magenta can complete the merger or otherwise raise additional capital to support Magenta’s operations if the merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of Magenta common stock has been and may be exacerbated by low trading volume. Additional factors that may cause the market price of Magenta common stock to fluctuate include:

 

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the entry into, or termination of, key agreements, including commercial partner agreements;

 

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announcements by commercial partners or competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;

 

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the loss of key employees;

 

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future sales of its common stock;

 

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general and industry-specific economic conditions that may affect its research and development expenditures;

 

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the failure to meet industry analyst expectations; and

 

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period-to-period fluctuations in financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of Magenta common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies.

Magenta and Dianthus securityholders will generally have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the merger, the current stockholders of Magenta and Dianthus will generally own a smaller percentage of the combined company than their ownership of their respective companies prior to the merger. Immediately after the merger, Magenta stockholders as of immediately prior to the merger are expected to own approximately 22.4% of the outstanding shares of capital stock of the combined company and former Dianthus securityholders, including shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 77.6% of the outstanding shares of capital stock of the combined company, subject to certain assumptions. The ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection. The Chief Executive Officer of Dianthus will serve as the Chief Executive Officer of the combined company following the completion of the merger.

 

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During the pendency of the merger, Magenta and Dianthus may not be able to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.

Covenants in the Merger Agreement impede the ability of Magenta and Dianthus to make acquisitions during the pendency of the merger, subject to specified exceptions. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, seeking, initiating or knowingly encouraging, inducing or facilitating the communication, making, submission or announcement of any acquisition proposal or acquisition inquiry or taking any action that could reasonably be expected to lead to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified exceptions. Any such transactions could be favorable to such party’s stockholders, but the parties may be unable to pursue them. For more information, see the section titled “The Merger Agreement—Non-Solicitation” beginning on page 190 of this proxy statement/prospectus.

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Magenta and Dianthus from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances as described in further detail in the section titled “The Merger Agreement—Non-Solicitation” beginning on page 190 of this proxy statement/prospectus. In addition, if Magenta terminates the Merger Agreement under specified circumstances, Magenta could be required to pay Dianthus a termination fee of $13.3 million, or Dianthus could be required to pay Magenta a termination fee of $13.3 million, plus, in each case, up to $1.5 million in expense reimbursements. This termination fee may discourage third parties from submitting competing proposals to Magenta, Dianthus or their respective stockholders, and may cause the Magenta or Dianthus board of directors to be less inclined to recommend a competing proposal.

Because the lack of a public market for Dianthus’ common stock makes it difficult to evaluate the fair market value of Dianthus’ capital stock, the value of the Magenta common stock to be issued to Dianthus stockholders may be more or less than the fair market value of Dianthus’ common stock.

The outstanding capital stock of Dianthus is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Dianthus’ capital stock. Because the percentage of Magenta equity to be issued to Dianthus stockholders was determined based on negotiations between the parties, it is possible that the value of the Magenta common stock to be issued to Dianthus stockholders will be more or less than the fair market value of Dianthus’ capital stock.

If the merger does not qualify as a reorganization under the Code, U.S. holders of Dianthus common stock may be taxed on the full amount of the consideration received in the merger.

As discussed more fully under the section titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” the merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the merger so qualifies, no gain will be recognized by U.S. holders of Dianthus common stock who receive only Magenta common stock in the merger. It is not, however, a condition to Dianthus’ obligation or Magenta’s obligation to complete the transactions that the merger so qualifies. None of the parties to the Merger Agreement have sought or intend to seek any ruling from the IRS regarding the qualification of the merger as a reorganization within the meaning of Section 368(a) of the Code. If the merger does not qualify for the U.S. federal income tax treatment described herein, U.S. holders of Dianthus common stock may be taxed on any gain realized up to the full fair market value of any Magenta common stock received in the merger.

 

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The tax treatment of the CVRs is uncertain.

Magenta intends to treat the issuance of the CVRs to the persons who prior to completion of the merger were Magenta stockholders as a distribution of property with respect to Magenta common stock. However, the U.S. federal income tax treatment of the CVRs is uncertain. There is no legal authority directly addressing the U.S. federal income tax treatment of contingent value rights with characteristics similar to the CVRs. Therefore, it is possible that the issuance of the CVRs may be treated as a distribution of equity with respect to Magenta stock, as an “open transaction,” or as a “debt instrument” for U.S. federal income tax purposes, and such questions are inherently factual in nature. For more information regarding the U.S. federal income tax consequences of the CVRs, see the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs to Holders of Magenta Common Stock.”

Risks Related to the Proposed Reverse Stock Split

The reverse stock split may not increase the combined company’s stock price over the long-term.

The principal purposes of the reverse stock split are to (i) increase the per-share market price of Magenta’s common stock above the Minimum Bid Price requirement under the Nasdaq rules so that the listing of Magenta and the shares of Magenta common stock being issued in the merger on Nasdaq will be approved and (ii) increase the number of authorized and unissued shares available for future issuance in connection with the merger. It cannot be assured, however, that the reverse stock split will accomplish any increase in the per-share market price of Magenta’s common stock for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Magenta’s common stock, it cannot be assured that the reverse stock split will increase the market price of its common stock by a multiple of the reverse stock split ratio mutually agreed by Magenta and Dianthus, or result in any permanent or sustained increase in the market price of Magenta’s common stock, which is dependent upon many factors, including Magenta’s business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of Magenta might meet the listing requirements for Nasdaq initially after the reverse stock split, it cannot be assured that it will continue to do so.

The reverse stock split may decrease the liquidity of the combined company’s common stock.

Although the Magenta board of directors believes that the anticipated increase in the market price of the combined company’s common stock resulting from the proposed reverse stock split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock. In addition, the reverse stock split may not result in an increase in the combined company’s stock price necessary to satisfy Nasdaq’s initial listing requirements for the combined company.

The reverse stock split may lead to a decrease in the combined company’s overall market capitalization.

Should the market price of the combined company’s common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same

 

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after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the reverse stock split.

Risks Related to Magenta’s Strategic Alternative Process and Potential Strategic Transaction

Failure to complete, or delays in completing, the proposed merger transaction with Dianthus could materially and adversely affect Magenta’s results of operations, business, financial results and/or stock price.

In February 2023, Magenta announced that it intended to conduct a comprehensive review of strategic alternatives for the company and its assets. After a comprehensive review of strategic alternatives, including identifying and reviewing potential candidates for the merger, on May 2, 2023, Magenta entered into the Merger Agreement with Dianthus and Merger Sub, pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub will merge with and into Dianthus, with Dianthus continuing as the surviving company and a wholly-owned subsidiary of Magenta. The closing of the merger is subject to approval by the stockholders of Magenta and Dianthus as well as other customary closing conditions, including the effectiveness of a registration statement filed with the SEC in connection with the transaction. If the merger is completed, the business of Dianthus will continue as the business of the combined company. Any failure to satisfy a required condition to closing may prevent, delay or otherwise materially and adversely affect the completion of the transaction, which could materially and adversely affect Magenta’s results of operations, business, financial results and/or stock price. Magenta cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that the proposed merger will be successfully consummated or that Magenta will be able to successfully consummate the proposed merger as currently contemplated under the Merger Agreement or at all.

Magenta’s efforts to complete the merger could cause substantial disruptions in, and create uncertainty surrounding, Magenta’s business, which may materially adversely affect Magenta’s results of operations and Magenta’s business. Uncertainty as to whether the merger will be completed may affect Magenta’s ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. A substantial amount of Magenta’s management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from Magenta’s day-to-day operations. Uncertainty as to Magenta’s future could adversely affect Magenta’s business and Magenta’s relationship with collaborators, suppliers, vendors, regulators and other business partners. For example, vendors, collaborators and other counterparties may defer decisions about working with Magenta or seek to change existing business relationships with Magenta. Changes to, or termination of, existing business relationships could adversely affect Magenta’s results of operations and financial condition, as well as the market price of Magenta’s common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Risks related to the failure to consummate, or delay in consummating, the proposed merger transaction with Dianthus include, but are not limited to, the following:

 

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Magenta would not realize any or all of the potential benefits of the merger, which could have a negative effect on Magenta’s results of operations, business or stock price;

 

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under some circumstances, Magenta may be required to pay a termination fee to Dianthus of $13.3 million, and/or expense reimbursement of up to $1.5 million;

 

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Magenta would remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the merger regardless of whether the merger is consummated;

 

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the trading price of Magenta’s common stock may decline to the extent that the current market price for Magenta’s stock reflects a market assumption that the merger will be completed;

 

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•

the attention of Magenta’s management and employees may have been diverted to the merger rather than to Magenta’s operations and the pursuit of other opportunities that could have been beneficial to Magenta;

 

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Magenta could be subject to litigation related to any failure to complete the merger;

 

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Magenta could potentially lose key personnel during the pendency of the merger as employees and other service providers may experience uncertainty about their future roles with Magenta following completion of the merger; and

 

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under the Merger Agreement, Magenta is subject to certain customary restrictions on the conduct of Magenta’s business prior to completing the merger, which restrictions could adversely affect Magenta’s ability to conduct Magenta’s business as Magenta otherwise would have done if Magenta was not subject to these restrictions.

The occurrence of any of these events individually or in combination could materially and adversely affect Magenta’s results of operations, business, and Magenta’s stock price.

Magenta cannot be sure if or when the merger will be completed.

The consummation of the merger is subject to the satisfaction or waiver of various conditions, including the authorization of the merger by Magenta’s stockholders and Dianthus’ stockholders. Magenta cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If Magenta is unable to satisfy certain closing conditions or if other mutual closing conditions are not satisfied, Dianthus will not be obligated to complete the merger. Under certain circumstances, Magenta would be required to pay Dianthus a termination fee of $13.3 million, and/or expense reimbursement of Dianthus of up to $1.5 million.

If the merger is not completed, Magenta’s board of directors, in discharging its fiduciary obligations to Magenta’s stockholders, would evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to Magenta’s stockholders as the merger, including a liquidation and dissolution. Any future sale or merger, financing or other transaction, including a liquidation or dissolution, may be subject to further stockholder approval. Magenta may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect on Magenta’s business.

Until the merger is completed, the Merger Agreement restricts Dianthus and Magenta from taking specified actions without the consent of the other party, and requires Magenta to operate in the ordinary course of business consistent with past practice. These restrictions may prevent Dianthus and Magenta from making appropriate changes to Magenta respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the merger. Further, if Magenta’s net cash at closing is lower than anticipated, either because expenses exceed current estimates or due to delays prior to closing, then the pre-merger stockholders of Magenta will own less of the combined company pursuant to the exchange ratio adjustment set forth in the Merger Agreement.

Any delay in completing the proposed merger may materially and adversely affect the timing and benefits that are expected to be achieved from the proposed merger.

The exchange ratio set forth in the Merger Agreement is not adjustable based on the market price of Magenta’s common stock, so the merger consideration at the closing of the merger may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set the exchange ratio for Dianthus capital stock being converted into Magenta’s common stock, and the exchange ratio is based on the outstanding capital stock of Dianthus and the outstanding common stock of Magenta, in each case immediately prior to the closing of the merger. Applying the exchange

 

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ratio formula in the Merger Agreement, the pre-merger Dianthus equityholders, including shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 77.6% of the outstanding capital stock of the combined company immediately following the merger, and the securityholders of Magenta immediately before the merger are expected to own approximately 22.4% of the outstanding capital stock of the combined company immediately following the merger, in each case, after giving effect to the Dianthus pre-closing financing and subject to certain assumptions detailed in the Merger Agreement. Under certain circumstances further described in the Merger Agreement, however, these ownership percentages may be adjusted up or down including, but not limited to, if Magenta’s net cash as of closing is lower than $59.5 million or greater than $60.5 million, and as a result, either the Magenta stockholders or the Dianthus stockholders could own less of the combined company than expected. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection.

Any changes in the market price of Magenta’s common stock before the completion of the merger will not affect the number of shares of Magenta’s common stock issuable to Dianthus’ stockholders pursuant to the Merger Agreement. Therefore, if before the completion of the merger the market price of Magenta’s common stock declines from the market price on the date of the Merger Agreement, then Dianthus’ stockholders could receive merger consideration with substantially lower value than the value of such merger consideration on the date of the Merger Agreement. Similarly, if before the completion of the merger the market price of Magenta’s common stock increases from the market price of Magenta’s common stock on the date of the Merger Agreement, then Dianthus’ stockholders could receive merger consideration with substantially greater value than the value of such merger consideration on the date of the Merger Agreement. The Merger Agreement does not include a price-based termination right.

The Merger Agreement contains provisions that limit Magenta’s ability to pursue alternatives to the merger, could discourage a potential competing acquiror of Magenta from making an alternative transaction proposal and, in specified circumstances, could require Magenta to pay a termination fee to Dianthus, which could significantly harm Magenta’s financial condition and the market price of Magenta’s common stock and negatively affect the future business and operations of each company.

The Merger Agreement contains provisions that make it difficult for Magenta to entertain a third-party proposal for an acquisition of Magenta. These provisions include Magenta’s agreement not to solicit or initiate any additional discussions with third parties regarding other proposals for Magenta’s acquisition, as well as restrictions on Magenta’s ability to respond to such proposals, subject to fulfillment of certain fiduciary requirements of Magenta’s board of directors.

If the proposed merger is not completed and the Merger Agreement is terminated under certain circumstances, Magenta may be required to pay Dianthus a termination fee of up to $13.3 million, and/or expense reimbursement of up to $1.5 million. Even if a termination fee is not payable in connection with a termination of the Merger Agreement, Magenta will have incurred significant fees and expenses, which must be paid whether or not the merger is completed. Further, if the proposed merger is not completed, it could significantly harm the market price of Magenta’s common stock.

In addition, if the Merger Agreement is terminated and the board of directors of Magenta determines to seek another business combination, there can be no assurance that either Magenta will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Merger Agreement.

Lawsuits may be filed against Magenta and the members of Magenta’s board of directors arising out of the proposed merger, which may delay or prevent the proposed merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against Magenta, Magenta’s board of directors, Dianthus, Dianthus’ board of directors and others in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is uncertain,

 

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and Magenta may not be successful in defending against any such future claims. Lawsuits that may be filed against Magenta, Magenta’s board of directors, Dianthus, or Dianthus’ board of directors could delay or prevent the merger, divert the attention of Magenta’s management and employees from Magenta’s day-to-day business and otherwise adversely affect Magenta’s financial condition.

Magenta’s stockholders potentially may not receive any payment on the CVRs and the CVRs may otherwise expire valueless.

The Merger Agreement contemplates that, at or prior to the effective time, Magenta, the holder’s representative and the rights agent (as defined in the CVR Agreement (defined below)) will execute and deliver a contingent value rights agreement (the “CVR Agreement”), pursuant to which each person who as of immediately prior to the effective time was a stockholder of record of Magenta or had the right to receive Magenta’s common stock will be entitled to receive a contractual contingent value right (“CVR”), issued by Magenta subject to and in accordance with the terms and conditions of the CVR Agreement. Pursuant to the CVR Agreement, each CVR holder is entitled to certain rights to receive a pro rata portion of the proceeds, if any, received by Magenta as a result of (i) contingent payments made to Magenta, such as milestone, royalty or earnout, when received under any pre-merger disposition agreements related to Magenta’s pre-merger assets (which includes milestone payments under the April 2023 asset purchase agreements pertaining to Magenta’s MGTA-145 and MGTA-45 programs and the CD117 antibodies including the clinical antibody that was used with MGTA-117) and (ii) a Magenta asset sale after the effective date of the merger and prior to December 31, 2023, received within a three-year period following the closing of the merger. Such proceeds are subject to certain permitted deductions, including for applicable tax payments, certain expenses incurred by Magenta or its affiliates, losses incurred or reasonably expected to be incurred by Magenta or its affiliates due to a third party proceeding in connection with a disposition and certain wind-down costs. The right of Magenta’s stockholders to derive any value from the CVRs will be contingent solely upon the disposition of such assets within the time periods specified in the CVR Agreement or upon achievement of the milestones or any other contingencies as provided in the CVR Agreement.

Magenta may not be able to achieve successful results from the disposition of such assets as described above. If this is not achieved for any reason within the time periods specified in the CVR Agreement, no payments will be made under the CVRs, and the CVRs will expire valueless.

Certain of Magenta’s officers and directors may have interests in the proposed merger that are different from, or in conflict with or in addition to, those of Magenta’s stockholders generally.

Certain officers and directors of Magenta may have interests in the proposed merger that are different from the interests of Magenta’s stockholders generally, including potentially, among others, the continued service as a director of the combined company, the acceleration of stock option vesting, and continued indemnification.

The closing of the merger will also result in the acceleration of vesting of options to purchase shares of Magenta’s common stock held by Magenta’s executive officers and directors, whether or not there is a covered termination of such officer’s employment or board membership. In addition, two of Magenta’s current directors are expected to become directors of the surviving company upon the closing of the merger, and all of Magenta’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. These interests, among others, may influence the officers and directors of Magenta and cause them to view the merger differently from how Magenta’s stockholders generally may view it.

For more information regarding the interests of Magenta and Dianthus directors and executive officers in the merger, please see the sections titled “The Merger—Interests of Magenta’s Directors and Executive Officers in the Merger” beginning on page 165 and “The Merger—Interests of Dianthus’ Directors and Executive Officers in the Merger” beginning on page 169 of this proxy statement/prospectus, as well as “Risk Factors—Risks Related to the Merger—Some Magenta and Dianthus directors and executive officers have interests in the merger that are different from yours and that may influence them to support or approve the merger without regard to your interests.”

 

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Magenta’s equityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, Magenta following the closing of the merger as compared to their current ownership and voting interest in Magenta.

After the completion of the merger, the current securityholders of Magenta will own a smaller percentage of the combined company than their ownership in Magenta prior to the merger. Immediately after the merger, it is currently estimated that pre-merger Magenta’s equityholders will own approximately 22.4% of the common stock of the combined company, and pre-merger Dianthus equityholders, including shares of Dianthus common stock and Dianthus pre-funded warrants purchased in the Dianthus pre-closing financing, are expected to own approximately 77.6% of the common stock of the combined company, in each case, after giving effect to the Dianthus pre-closing financing and subject to certain assumptions. These estimates are based on the anticipated exchange ratio and are subject to adjustment as provided in the Merger Agreement.

In addition, the board of directors of the combined company will initially include two individuals with prior affiliations with Magenta. Consequently, securityholders of Magenta will not be able to exercise the same influence over the management and policies of the combined organization following the closing of the merger than they currently exercise over the management and policies of Magenta.

Magenta’s stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the proposed merger, Magenta’s stockholders will have experienced substantial dilution of their ownership interests in Magenta without receiving the expected commensurate benefit, or only receive part of the commensurate benefit to the extent the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the proposed merger.

If Magenta does not successfully consummate the merger or another strategic transaction, Magenta’s board of directors may decide to pursue a dissolution and liquidation of Magenta. In such an event, the amount of cash available for distribution to Magenta’s stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which Magenta can give you no assurance.

There can be no assurance that the merger will be completed. If the merger is not completed, Magenta’s board of directors may decide to pursue a dissolution and liquidation of Magenta. In such an event, the amount of cash available for distribution to Magenta’s stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Magenta funds its operations while pursuing the merger. In addition, if Magenta’s board of directors were to approve and recommend, and Magenta’s stockholders were to approve, a dissolution and liquidation of the company, Magenta would be required under Delaware corporate law to pay Magenta’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Magenta’s commitments and contingent liabilities may include obligations under Magenta’s employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the company, litigation against Magenta, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of Magenta’s assets would need to be reserved pending the resolution of such obligations.

In addition, Magenta may be subject to litigation or other claims related to a dissolution and liquidation of Magenta. If a dissolution and liquidation were to be pursued, Magenta’s board of directors, in consultation with Magenta’s advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Magenta’s common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up of the company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Magenta’s stockholders.

 

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Magenta is substantially dependent on Magenta’s remaining employees to facilitate the consummation of the merger.

Magenta’s ability to consummate a strategic transaction depends upon its ability to retain its employees required to consummate such a transaction, the loss of whose services may adversely impact the ability to consummate such transaction. In April 2022, and then again in February 2023, Magenta undertook an organizational restructuring that significantly reduced its workforce in order to conserve its capital resources. As of June 30, 2023, Magenta had only six full-time employees. Magenta’s ability to successfully complete the merger depends in large part on Magenta’s ability to retain certain remaining personnel. Despite Magenta’s efforts to retain these employees, one or more may terminate their employment with Magenta on short notice. Magenta’s cash conservation activities may yield other unintended consequences, such as attrition beyond its planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment. The loss of the services of certain employees could potentially harm Magenta’s ability to consummate the merger, to run Magenta’s day-to-day business operations, as well as to fulfill Magenta’s reporting obligations as a public company.

Risks Related to Magenta

Risks Related to Magenta’s Financial Position and Need for Additional Capital in Event the Merger is Not Consummated

Magenta has incurred net losses every year since its inception and anticipates that Magenta will continue to incur net losses in the future.

Magenta is a biotechnology company and it has a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that product candidates will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable.

Magenta has no products approved for commercial sale and has not generated any revenue from product sales to date, and it continues to incur expenses related to its ongoing operations. To date, Magenta has invested substantially all of its efforts and financial resources in the research and development of its product candidates. In December 2022, Magenta announced that it had stopped dosing in Cohort 4 (dose level 0.13 mg/kg) of the Phase 1/2 clinical trial for MGTA-117 in patients with relapsed/refractory acute myeloid leukemia (“R/R AML”), and myelodysplastic syndromes (“MDS”) pursuant to the clinical trial protocol, due to the observance of dose-limiting toxicities (“DLTs”), in two of the participants dosed in Cohort 4. As a result of these observations, two Suspected, Unexpected, Serious Adverse Reaction (“SUSARs”) were reported to the U.S. Food and Drug Administration (“FDA”). In January 2023, Magenta announced that the last participant dosed in Cohort 3 (dose level 0.08 mg/kg) in the Phase 1/2 clinical trial experienced a Grade 5 serious adverse event (“SAE”) (respiratory failure and cardiac arrest resulting in death) deemed to be possibly related to MGTA-117, and this was reported to the FDA as a SUSAR. After consultation with the trial’s safety Cohort Review Committee, and with the highest regard for patient safety, Magenta voluntarily paused dosing in the clinical trial. The FDA subsequently placed the trial on partial clinical hold in February 2023. In February of 2023, after a review of its business, programs, resources and capabilities, Magenta announced the decision to halt further development of its programs and to conduct a comprehensive review of strategic alternatives. As a result of that decision, Magenta discontinued the MGTA-117 Phase 1/2 clinical trial in patients with R/R AML and MDS. Magenta discontinued the MGTA-145 Phase 2 stem cell mobilization clinical trial in patients with sickle cell disease (“SCD”). Lastly, Magenta stopped incurring certain costs relating to MGTA-45, including manufacturing and costs relating to certain other activities that were intended to support an investigative new drug application (“IND”), for MGTA-45 (previously named CD45-ADC). In April 2023, Magenta sold certain assets, including intellectual property, related to its product candidates MGTA-117, MGTA-45 and MGTA-145.

As a result, Magenta is not profitable and has incurred losses in each period since its inception in June 2015. For the three months ended March 31, 2023, Magenta reported a net loss of $29.2 million. For the years ended

 

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December 31, 2022 and 2021, Magenta reported net losses of $76.5 million and $71.1 million, respectively. As of March 31, 2023, Magenta had an accumulated deficit of $431.2 million. If Magenta resumes development of product candidates, it will not generate revenue from product sales unless and until it successfully completes clinical development and obtains regulatory approval for such product candidates. If Magenta obtains regulatory approval for any product candidates, it expects to incur significant expenses related to developing its commercialization capability to support product sales, marketing and distribution. Further, Magenta expects to incur additional costs associated with operating as a public company.

Magenta expects to continue to incur costs and expenditures in connection with the process of evaluating its strategic alternatives. Should Magenta resume development of product candidates, Magenta will incur substantial research and developments costs and other expenditures to develop such product candidates. Magenta may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The size of Magenta’s future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenue. Magenta’s prior losses and expected future losses have had and will continue to have an adverse effect on its stockholders’ equity and working capital.

Should Magenta resume development of product candidates, it will require additional capital to fund its operations. If Magenta fails to obtain necessary financing, it will not be able to complete the development and commercialization of such product candidates.

Magenta’s operations have consumed substantial amounts of cash since its inception. Should Magenta resume development of product candidates, it would expect to continue to spend substantial amounts of cash (including the net proceeds from its initial public offering (“IPO”) and its subsequent public and private equity offerings) to conduct further research and development, preclinical testing, clinical trials of such product candidates, to seek regulatory approvals for such product candidates and to launch and commercialize such product candidates for which Magenta receives regulatory approval, including potentially building its own commercial organization to address the U.S., EU and certain other markets.

As of March 31, 2023, Magenta had approximately $78.2 million in cash, cash equivalents and marketable securities. Should Magenta resume development of product candidates, its monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with successful development of its product candidates is highly uncertain, Magenta is unable to estimate the actual funds it will require for development and any approved marketing and commercialization activities. Magenta’s future expenses and future funding requirements, both near and long-term, will depend on many factors, including but not limited to:

 

•

the timing and outcome of Magenta’s exploration of potential strategic alternatives;

 

•

the initiation, progress, timing, costs and results of research, preclinical studies and clinical trials for product candidates;

 

•

the costs to develop, maintain, and enhance a sustainable, scalable, reproducible and transferable manufacturing process for product candidates;

 

•

the clinical development plans Magenta establishes for product candidates;

 

•

the number and characteristics of product candidates that Magenta develops or may in-license;

 

•

the cost of milestone or other payments under any license, acquisition, collaboration or other strategic transaction agreements;

 

•

the outcome, timing and cost of meeting regulatory requirements established by the FDA, the EMA and other comparable foreign regulatory authorities;

 

•

the cost of filing, prosecuting, defending and enforcing its patent claims and other intellectual property rights;

 

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•

the cost of defending material intellectual property disputes, including patent infringement actions brought by third parties against Magenta or product candidates;

 

•

the effect of competing technological and market developments;

 

•

the cost and timing of completion of commercial-scale outsourced manufacturing activities;

 

•

the cost of seeking to attract, hire and retain skilled personnel;

 

•

the cost of establishing sales, marketing and distribution capabilities for product candidates for which Magenta may receive regulatory approval in regions where it chooses to commercialize its products on its own; and

 

•

the cost of, and ability to maintain on reasonable commercial and economic terms, sufficient office and laboratory space to support its operations.

Magenta cannot be certain that additional funding will be available on acceptable terms, or at all, and such funding may become even more difficult to obtain due to rising interest rates and the current downturn in the U.S. capital markets and the biotechnology sector in general. Competition for additional capital among biotechnology companies may be particularly intense during this present economic downturn. Magenta may be unable to raise capital through public offerings of its common stock and may need to turn to alternative financing arrangements. Such arrangements, if Magenta pursues them, could involve issuances of one or more types of securities, including common stock, preferred stock, convertible debt, warrants to acquire common stock or other securities. These securities could be issued at or below the then prevailing market price for its common stock. In addition, if Magenta issues debt securities, the holders of the debt would have a claim to its assets that would be superior to the rights of stockholders until the principal, accrued and unpaid interest and any premium or make-whole has been paid. Interest on any newly-issued debt securities and/or newly-incurred borrowings would increase its operating costs and reduce its net income, and these impacts may be material. If the issuance of new securities results in diminished rights to holders of its common stock, the market price of its common stock could be materially and adversely affected. If Magenta is unable to raise additional capital in sufficient amounts or on terms acceptable to it, Magenta may have to significantly delay, scale back or discontinue the development or commercialization of product candidates or one or more of its other research and development initiatives, and Magenta may also be forced to reduce or terminate its operations. Any of the above events could significantly harm its business, prospects, financial condition and results of operations and cause the price of its common stock to decline.

Raising additional capital may cause dilution to Magenta’s existing stockholders, restrict its operations or require Magenta to relinquish rights to its technologies or product candidates.

Magenta may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that Magenta raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of its stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business.

Magenta has consummated and continues to explore strategic transactions regarding its product candidates and related assets, including, without limitation, licensing transactions and asset sales. In April 2023, Magenta sold certain assets, including intellectual property, related to its product candidates MGTA-117, MGTA-45 and MGTA-145. In any strategic transaction, Magenta has and may continue to relinquish valuable rights to, sell or otherwise dispose of its technologies, product candidates or other assets at unfavorable prices or on terms unfavorable to it. In particular, given the current downturn in the U.S. capital markets and the biotechnology

 

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sector in general, Magenta may enter into such transactions on terms and at prices less favorable to Magenta than would otherwise occur. Magenta may also be required to relinquish or license on unfavorable terms its rights to technologies or product candidates. As a result, Magenta may fail to realize the full potential of product candidates.

Any of the foregoing events could have a material adverse effect upon its business and future prospects.

Magenta’s company has a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for its future viability.

Magenta was founded and commenced operations in June 2015. Magenta’s operations to date have been limited to organizing and staffing Magenta, business planning, raising capital, acquiring and developing its technology, identifying potential product candidates, and undertaking preclinical studies and clinical trials. Although Magenta has conducted clinical trials for certain product candidates, it has not yet demonstrated an ability to successfully complete late-stage clinical trials of product candidates, obtain marketing approvals, manufacture a commercial-scale medicine, or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful commercialization of product candidates. Typically, it takes about 10 to 15 years to develop a new medicine from the time it is discovered to when it is available for treating patients. Consequently, any predictions Magenta makes about its future success or viability may not be as accurate as they could be if Magenta had a longer operating history.

In addition, Magenta may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. For example, management may fail to undertake sufficient risk mitigation strategies for elements of its business subject to heightened risk, and its business may be harmed as a result.

Magenta has never generated revenue from product sales and may never be profitable.

Should Magenta resume development of product candidates, its ability to generate revenue from product sales and achieve profitability depends on its ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, product candidates Magenta may identify for development. Magenta may not generate revenues from product sales for the next several years, if ever. Magenta’s ability to generate future revenues from product sales would depend heavily on its and or its collaborators’ ability to successfully:

 

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identify product candidates and complete research and preclinical and clinical development of any product candidates Magenta may identify;

 

•

seek and obtain regulatory and marketing approvals for product candidates for which Magenta completes clinical trials;

 

•

launch and commercialize any product candidates for which Magenta obtains regulatory and marketing approval by establishing a sales force, marketing, and distribution infrastructure or, alternatively, collaborating with a commercialization partner;

 

•

qualify for adequate coverage and reimbursement by government and third-party payors for any product candidates for which Magenta obtains regulatory and marketing approval;

 

•

develop, maintain, and enhance a sustainable, scalable, reproducible, and transferable manufacturing process for product candidates Magenta may develop;

 

•

establish and maintain supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and the market demand for product candidates for which Magenta obtains regulatory and marketing approval;

 

•

obtain market acceptance of product candidates Magenta may develop as viable treatment options;

 

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•

address competing technological and market developments;

 

•

implement internal systems and infrastructure, as needed;

 

•

negotiate favorable terms in any collaboration, licensing, or other arrangements into which Magenta may enter and perform its obligations in such collaborations;

 

•

maintain, protect, and expand its portfolio of intellectual property rights, including patents, trade secrets, and know-how;

 

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avoid and defend against third-party interference or infringement claims; and

 

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attract, hire, and retain qualified personnel.

Even if one or more product candidates Magenta may develop is approved for commercial sale, it anticipates incurring significant costs associated with commercializing any approved product candidates. Magenta’s expenses could increase beyond expectations if Magenta is required by the FDA, the EMA, or other regulatory authorities to perform clinical and other studies in addition to those that it anticipates. Even if Magenta is able to generate revenues from the sale of any approved products, Magenta may not become profitable and may need to obtain additional funding to continue operations.

Risks Related to Magenta’s Business if Merger is Not Consummated

Magenta may not be successful in completing the merger, and any strategic transactions that it may consummate in the future could have negative consequences.

Magenta is exploring strategic transactions regarding any product candidates and related assets, including, without limitation, licensing transactions and asset sales. In April 2023, Magenta sold certain assets, including intellectual property, related to its product candidates MGTA-117, MGTA-45 and MGTA-145. There can be no assurance that Magenta will be able to successfully consummate the merger or that the merger will be completed on attractive terms, within the anticipated timing, or at all. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and Magenta has incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal and accounting fees and expenses and other related charges. Magenta may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in its business.

In addition, any strategic business combination or other transactions that Magenta may consummate in the future could have a variety of negative consequences and it may implement a course of action or consummate a transaction that yields unexpected results that adversely affects its business and decreases the remaining cash available for use in its business or the execution of its strategic plan. There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value or achieve the anticipated results. Any potential transaction would be dependent on a number of factors that may be beyond its control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with Magenta, obtaining stockholder approval and the availability of financing to third parties in a potential transaction with Magenta on reasonable terms. Any failure of such a potential transaction to achieve the anticipated results could significantly impair its ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to its stockholders.

If Magenta is not successful in setting forth a new strategic path for Magenta, or if its plans are not executed in a timely fashion, this may cause reputational harm with its stockholders and the value of its securities may be adversely impacted. In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of Magenta could cause its stock price to fluctuate significantly.

 

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Magenta may not realize any additional value in the merger.

Dianthus may place minimal or no value on Magenta’s assets and its public listing. Further, should Magenta resume development of product candidates, the development and any potential commercialization of such product candidates will require substantial additional cash to fund the costs associated with conducting the necessary preclinical and clinical testing and obtaining regulatory approval. Consequently, Dianthus may choose not to spend additional resources and continue development of Magenta’s product candidates and may attribute little or no value, in such a transaction, to those product candidates.

If Magenta is successful in completing the merger, it may be exposed to other operational and financial risks.

Although there can be no assurance that the merger will be completed, the negotiation and consummation of the merger has required and will continue to require significant time on the part of its management, and the diversion of management’s attention may disrupt its business.

The negotiation and consummation of the merger may also require more time or greater cash resources than Magenta anticipates and exposes Magenta to other operational and financial risks, including:

 

•

increased near-term and long-term expenditures;

 

•

exposure to unknown liabilities;

 

•

higher than expected acquisition or integration costs;

 

•

incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;

 

•

write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;

 

•

increased amortization expenses;

 

•

difficulty and cost in combining the operations and personnel of any acquired business with its operations and personnel;

 

•

impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;

 

•

inability to retain key employees of Magenta or any acquired business; and

 

•

possibility of future litigation.

Any of the foregoing risks could have a material adverse effect on its business, financial condition and prospects.

If the merger is not consummated, Magenta’s board of directors may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the merger will be completed. If the merger is not completed, Magenta’s board of directors may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such decision and, with the passage of time the amount of cash available for distribution will be reduced as Magenta continues to fund its operations. In addition, if Magenta’s board of directors were to approve and recommend, and its stockholders were to approve, a dissolution and liquidation, Magenta would be required under Delaware corporate law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to its stockholders. As a result of this requirement, a portion of its assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is

 

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uncertain. In addition, Magenta may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, Magenta’s board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of its common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up.

Magenta’s ability to consummate the merger depends on its ability to retain its employees required to consummate such a transaction.

Magenta’s ability to consummate the merger depends upon its ability to retain its employees required to consummate such a transaction, the loss of whose services may adversely impact the ability to consummate such a transaction. In April 2022, and then again in February 2023, Magenta undertook an organizational restructuring that significantly reduced its workforce in order to conserve its capital resources. Magenta’s cash conservation activities may yield unintended consequences, such as attrition beyond its planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment. If Magenta is unable to successfully retain its remaining personnel, it may be unable to successfully consummate a strategic transaction, and its business operations may be substantially disrupted.

Magenta’s corporate restructuring and the associated reduction in workforce may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt its business.

In April 2022, and then again in February 2023, Magenta undertook an organizational restructuring that significantly reduced its workforce, including the departure of its chief executive officer. Magenta may not realize, in full or in part, the anticipated benefits, savings and improvements in its cost structure from its restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If Magenta is unable to realize the expected operational efficiencies and cost savings from the restructuring, its operating results and financial condition will be adversely affected. Furthermore, its restructuring plan may be disruptive to its operations. For example, its headcount reductions could yield unanticipated consequences, such as increased difficulties in implementing its business strategy, including retention of its remaining employees. Employee litigation related to the headcount reduction could be costly and prevent management from fully concentrating on the business.

Any future growth of Magenta’s business would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Due to its limited resources, Magenta may not be able to effectively manage its operations or recruit and retain qualified personnel, which may result in weaknesses in its infrastructure and operations, risks that Magenta may not be able to comply with legal and regulatory requirements, loss of employees and reduced productivity among remaining employees.

The impact and results of Magenta’s ongoing strategic process are uncertain and may not be successful.

Magenta’s board of directors remains dedicated to diligent deliberations and the making of informed decisions that the directors believe are in the best interests of the company and its stockholders. There can be no assurance, however, that the company’s current strategic direction, or the board’s evaluation of strategic alternatives, will result in any initiatives, agreements, transactions or plans that will further enhance stockholder value.

In addition, given the substantial restructuring of Magenta’s operations over the past several years, it may be difficult to evaluate its current business and future prospects on the basis of historical operating performance.

Magenta may become involved in litigation that could divert management’s attention and harm the company’s business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, litigation has often followed certain significant business transactions, such as the sale of a company, the announcement of any other strategic transaction, or the announcement of negative events, such as

 

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negative results from clinical trials. Magenta may be exposed to such litigation even if no wrongdoing occurred. Litigation is usually expensive and diverts management’s attention and resources, which could adversely affect its business, cash resources, its ability to consummate a potential strategic transaction or the ultimate value its stockholders receive in any such transaction.

Risks Related to Magenta’s Commercialization, Government Regulation and Competition

Magenta may never obtain FDA approval for product candidates in the United States, and even if it does, Magenta may never obtain approval for or commercialize product candidates in any other jurisdiction, which would limit its ability to realize their full market potential.

In order to eventually market any product candidates in any particular foreign jurisdiction, Magenta must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding safety and efficacy. Approval by the FDA in the United States, if obtained, does not ensure approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for Magenta and require additional preclinical studies or clinical trials which could be costly and time-consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of products in those countries. The foreign regulatory approval process involves all the risks associated with FDA approval. Magenta does not have any product candidates approved for sale in any jurisdiction, including international markets, and it does not have experience in obtaining regulatory approval in international markets. If Magenta fails to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, its target market will be reduced and its ability to realize the full market potential of products will be harmed.

Failure to obtain marketing approval in foreign jurisdictions would prevent any product candidates Magenta may develop from being marketed in such jurisdictions, which, in turn, would materially impair Magenta’s ability to generate revenue.

In order to market and sell any product candidates Magenta may develop in the European Union and many other foreign jurisdictions, Magenta or its third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. Magenta or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. Magenta may not be able to file for marketing approvals and may not receive necessary approvals to commercialize its medicines in any jurisdiction, which would materially impair its ability to generate revenue.

Even if Magenta obtains marketing approvals for any product candidates it develops, the terms of approvals and ongoing regulation of products could require the substantial expenditure of resources and may limit how Magenta manufactures and markets such products, which could materially impair its ability to generate revenue.

Any product candidate for which Magenta obtains marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such medicine, will be

 

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subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, applicable product tracking and tracing requirements, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine.

Accordingly, assuming Magenta, or any collaborators it may have, receive marketing approval for any product candidates Magenta develop, Magenta, and such collaborators, and its and their contract manufacturers will continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, and quality control. If Magenta and such collaborators are not able to comply with post-approval regulatory requirements, Magenta and such collaborators could have the marketing approvals for products withdrawn by regulatory authorities and its, or such collaborators’, ability to market any future products could be limited, which could adversely affect its ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on its business, operating results, financial condition and prospects.

Even if any product candidates Magenta may develop are approved by government regulators, the commercial success of such product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Even with the requisite approvals from the FDA in the United States, the EMA in the European Union and other regulatory authorities internationally, the commercial success of such product candidates Magenta may develop will depend, in part, on the acceptance of physicians, patients and health care payors of such product candidates as medically necessary, cost-effective and safe. Even before receiving any potential regulatory approval for a product candidate, Magenta may determine that the clinical trial results for a product candidate suggest that it does not have a product profile that would be competitive compared to other therapeutic options. Any product that Magenta develops or commercializes may not have or gain acceptance by physicians, patients, health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, Magenta may not generate significant product revenue and may not become profitable. Efforts to educate the medical community and third-party payors on the benefits of any product candidates may require significant resources, including management time and financial resources, and may not be successful. The degree of market acceptance of product candidates Magenta may develop, if approved for commercial sale, will depend on several factors, including:

 

•

the efficacy, durability and safety of such product candidates as demonstrated in clinical trials;

 

•

the potential and perceived advantages of any product candidates over alternative treatments;

 

•

the cost of treatment relative to alternative treatments;

 

•

its ability to offer the product for sale at competitive prices;

 

•

the clinical indications for which any product candidate is approved by the FDA or the EMA;

 

•

the product’s convenience and ease of administration compared to alternative treatments;

 

•

the willingness of physicians to prescribe new therapies;

 

•

the willingness of the target patient population to try new therapies;

 

•

the prevalence and severity of any side effects;

 

•

product labeling or product insert requirements of the FDA, EMA or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

 

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•

relative convenience and ease of administration;

 

•

the strength of marketing and distribution support;

 

•

the timing of market introduction of competitive products;

 

•

publicity concerning products or competing products and treatments;

 

•

changes in the standard of care for the targeted indications for the product; and

 

•

sufficient third-party payor coverage and adequate reimbursement.

In addition, Magenta analyzes these factors with respect to any product candidates before they are approved by conducting market research. Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched. Further, Magenta may determine not to commercialize a product candidate based on that analysis or based on unfavorable pricing and reimbursement terms. Any product candidate Magenta may develop that does not have a competitive product profile compared to other therapeutic options, including those that obtain regulatory approval but fail to achieve market acceptance or commercial success, would adversely affect its business prospects.

Magenta currently has no marketing and sales organization and has no experience in marketing products. Should Magenta resume development of product candidates, if it is unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell such product candidates, it may not be able to generate product revenue.

Magenta currently has no sales, marketing or distribution capabilities and has no experience in marketing products. Should Magenta resume development of product candidates, it would intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources and time. Magenta will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. If Magenta is unable or decide not to establish internal sales, marketing and distribution capabilities, it will pursue collaborative arrangements regarding the sales and marketing of products, however, there can be no assurance that it will be able to establish or maintain such collaborative arrangements, or if Magenta is able to do so, that they will have effective sales forces. Any revenue Magenta receives will depend upon the efforts of such third parties, which may not be successful. Magenta may have little or no control over the marketing and sales efforts of such third parties and revenue from product sales may be lower than if Magenta had commercialized such products itself. Magenta also faces competition in its search for third parties to assist Magenta with the sales and marketing efforts of product candidates. There can be no assurance that Magenta will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.

Coverage and reimbursement may be limited or unavailable in certain market segments for product candidates, if approved, which could make it difficult for Magenta to sell such product candidates or therapies profitably. Even if Magenta is able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, which would harm its business.

Should Magenta resume development of product candidates, their success, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors. Magenta cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from product candidates or assure that coverage and reimbursement will be available for any product that it may develop. Magenta may develop product candidates to be used in conjunction with gene therapy treatments that have encountered challenges in obtaining coverage and reimbursement, and such challenges may also affect the

 

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coverage and reimbursement Magenta may obtain for such product candidates. For additional information regarding laws and regulations related to reimbursement, see “Magenta’s Business—Reimbursement.”

Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require Magenta to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if Magenta obtains coverage for a given product, the resulting reimbursement payment rates might not be adequate for Magenta to maintain pricing sufficient to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of product candidates. Patients are unlikely to use product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of such product candidates.

The regulations that govern marketing approvals, pricing, and reimbursement for new medicines vary widely from country to country. For example, some countries require approval of the sale price of a medicine before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, Magenta might obtain marketing approval for a medicine in a particular country, but then be subject to price regulations that delay its commercial launch of the medicine, possibly for lengthy time periods, and negatively impact the revenues Magenta is able to generate from the sale of the medicine in that country. Adverse pricing limitations may hinder its ability to recoup its investment in one or more product candidates, even if any product candidates Magenta may develop obtain marketing approval.

There is significant uncertainty related to insurance coverage and reimbursement of newly approved products. Because product candidates Magenta may develop may have a higher cost of goods than conventional therapies, and may require long-term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for Magenta to achieve profitability may be greater. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for product candidates. There may be significant delays in obtaining reimbursement for newly approved medicines, and coverage may be more limited than the purposes for which the medicine is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any medicine will be paid for in all cases or at a rate that covers its costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levels for new medicines, if applicable, may also not be sufficient to cover its costs and may not be made permanent. Reimbursement rates may vary according to the use of the medicine and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost medicines and may be incorporated into existing payments for other services.

Magenta cannot be sure that reimbursement will be available for any medicine that it commercializes and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which Magenta obtains marketing approval. If reimbursement is not available or is available only to limited levels, Magenta may not be able to successfully commercialize any product candidate for which Magenta obtains marketing approval. Magenta’s ability to commercialize any medicines successfully also will depend in part on the extent to which reimbursement for these medicines and related treatments will be available from government health administration authorities, private health insurers, and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

 

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EU drug marketing and reimbursement regulations may materially affect Magenta’s ability to market and receive coverage for products in the EU Member States.

Should Magenta resume development of product candidates, it would intend to seek approval to market product candidates in both the United States and in selected foreign jurisdictions. If Magenta obtains approval in one or more foreign jurisdictions for such product candidates, it will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the European Union, the pricing of biologics is subject to governmental control and other market regulations which could put pressure on the pricing and usage of product candidates. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for those product candidates and may be affected by existing and future health care reform measures.

Historically, products launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly lower. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of any product candidates is unavailable or limited in scope or amount, its revenues from sales by Magenta or its strategic partners and the potential profitability of any product candidates in those countries would be negatively affected.

Foreign governments often impose strict price controls on approved products, which may adversely affect Magenta’s future profitability in those countries, and recent federal legislation and actions by federal, state and local governments may permit reimportation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could adversely affect its future profitability.

Frequently foreign governments impose strict price controls on newly approved therapeutic products. If Magenta obtains regulatory approval to sell products in foreign countries, it may be unable to obtain a price that provides an adequate financial return on its investment. Furthermore, Magenta may face competition in the United States for its development candidates and investigational medicines, if approved, from therapies sourced from foreign countries that have placed price controls on pharmaceutical products. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price Magenta receives for any products that it may develop and adversely affect its future revenues and prospects for profitability.

Ongoing healthcare legislative and regulatory reform measures may increase the difficulty and cost for Magenta to obtain marketing approval of and commercialize Magenta’s product candidates, and may affect the prices it may set.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities and affect its ability to profitably sell any products for which Magenta obtains marketing approval. Changes in regulations, statutes or the interpretation of existing regulations could impact its business in the future by requiring, for example: (1) changes to its manufacturing arrangements; (2) additions or modifications to product labeling; (3) the recall or discontinuation of its products; or (4) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of its business. For additional information regarding these regulations, statutes or their interpretations, see “Magenta’s Business—Governmental Regulation—Current and Future Legislation.”

The Inflation Reduction Act of 2022 (“IRA”) includes several provisions that may impact Magenta’s business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D

 

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beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one rare disease designation and for which the only approved indication is for that disease or condition. If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The effects of the IRA on Magenta’s business and the healthcare industry in general is not yet known.

In addition, President Biden has issued multiple executive orders that have sought to reduce prescription drug costs. In February 2023, HHS also issued a proposal in response to an October 2022 executive order from President Biden that includes a proposed prescription drug pricing model that will test whether targeted Medicare payment adjustments will sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved through FDA’s accelerated approval pathway. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect:

 

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the demand for any product candidates, if approved;

 

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the ability to set a price that Magenta believes is fair for any product candidates, if approved;

 

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Magenta’s ability to generate revenues and achieve or maintain profitability;

 

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the level of taxes that Magenta is required to pay; and

 

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the availability of capital.

Additional laws, and future state and federal healthcare reform measures may be adopted in the future, any of which may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices Magenta may obtain for any product candidates for which it may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used. Magenta expects that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that Magenta receives for any approved product and could seriously harm its future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent Magenta from being able to generate revenue, attain profitability or commercialize products.

Data collection is governed by complex and restrictive regulations governing the use, processing, and transfer of personal information, and compliance with these regulations could result in additional costs and limitations on Magenta’s ability to collect and process data. Failure to comply with these regulations could subject Magenta to significant penalties, which may adversely affect its business.

In the event Magenta decides to conduct clinical trials or enroll subjects in future clinical trials in the European Economic Area (“EEA”) and in the United Kingdom, it may be subject to additional privacy restrictions. The collection, use, storage, transfer, and other processing of personal data, including personal health data, regarding individuals in the EEA is governed, as of May 2018, by the European Union’s General Data Protection Regulation (“EU GDPR”). Following the U.K.’s withdrawal from the European Union (“Brexit”), the

 

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EU GDPR has been incorporated into U.K.’s laws or the U.K. General Data Protection Regulation (the “U.K. GDPR”), and, together with the EU GDPR, (the “GDPR”). The GDPR imposes a number of measures on companies relating to their processing of personal data (for example, informing individuals of how their personal data is handled and how they can exercise their rights, ensuring a valid lawful basis for processing, mandatory data breach notification requirements, maintaining internal records, entering into data processing agreements with third parties, implementing appropriate security and data retention requirements). Failure to comply with the requirements of the GDPR may result in warning letters, mandatory audits, orders to cease/change the use of data, and financial penalties, including fines of up to 4% of global revenues, or €20 million (£17.5 million for the United Kingdom), whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

Despite Brexit, the GDPR remains largely aligned and the data protection obligations of the EU GDPR continue to apply to U.K. related processing of personal data in a substantially unvaried form under the U.K. GDPR. Currently, the most impactful point of divergence relates to transfer mechanisms (i.e., the ability for companies in the European Union or the United Kingdom to transfer personal data to third countries, including the United States), because it requires Magenta to implement a variety of different contractual clauses approved by EU’s or U.K.’s regulators, and carry out transfer impact assessments to establish whether the third country can ensure essential equivalency. This complexity and the additional contractual burden increases its overall risk exposure and may result in Magenta needing to make strategic considerations around where EEA and U.K. personal data is stored and which service providers Magenta can utilize for the processing of EEA and U.K. personal data. There is an increasing risk of further divergence in the data protection laws as between the United Kingdom and the EEA, in the future, including with regard to application, interpretation, enforcement and administrative burdens. The U.K. Government has also now introduced a Data Protection and Digital Information Bill (“U.K. Bill”) into the U.K. legislative process. The aim of the U.K. Bill is to reform the U.K.’s data protection regime following Brexit. If passed, the final version of the U.K. Bill may have the effect of further altering the similarities between the United Kingdom and EEA data protection regime. This may lead to additional compliance costs and could increase Magenta’s overall risk exposure as Magenta may no longer be able to take a unified approach across the EEA and the United Kingdom, and Magenta will need to amend its processes and procedures to align with the new framework. Achieving and maintaining compliance with the GDPR is a rigorous and time-intensive process that may increase its cost of doing business or require Magenta to change its business practices, and despite those efforts, there is a risk that Magenta may be subject to fines and penalties, litigation, and reputational harm in connection with any future European activities. For additional information regarding the GDPR, see “Magenta’s Business—Governmental Regulation.” In the United States, the data protection landscape is rapidly growing and evolving, and achieving and maintaining compliance with current and future U.S. state and federal privacy laws will be similarly onerous and may adversely affect its business. For example, if Magenta fails to comply with the California Consumer Protection Act (“CCPA”), it could be subject to civil penalties. Further, if Magenta experiences a data breach that results in the loss of personal information of California residents, Magenta may be subject to a private right of action under the CCPA. While there are currently exemptions under the CCPA for protected health information that is subject to Health Insurance Portability and Accountability Act of 1966 (“HIPAA”), and for patient information subject to clinical trial regulations, the CCPA may still negatively impact its business activities. There continues to be uncertainty surrounding the enforcement and implementation of the CCPA, which exemplifies the vulnerability of its business to the evolving regulatory environment related to personal data and protected health information.

The California Privacy Rights Act (“CPRA”), which became effective on January 1, 2023, significantly modifies the CCPA and imposes additional obligations on companies covered by the legislation, including by expanding consumers’ rights with respect to certain sensitive personal information, and establishing a state agency vested with the authority to enforce the CCPA.

In addition, Magenta may become subject to or affected by new or additional data protection requirements and face increased scrutiny or attention from regulatory authorities. The effects of these laws are potentially

 

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significant and may require Magenta to modify its data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase its potential exposure to regulatory enforcement and/or litigation. The CCPA, as amended by the CPRA, has prompted the enactment of similar, comprehensive privacy and data protection legislation in other states. For example, in March 2021, Virginia enacted the Consumer Data Protection Act, which became effective on January 1, 2023. In addition, similar consumer privacy laws have been passed in Colorado, Utah, Connecticut, Iowa and Indiana. Furthermore, a number of other U.S. states have proposed similar privacy and data protection legislation, and it is possible that certain of these proposals will pass. Although many of the existing state privacy laws exempt clinical trial information and health information governed by HIPAA, future privacy and data protection laws may be broader in scope. Magenta also anticipates that more states may enact legislation similar to the CCPA, which has prompted a number of proposals for new federal and state-level privacy legislation. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

Additionally, HIPAA, as amended by the Health Information Technology and Clinical Health Act (“HITECH”), and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances. These laws may differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude that its business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other laws and regulations governing the processing of data by healthcare entities. If its operations are found to be in violation of any of these laws or any other governmental regulations that may apply to Magenta, it may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of its operations. If any of the physicians or other healthcare providers or entities with whom Magenta expects to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Ensuring business arrangements comply with applicable laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention away from the business.

 

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Laws and regulations governing international operations may preclude Magenta from developing, manufacturing and selling certain products outside of the United States and require Magenta to develop, implement and maintain costly compliance programs.

If Magenta expand its operations outside of the United States, it must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which it plans to operate. The Foreign Corrupt Practices Act (“FCPA”), prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If Magenta expands its presence outside of the United States, it will require Magenta to dedicate additional resources to comply with these laws, and these laws may preclude it from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit its growth potential and increase Magenta’s development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

If Magenta or Magenta’s third-party manufacturers fail to comply with environmental, health and safety laws and regulations, it could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

Magenta is subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. In the past, its operations have involved the use of hazardous and flammable materials, including chemicals and biological materials. Magenta’s operations also have produced hazardous waste products. Magenta generally contracted with third parties for the disposal of these materials and wastes. Magenta cannot eliminate the risk of contamination or injury from these materials, which could cause an interruption of its business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although Magenta believes that the safety procedures utilized by its third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, Magenta cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, Magenta may be held liable for any resulting damages and such liability could exceed its resources and state or federal or other applicable authorities may curtail its use of certain materials and/or interrupt its business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. Magenta cannot predict the impact of such changes and cannot be certain of its future compliance. In addition, Magenta may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and

 

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regulations may impair its research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. Magenta does not currently carry biological or hazardous waste insurance coverage.

Although Magenta maintains workers’ compensation insurance to cover it for costs and expenses it may incur due to injuries to Magenta’s employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

Magenta may compete against numerous large, established companies that have substantially greater financial, technical, research, manufacturing, marketing, distribution and other resources than it, and its operating results and cash flows will suffer if Magenta fails to compete effectively.

The pharmaceutical and biopharmaceutical industry is characterized by intense competition and rapid and significant technological changes and advancements. Magenta’s potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions. Many companies, research institutions and universities are doing research and development work in a number of areas similar to those that Magenta focuses on that could lead to the development of new products which could compete with and be superior to any product candidates it may develop. Magenta expects technological developments in the pharmaceutical and biopharmaceutical and related fields to occur at a rapid rate, and Magenta believes competition will intensify as advances in these fields are made. Accordingly, Magenta would be required to continue to devote substantial resources and efforts to research and development activities in order to potentially achieve and maintain a competitive position in this field. Products that Magenta develops may become obsolete before Magenta is able to market them or to recover all or any portion of its research and development expenses.

Most of the companies with which Magenta would likely compete have substantially greater financial, technical, research, manufacturing, marketing, distribution and other resources than Magenta does, including staff, experienced marketing and manufacturing organizations, and well-established sales forces. In addition, smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Should Magenta resume development of product candidates, Magenta would likely be competing with companies that have significantly more experience and expertise in undertaking preclinical testing and human clinical trials with new or improved therapeutic products and obtaining regulatory approvals of such products. A number of these companies already market and may be in advanced phases of clinical testing of various drugs that could compete with any product candidates Magenta may develop Magenta’s potential competitors may develop or commercialize products more rapidly than Magenta does or with significant advantages over any products it develops. Magenta’s potential competitors may therefore be more successful in commercializing their products than Magenta is, which could adversely affect its competitive position and business.

In addition to larger pharmaceutical or biopharmaceutical companies that may develop different competing technologies or technologies, Magenta would likely be competing with a number of smaller biotechnology companies. Magenta is aware that collaborations between smaller companies and larger established companies could compete with its potential programs. Colleges, universities, governmental agencies and other public and private research organizations are becoming more active in seeking patent protection and licensing arrangements to collect royalties for use of technologies that they have developed, some of which may be directly competitive with its programs and product candidates. In addition, certain gene therapy companies are also developing their own conditioning programs to be used in connection with their therapies.

Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in its competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Magenta’s potential competitors, either alone or with collaborative partners, may succeed in developing,

 

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acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than any product candidates. Such competitors may also develop proprietary technologies or secure patent protection that Magenta may need for the development of its technologies and products. Magenta believes the key competitive factors that will affect the development and commercial success of its product candidates Magenta may develop are efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.

Even if Magenta obtains regulatory approval of any product candidates, the availability and price of any of its potential competitors’ products could limit the demand and the price Magenta is able to charge for such product candidates. Magenta may not be able to implement its business plan if the acceptance of its product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to such product candidates, or if physicians switch to other new drug or biologic products or choose to reserve any product candidates that Magenta may develop for use in limited circumstances.

Risks Related to Magenta’s Intellectual Property

Magenta depends on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm Magenta’s business.

In connection with the potential development of product candidates, Magenta may need to enter license intellectual property from third parties. License agreements to intellectual property may require Magenta to use diligent efforts or meet development thresholds, to maintain the license, including establishing a set timeline for developing and commercializing products. If Magenta fails to comply with any of the obligations under its license agreements, including payment terms and diligence terms, licensors may have the right to terminate its agreements, in which case Magenta may lose important intellectual property rights and it may not be able to develop, manufacture, market or sell the products covered by its agreements or it may face other penalties under such agreements. In addition, such a termination could result in the licensor reacquiring the intellectual property rights and subsequently enabling a competitor to access the technology. Any such occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of license agreements or reduction or elimination of its rights under them may result in its having to negotiate a new or reinstated agreement, which may not be available to Magenta on equally favorable terms, or at all, which may mean Magenta is unable to develop or commercialize the affected product candidate or cause Magenta to lose its rights under the agreement.

Further, the agreements under which Magenta may licenses intellectual property or technology from third parties may be are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. Accordingly, material disputes may arise between Magenta and its licensor, or its licensor and its licensors, regarding intellectual property subject to a license agreement, including those relating to:

 

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the scope of rights, if any, granted under the license agreement and other interpretation-related issues;

 

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whether and the extent to which Magenta’s technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;

 

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whether Magenta’s licensor or its licensor had the right to grant the license agreement;

 

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whether third parties are entitled to compensation or equitable relief, such as an injunction, for its use of the intellectual property without their authorization;

 

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Magenta’s right to sublicense patent and other rights to third parties under collaborative development relationships;

 

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whether Magenta is complying with its obligations with respect to the use of the licensed technology in relation to its development and commercialization of product candidates;

 

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its involvement in the prosecution of the licensed patents and Magenta’s licensors’ overall patent enforcement strategy;

 

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•

the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by Magenta’s licensors and by Magenta and its partners; and

 

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the amounts of royalties, milestones or other payments due under the license agreement.

The resolution of any contract interpretation disagreement that may arise could narrow what Magenta believes to be the scope of its rights to the relevant intellectual property or technology, increase what Magenta believes to be its financial or other obligations under the relevant agreement, or decrease the financial or other benefits Magenta might otherwise receive under the relevant agreement. If material disputes over intellectual property that Magenta has licensed prevent or impair its ability to maintain licensing arrangements on acceptable terms, or are insufficient to provide Magenta the necessary rights to use the intellectual property, Magenta may be unable to successfully develop and commercialize the affected product candidates. If Magenta or any such licensors fail to adequately protect this intellectual property, its ability to commercialize any product candidates could suffer. Any material disputes with licensors or any termination of the licenses on which Magenta depends could have a material adverse effect on its business, financial condition, results of operations and prospects.

Should Magenta resume development of product candidates, its commercial success would likely depend on its ability to obtain, maintain and protect its intellectual property and proprietary technology.

Should Magenta resume development of product candidates, its commercial success would likely depend in large part on its ability to obtain, maintain and protect intellectual property protection through patents, trademarks, and trade secrets in the United States and other countries with respect to such product candidates. If Magenta does not adequately protect its intellectual property rights, competitors may be able to erode, negate or preempt any competitive advantage Magenta may have, which could harm its business and ability to achieve profitability.

To protect Magenta’s proprietary position, it may need to owns and has in-licensed certain issued patents and has filed and may file provisional and non-provisional patent applications in the United States or abroad related to product candidates that are important to its business. Provisional patent applications are not eligible to become issued patents until, among other things, Magenta files a non-provisional patent application within 12 months of the filing of one or more related provisional patent applications. If Magenta does not timely file non-provisional patent applications, it may lose its priority date with respect to provisional patent applications and any patent protection on the inventions disclosed in its provisional patent applications. Magenta cannot predict whether any such patent applications will result in the issuance of patents that provide Magenta with any competitive advantage. Moreover, the patent application and approval process is expensive and time-consuming. Magenta may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

In some instances, agreements through which Magenta licenses patent rights may not give Magenta control over patent prosecution or maintenance, so that Magenta may not be able to control which claims or arguments are presented, how claims are amended, and may not be able to secure, maintain, or successfully enforce necessary or desirable patent protection from those patent rights. Magenta might not have primary control over patent prosecution and maintenance for certain of the patents and patent applications Magenta may license, and therefore could not guarantee that these patents and applications would be prosecuted or maintained in a manner consistent with the best interests of its business. Magenta might not be certain that patent prosecution and maintenance activities by any licensors will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents. Moreover, any its future owned and licensed patents may be, co-owned with third parties. If Magenta is unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including competitors, and those competitors could market competing products and technology. In addition, Magenta may need the cooperation of any such co-owners of patents in order to enforce such patents against third parties, and such cooperation may not be provided to it.

If the scope of the patent protection Magenta or licensors obtain is not sufficiently broad, Magenta may not be able to prevent others from developing and commercializing technology and products similar or identical to

 

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Magenta’s. The degree of patent protection Magenta requires to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect rights or permit Magenta to gain or keep any competitive advantage. Should Magenta resume development of product candidates, Magenta could not provide any assurances that any licensed patents have, or that any of its pending owned or licensed patent applications that mature into issued patents will include, claims with a scope sufficient to protect its product candidates or otherwise provide any competitive advantage, nor can Magenta assure you that any licenses will remain in force. Other parties have developed or may develop technologies that may be related or competitive with its approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with its patent applications, either by claiming the same compounds, formulations or methods or by claiming subject matter that could dominate its patent position. In addition, the laws of foreign countries may not protect its rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, any patent portfolio may not provide Magenta with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to any product candidates it may develop. In addition, any patent portfolio licensed to Magenta may be licensed to third parties, such as outside its field, and such third parties may have certain enforcement rights. Thus, any owned and licensed patents and any patents Magenta owns or licenses in the future could be put at risk of being invalidated or interpreted narrowly in litigation filed by or against another licensee or in administrative proceedings brought by or against another licensee in response to such litigation or for other reasons.

Should Magenta resume development of product candidates, the patent protection Magenta obtains for product candidates may not be sufficient to provide Magenta with any competitive advantage, or its patents may be challenged.

Any owned and licensed patents and pending patent applications, if issued, may not provide Magenta with any meaningful protection or prevent competitors from designing around its patent claims to circumvent its patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to product candidates Magenta may develop but falls outside the scope of its patent protection or license rights. If the patent protection provided by the patents and patent applications Magenta holds or pursues with respect to product candidates it may develop is not sufficiently broad to impede such competition, its ability to successfully commercialize those product candidates could be negatively affected, which would harm its business.

Magenta, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, Magenta may miss potential opportunities to strengthen its patent position.

It is possible that defects of form in the preparation or filing of patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If Magenta or its partners, collaborators, licensees, or licensors, whether current or future, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If its partners, collaborators, licensees, or licensors, are not fully cooperative or disagree with Magenta as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair its ability to prevent competition from third parties, which may have an adverse impact on its business.

The patent position of biotechnology and pharmaceutical companies carries uncertainty. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and

 

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factual questions, which are dependent upon the current legal and intellectual property context, extant legal precedent and interpretations of the law by individuals. As a result, the issuance, scope, validity, enforceability and commercial value of its patent rights are characterized by uncertainty.

Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent is issued from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are not published until 18 months after filing, or in some cases not at all. Therefore, Magenta cannot be certain that it was the first to make the inventions claimed in its patents or pending patent applications, or that it was the first to file for patent protection of such inventions. Similarly, Magenta cannot be certain that parties from whom Magenta does or may license or purchase patent rights were the first to make relevant claimed inventions, or were the first to file for patent protection for them. If third parties have filed prior patent applications on inventions claimed in its patents or applications that were filed on or before March 15, 2013, an interference proceeding in the United States can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of its applications. If third parties have filed such prior applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third parties to determine whether Magenta’s invention was derived from theirs.

Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, its owned and licensed patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. There is no assurance that all of the potentially relevant prior art relating to its patents and patent applications has been found. If such prior art exists, it may be used to invalidate a patent, or may prevent a patent from issuing from a pending patent application. For example, such patent filings may be subject to a third-party submission of prior art to the U.S. Patent and Trademark Office (“USPTO”) or to other patent offices around the world. Alternately or additionally, Magenta may become involved in post-grant review procedures, oppositions, derivation proceedings, ex parte reexaminations, inter partes review, supplemental examinations, or interference proceedings or challenges in district court, in the U.S. or in various foreign patent offices, including both national and regional, challenging patents or patent applications in which Magenta has rights, including patents on which Magenta relies to protect its business. An adverse determination in any such challenges may result in loss of the patent or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, or in denial of the patent application or loss or reduction in the scope of one or more claims of the patent application, any of which could limit its ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of its technology and products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

Pending and future patent applications may not result in patents being issued that protect its business, in whole or in part, or which effectively prevent others from commercializing competitive products. Competitors may also be able to design around its patents. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of its patents or narrow the scope of its patent protection. In addition, the laws of foreign countries may not protect its rights to the same extent or in the same manner as the laws of the United States. For example, patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of methods of treatment of the human body more than U.S. law does. Any of these outcomes could have a material adverse effect on its ability to generate revenue.

 

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The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that Magenta or any of its future development partners will be successful in protecting any product candidates by obtaining and defending patents. These risks and uncertainties include the following:

 

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the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case;

 

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patent applications may not result in any patents being issued;

 

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patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;

 

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Magenta’s competitors, many of whom have substantially greater resources and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate its ability to make, use and sell its potential product candidates;

 

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there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and

 

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countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.

Issued patents that Magenta has, may obtain or license may not provide it with any meaningful protection, prevent competitors from competing with Magenta or otherwise provide it with any competitive advantage. Magenta’s competitors may be able to circumvent its patents by developing similar or alternative technologies or products in a non-infringing manner. Magenta’s competitors may also seek approval to market their own products similar to or otherwise competitive with products it may develop. Alternatively, its competitors may seek to market generic versions of any approved products by submitting Abbreviated New Drug Applications to the FDA in which they claim that patents owned or licensed by Magenta are invalid, unenforceable or not infringed. In these circumstances, Magenta may need to defend or assert its patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find its patents invalid or unenforceable, or that its competitors are competing in a non-infringing manner. Thus, even if Magenta has valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve its business objectives. Any of the foregoing could have a material adverse effect on its business, financial condition, results of operations and prospects.

If Magenta is unable to protect the confidentiality of trade secrets, its business and competitive position may be harmed.

In addition to the protection afforded by patents, Magenta may rely upon trade secret protection, know-how and continuing technological innovation to develop and maintain its competitive position. Magenta may seek to protect its proprietary technology and processes, in part, by entering into confidentiality agreements with its contractors, collaborators, scientific advisors, employees and consultants and invention assignment agreements with its consultants and employees. However, Magenta may not obtain these agreements in all circumstances, and individuals with whom Magenta has these agreements may not comply with their terms. The assignment of intellectual property rights under these agreements may not be self-executing or the assignment agreements may be breached, and Magenta may be forced to bring claims against third parties, or defend claims that they may bring against it, to determine the ownership of what Magenta regards as its intellectual property. In addition,

 

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Magenta may not be able to prevent the unauthorized disclosure or use of its technical know-how or other trade secrets by the parties to these agreements despite the existence of confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures is difficult and Magenta does not know whether the steps Magenta has taken to protect its proprietary technologies will be effective. If any of the contractors, collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, Magenta may not have adequate remedies for any such breach or violation. As a result, Magenta could lose its trade secrets. Enforcing a claim against a third party that illegally obtained and is using its trade secrets, like patent litigation, is expensive and time-consuming and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing or unwilling to protect trade secrets.

Moreover, any trade secrets could otherwise become known or be independently discovered by its competitors or other third parties. Competitors and other third parties could purchase product candidates developed by us and attempt to replicate some or all of the competitive advantages Magenta derives from its development efforts, willfully infringe its intellectual property rights, design around its protected technology or develop their own competitive technologies that fall outside of its intellectual property rights. If any trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, Magenta would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with it. If trade secrets are not adequately protected or sufficient to provide an advantage over its competitors, its competitive position could be adversely affected, as could its business. Additionally, if the steps taken to maintain Magenta’s trade secrets are deemed inadequate, Magenta may have insufficient recourse against third parties for misappropriating its trade secrets.

If trademarks and trade names are not adequately protected, then Magenta may not be able to build name recognition in its markets of interest and its business may be adversely affected.

Magenta’s registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. Magenta may not be able to protect its rights to these trademarks and trade names, which it needs to build name recognition among potential partners or customers in its markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to Magenta’s, thereby impeding its ability to build brand identity and possibly leading to market confusion. If Magenta asserts trademark infringement claims, a court may determine that the marks Magenta has asserted are invalid or unenforceable, or that the party against whom Magenta has asserted trademark infringement has superior rights to the marks in question. In this case, Magenta could ultimately be forced to cease use of such trademarks. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of its registered or unregistered trademarks or trade names. Over the long term, if Magenta is unable to establish name recognition based on its trademarks and trade names, then Magenta may not be able to compete effectively and its business may be adversely affected. Magenta’s efforts to enforce or protect its proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect its business, financial condition, results of operations and prospects.

Third-party claims of intellectual property infringement, misappropriation or other violations may prevent or delay Magenta’s product discovery and development efforts, should Magenta resume them, and may have a material adverse effect on its business.

Magenta’s commercial success depends in part on its avoiding infringement, misappropriation and other violations of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, under

 

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U.S. patent reform, new procedures including inter partes review and post grant review have been implemented. As stated above, this reform will bring uncertainty to the possibility of challenge to its patents in the future. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which Magenta may develop product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that such product candidates may give rise to claims of infringement of the patent rights of others.

Third parties could assert that Magenta is employing their proprietary technology without authorization. There may also be third-party patents of which Magenta is currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of product candidates it may develop. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that product candidates Magenta develops may infringe. In addition, third parties may obtain patents in the future and claim that use of its technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any product candidates Magenta may develop, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block its ability to commercialize such product candidates unless Magenta obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of Magenta’s formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block its ability to develop and commercialize such product candidates unless Magenta obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. Even if Magenta obtained such a license, it may only be non-exclusive, which would permit third parties to use the same intellectual property and compete with it. If Magenta is unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, it may be unable to commercialize product candidates, or such efforts may be impaired or delayed, which could in turn significantly harm its business.

Parties making claims against Magenta may seek and obtain an injunctive or other equitable relief, which could effectively block its ability to further develop and commercialize product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from its business. Magenta may not have sufficient resources to bring these actions to a successful conclusion. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of its common stock.

In the event of a successful claim of infringement against Magenta, it may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign infringing products, which may be impossible or require substantial time and monetary expenditure. Magenta cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, Magenta may need to obtain licenses and access to intellectual property owned or controlled by third parties in order to advance research or allow commercialization of product candidates. Magenta may fail to obtain these licenses and/or access to such intellectual property at a reasonable cost or on reasonable terms, if at all. In that event, Magenta would be unable to further develop and commercialize product candidates, which could harm its business significantly. Any of the foregoing may have a material adverse effect on its business, financial condition, results of operations and prospects.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies

 

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require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, Magenta’s competitors might be able to enter the market earlier than would otherwise have been the case, which would have a material adverse effect on its business.

Some intellectual property that Magenta may in-license may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit its exclusive rights, and limit its ability to contract with non-U.S. manufacturers.

The intellectual property rights that Magenta may license may be generated through the use of U.S. government funding and therefore may be subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in product candidates pursuant to the Bayh-Dole Act of 1980 (“Bayh-Dole Act”). These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require Magenta to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”). The U.S. government also has the right to take title to these inventions if Magenta, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require Magenta or the applicable licensor to expend substantial resources. In addition, the U.S. government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit its ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. To the extent any of its current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.

Magenta may become involved in lawsuits to protect or enforce patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe Magenta’s patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, Magenta may be required to file infringement claims, which can be expensive and time-consuming and divert the time and attention of its management and scientific personnel. Any claims Magenta asserts against perceived infringers could provoke these parties to assert counterclaims against Magenta alleging that Magenta infringes their patents, in addition to counterclaims asserting that its patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of Magenta’s is invalid or unenforceable, in whole or in part, and that Magenta does not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that Magenta does not have the right to stop the other party from using the invention at issue on the grounds that its patent claims do not cover

 

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the invention. An adverse outcome in a litigation or proceeding involving its patents could limit its ability to assert its patents against those parties or other competitors and may curtail or preclude its ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect its competitive business position, business prospects and financial condition. Similarly, if Magenta asserts trademark infringement claims, a court may determine that the marks Magenta has asserted are invalid or unenforceable, or that the party against whom Magenta has asserted trademark infringement has superior rights to the marks in question. In this case, Magenta could ultimately be forced to cease use of such trademarks.

Even if Magenta establishes infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of its confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of its common stock. Moreover, there can be no assurance that Magenta will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if Magenta ultimately prevails in such claims, the monetary cost of such litigation and the diversion of the attention of its management and scientific personnel could outweigh any benefit Magenta receives as a result of the proceedings. Any of the foregoing may have a material adverse effect on its business, financial condition, results of operations and prospects.

Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Magenta’s ability to protect any product candidates that it may develop.

As is the case with other biopharmaceutical companies, Magenta’s success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty regarding its ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken its ability to obtain new patents or to enforce its existing patents and patents that Magenta might obtain in the future. For example, in the case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not patentable. In addition, the case Amgen Inc. v. Sanofi affects the way antibody claims are examined and litigated. Magenta cannot predict how future decisions by the courts, the Congress or the USPTO may impact the value of its patents.

In addition, a European Unified Patent Court (“UPC”) is scheduled to come into force during 2023. The UPC will be a common patent court to hear patent infringement and revocation proceedings effective for member states of the European Union (“EU”). This could enable third parties to seek revocation of any European patents in a single proceeding at the UPC rather than through multiple proceedings in each of the jurisdictions in which the European patent is validated. Any such revocation and loss of patent protection could have a material adverse impact on Magenta’s business and its ability to commercialize or license its technology and products. Moreover, the controlling laws and regulations of the UPC will develop over time and may adversely affect its ability to enforce or defend the validity of any European patents. Magenta may decide to opt out any European patents and patent applications from the UPC. If certain formalities and requirements are not met, however, any European patents and patent applications could be challenged for non-compliance and brought under the jurisdiction of the UPC. Magenta cannot be certain that European patents and patent applications will avoid falling under the jurisdiction of the UPC, if Magenta decides to opt out of the UPC.

 

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Magenta may not be able to protect any intellectual property rights throughout the world.

Filing, prosecuting, maintaining, defending and enforcing patents on any product candidates Magenta may develop in all countries throughout the world would be prohibitively expensive, and intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, Magenta may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions. Competitors may use its technologies in jurisdictions where Magenta has not obtained patent protection to develop their own drugs and may export otherwise infringing drugs to territories where Magenta has patent protection, but enforcement rights are not as strong as those in the United States. These drugs may compete with product candidates Magenta may develop and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for Magenta to stop the infringement of its patents generally. Proceedings to enforce its patent rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its patents at risk of being invalidated or interpreted narrowly and its patent applications at risk of not issuing and could provoke third parties to assert claims against Magenta. Magenta may not prevail in any lawsuits that it initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful.

Many countries have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In those countries, Magenta may have limited remedies if patents are infringed or if Magenta is compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit its potential revenue opportunities. Accordingly, its efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that Magenta develops or licenses, which could adversely affect its business, financial condition, results of operations, and prospects.

Patent terms may be inadequate to protect Magenta’s competitive position on any product candidates that it may develop for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest filing date of a non-provisional application to which the patent claims priority. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering any product candidates it may develop are obtained, once the patent life has expired for a product candidate, it may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, its owned and licensed patent portfolio may not provide Magenta with sufficient rights to exclude others from commercializing product candidates similar or identical to any product candidates it may develop.

Depending upon the timing, duration and conditions of any FDA marketing approval of any product candidates Magenta may develop, one or more of its U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Amendments”) and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent

 

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term lost during product development and the FDA regulatory review process. However, Magenta may not receive an extension if it fails to exercise due diligence during the testing phase or regulatory review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than Magenta requests. Only one patent per approved product can be extended, the extension cannot extend the total patent term beyond 14 years from approval and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. If Magenta is unable to obtain patent term extension or the term of any such extension is less than it requests, the period during which Magenta can enforce its patent rights for the applicable product candidate will be shortened and its competitors may obtain approval to market competing products sooner. As a result, its revenue from applicable products could be reduced. Further, if this occurs, its competitors may take advantage of its investment in development and trials by referencing its clinical and preclinical data and launch their product earlier than might otherwise be the case, and its competitive position, business, financial condition, results of operations and prospects could be materially harmed.

Third parties may assert that Magenta’s employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

Magenta employs individuals who were previously employed at universities or other biopharmaceutical companies, including Magenta’s competitors or potential competitors. Although Magenta tries to ensure that its employees and consultants do not use the proprietary information or know-how of others in their work for Magenta, it may be subject to claims that Magenta or its employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If Magenta fails in defending any such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or personnel. Even if Magenta is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Magenta may be subject to claims challenging the inventorship or ownership of patents and other intellectual property.

Magenta may be subject to claims that former employees, collaborators or other third parties have an interest in own patent rights, trade secrets or other intellectual property as an inventor or co-inventor. For example, a third party may assert claims against Magenta arising out of conflicting obligations of employees, consultants or others who are involved in developing product candidates or other technologies. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership of owned patent rights, trade secrets or other intellectual property. If Magenta fails in defending any such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to product candidates and other technologies. Even if Magenta is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on its business, financial condition, results of operations and prospects.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by Magenta’s intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect its business or permit Magenta to maintain its competitive advantage. For example:

 

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others may be able to make products that are similar to any product candidates Magenta may develop or utilize similar technology but that are not covered by the claims of the patents that it licenses or owns;

 

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Magenta, or its current or future licensors might not have been the first to make the inventions covered by the issued patent or pending patent application that Magenta licenses or owns;

 

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Magenta, or its current or future licensors might not have been the first to file patent applications covering certain of its or their inventions;

 

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others may independently develop similar or alternative technologies or duplicate any of Magenta’s technologies without infringing its owned or licensed intellectual property rights;

 

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it is possible that Magenta’s pending owned or licensed patent applications or those that Magenta may own or license in the future will not lead to issued patents;

 

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issued patents that Magenta holds rights to may be held invalid or unenforceable, including as a result of legal challenges by its competitors;

 

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Magenta’s competitors might conduct research and development activities in countries where Magenta does not have patent rights and then use the information learned from such activities to develop competitive products for sale in its major commercial markets;

 

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Magenta may not develop additional proprietary technologies that are patentable;

 

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the patents of others may harm Magenta’s business; and

 

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Magenta may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could harm Magenta’s business, financial condition, results of operations, and prospects.

Risks Related to Magenta’s Reliance on Third Parties and Manufacturing

Magenta has been and may in the future be subject to many manufacturing risks, any of which could substantially increase its costs, delay clinical programs and limit the supply of product candidates.

Magenta has historically contracted with third party manufacturers to make product candidates to support preclinical and clinical trials. Should Magenta resume development of product candidates, Magenta’s contract development and manufacturing organizations (“CDMOs”) may not be able to adopt, adapt or scale up the manufacturing process in a timely manner to support future clinical trials. The process of manufacturing product candidates is complex, highly regulated and subject to several risks, including:

 

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the manufacturing processes are susceptible to product loss due to contamination by adventitious microorganisms, equipment failure, improper installation or operation of equipment, vendor or operator error and improper storage conditions. Even minor deviations from normal manufacturing processes could result in reduced production yields and quality as well as other supply disruptions. If microbial, viral or other contaminations are discovered in any product candidates or in the manufacturing facilities in which product candidates are made, the manufacturing facilities may need to be closed for an extended period of time to investigate and eliminate the contamination;

 

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the manufacturing facilities in which product candidates are made could be adversely affected by equipment failures, labor and raw material shortages, financial difficulties of CDMOs, natural disasters, power failures, local political unrest and numerous other factors;

 

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any adverse developments affecting manufacturing operations for product candidates may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the supply of product candidates. Magenta may also have to record inventory write-offs and incur other charges and expenses for product candidates that fail to meet specifications, undertake costly remediation efforts or seek more expensive manufacturing alternatives.

The manufacture of Magenta’s product candidates requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of these

 

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biopharmaceutical products sometimes encounter difficulties in production, especially during scale-up from the manufacturing process used for preclinical and early clinical trials to a validated process needed for pivotal clinical studies and commercial launch. These problems include failure to meet target production costs and yields, sub-par quality control testing, including stability of the product, quality assurance system failures, operator error and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Magenta cannot assure you that any product quality issues relating to the manufacture of any product candidates will not occur in the future.

Magenta does not have and it does not currently plan to acquire or build the facilities or internal capabilities to manufacture bulk drug substance or filled drug product for use in preclinical studies, clinical trials or commercialization. To a large extent, that makes Magenta dependent on the goodwill of its contract manufacturing partners to quickly fix deviations that will inevitably occur during the manufacturing of its product. Any delay or interruption in the supply of clinical trial materials could delay the completion of preclinical studies or clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require Magenta to commence new preclinical studies or clinical trials at additional expense or terminate preclinical studies or clinical trials altogether.

Magenta has no manufacturing facility. As a result, Magenta has been dependent on third-party manufacturers, as well as on third parties for its supply chain. If Magenta experiences problems with any third parties, or the actual demand for product candidates exceeds forecasts, the manufacture of adequate supplies of product candidates or products could be delayed.

Magenta does not own or operate facilities for the manufacture of product candidates. Magenta currently have no plans to build its own manufacturing facilities for clinical or commercial operations. Magenta has in the past relied on third party manufacturers for the chemical manufacture of active pharmaceutical ingredient and for the production of final product formulation and packaging for clinical trials, and Magenta expects to rely on such third party manufacturers for any future product candidates it develops. Although alternative third-party suppliers with the necessary manufacturing and regulatory expertise and facilities exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers should Magenta resume development of product candidates. Magenta may encounter technical difficulties or delays in the transfer of manufacturing on a commercial scale to third party manufacturers. Magenta may be unable to enter into agreements for commercial supply with third party manufacturers or may be unable to do so on acceptable terms. If Magenta is unable to arrange for alternative third-party manufacturing sources, or to do so on commercially reasonable terms or in a timely manner, it may not be able to complete development of product candidates, or obtain regulatory approval to market them.

Reliance on third party manufacturers entails risks to which Magenta would not be subject if it manufactured product candidates or products by itself. These risks include reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond its control, including a failure to manufacture product candidates or any products Magenta may eventually commercialize in accordance with its specifications, and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to it. In addition, the FDA and other regulatory authorities require that product candidates and any products that Magenta may eventually commercialize be manufactured according to cGMP and similar foreign standards. Any failure by its third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of its product candidates and could cause Magenta to incur higher costs and prevent Magenta from commercializing product candidates successfully. In addition, such failure could be the basis for the FDA to issue a warning letter, withdraw approvals for any product candidates previously granted to Magenta, or take other regulatory or legal action, including recall or seizure of outside supplies of the product candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of products, refusal to permit the import or export of products, injunction, or imposing civil and criminal penalties.

 

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Magenta has in the past relied on and, should it resume development of product candidates, may continue to rely on third parties to conduct its preclinical and clinical trials and Magenta may rely on them to perform other tasks for Magenta as well. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, Magenta may not be able to obtain regulatory approval for or commercialize product candidates and its business could be substantially harmed.

Magenta has in the past relied on and, should it resume development of product candidates, Magenta may continue to rely upon medical institutions, clinical investigators, contract laboratories, its contract research organizations (“CROs”) and other third parties to conduct future preclinical studies and clinical trials for such product candidates. Magenta expects to rely heavily on these parties for execution of preclinical and future clinical trials for any product candidates Magenta may seek to develop, and Magenta controls only certain aspects of their activities. Nevertheless, Magenta will be responsible for ensuring that each of its preclinical and clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and its reliance on CROs will not relieve Magenta of its regulatory responsibilities. For any violations of laws and regulations during the conduct of its preclinical studies and clinical trials, Magenta could be subject to warning letters or enforcement action that may include civil penalties up to and including criminal prosecution.

Magenta and any CROs it engages will be required to comply with regulations, including current good clinical practices (“cGCPs”) and current good laboratory practices (“cGLPs”) for conducting, monitoring, recording and reporting the results of preclinical and clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are enforced by the FDA and comparable foreign regulatory authorities for any drugs in clinical development. The FDA enforces cGCP regulations through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If Magenta or its CROs fail to comply with applicable cGCPs or cGLP, the clinical data generated in clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require Magenta to perform additional clinical trials before approving its marketing applications. Magenta cannot assure you that, upon inspection, the FDA will determine that any of clinical trials will comply with cGCPs or cGLPs. In addition, clinical trials must be conducted with product candidates produced in accordance with the requirements in the FDA’s cGMP requirements. Magenta’s failure or the failure of its CROs to comply with these regulations may require Magenta to repeat clinical trials, which would delay the regulatory approval process and could also subject Magenta to enforcement action.

If Magenta relies on CROs to conduct future clinical trials of any product candidates Magenta may seek to develop, many important aspects of its development programs, including their conduct and timing, will be outside of its direct control. Magenta’s reliance on third parties to conduct future preclinical studies and clinical trials will also result in less day-to-day control over the management of data developed through preclinical studies and clinical trials than would be the case if Magenta was relying entirely upon its own staff.

If any of Magenta’s relationships with these third-party CROs terminate, Magenta may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to its clinical protocols, regulatory requirements or for other reasons, any preclinical studies or clinical trials with which such CROs are associated with may be extended, delayed or terminated. In such cases, Magenta may not be able to obtain regulatory approval for or successfully commercialize product candidates. As a result, its financial results and the commercial prospects for such product candidates in the subject indication could be harmed, its costs could increase and its ability to generate revenue could be delayed.

Any significant disruption in its manufacturer or supplier relationships could harm its business. Any significant delay in the supply of product candidates or their key materials for clinical trials or other testing could

 

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considerably delay completion of clinical trials, product testing, potential regulatory approval of any product candidates and the commercial launch of such product candidates, if approved, which would impair Magenta’s ability to generate revenues from the sale of those product candidates.

Risks Related to Magenta’s Collaborations with Third Parties

Should Magenta resume development of product candidates, it may depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates it develops. If any such collaborations are not successful, Magenta may not be able to capitalize on the market potential of those product candidates and its business may be adversely affected.

Should Magenta resume development of product candidates, Magenta may depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates it may develop. For example, Magenta had collaboration agreements with bluebird bio, Inc. for its Phase 2 trial of MGTA-145 plus plerixafor for mobilization and collection of stem cells in patients with sickle cell disease, AVROBIO, Inc. (“AVROBIO”) to evaluate the potential utility of MGTA-117 for conditioning patients before they receive one of AVROBIO’s investigational lentiviral gene therapies, and Beam Therapeutics Inc. (“Beam”) to evaluate the potential utility of MGTA-117 for conditioning of patients with sickle cell disease and beta-thalassemia receiving Beam’s base editing therapies. Each of these collaborations were terminated after Magenta’s decision in February 2023 to halt further development of its programs. In April 2023, Magenta sold certain assets, including intellectual property, related to its product candidates MGTA-117, MGTA-45 and MGTA-145.

In any collaboration agreements that Magenta may enter into in the future, Magenta has or will likely have limited control over the amount and timing of resources that its collaborators dedicate to the development or commercialization of any product candidates it may seek to develop with them. Magenta’s ability to develop product candidates and generate revenues from its collaborations will depend on its collaborators’ abilities to successfully perform the functions assigned to them in these arrangements, as well as the success of the collaborators’ underlying therapies. Magenta cannot predict the success of any collaboration that it enters into.

Collaborations involving Magenta’s research programs or any product candidates Magenta may develop pose certain risks, including the following:

 

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Collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations.

 

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Collaborators may not pursue development and commercialization of any product candidates Magenta may develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus, available funding or external factors such as an acquisition that diverts resources or creates competing priorities.

 

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Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing.

 

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A collaborator’s product candidate may have a safety or efficacy profile that would impact the collaborator’s ability to continue to pursue the development and commercialization of any product candidate which in turn would negatively impact its ability to continue to pursue the development and commercialization of any product candidate it may seek to develop.

 

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Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with product candidates it may seek to develop if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than Magenta’s.

 

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Collaborators with marketing and distribution rights to one or more medicines may not commit sufficient resources to the marketing and distribution of such medicine or medicines.

 

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Collaborators may not properly obtain, maintain, enforce, or defend its intellectual property or proprietary rights or may use its proprietary information in such a way as to invite litigation that could jeopardize or invalidate its proprietary information or expose Magenta to potential litigation.

 

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Material disputes may arise between the collaborators and Magenta that result in the delay or termination of the research, development, or commercialization of product candidates it may seek to develop or that result in costly litigation or arbitration that diverts management attention and resources.

 

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Magenta may lose certain valuable rights under circumstances identified in its collaborations, including if Magenta undergoes a change of control.

 

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Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

 

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Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of Magenta were to be involved in a business combination, the continued pursuit and emphasis on product development or commercialization program under such collaboration could be delayed, diminished, or terminated.

 

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Collaborators, including in the gene therapy space, may be unable to financially partner with Magenta to develop any product candidates due to the current challenging conditions in the financial markets and their limited ability to raise capital.

 

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Collaborators may be unable to survive in the current challenging economic environment, and as a result they may be forced to terminate their business operations, including termination of the performance of their collaboration agreements with Magenta.

If such collaborations do not result in the successful development and commercialization of products, or if collaborators terminates its agreement with Magenta, it may not receive any future research funding or milestone or royalty payments under the collaboration. If Magenta does not receive the funding Magenta expects under these agreements, its development of any product candidates could be delayed, and Magenta may need additional resources to develop such product candidates. In addition, if collaborators terminates its agreement with Magenta, Magenta may find it more difficult to find a suitable replacement collaborator or attract new collaborators, and its development programs may be delayed or the perception of Magenta in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval, and commercialization described in Magenta’s Annual Report on Form 10-K for the year ended December 31, 2022 apply to the activities of its collaborators.

Magenta has in the past and may in the future decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of any product candidates it may develop. These relationships, or those like them, may require Magenta to incur non-recurring and other charges, increase its near- and long-term expenditures, issue securities that dilute its existing stockholders, or disrupt its management and business. In addition, Magenta could face significant competition in seeking appropriate collaborators, and the negotiation process is time-consuming and complex. Magenta’s ability to reach a definitive collaboration agreement will depend, among other things, upon its assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of several factors. If Magenta licenses rights to any product candidates Magenta or its collaborators may develop, it may not be able to realize the benefit of such transactions if Magenta is unable to successfully integrate them with its existing operations and company culture.

 

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Should Magenta resume development of product candidates, if any party to which Magenta has outsourced certain functions fails to perform its obligations under agreements with Magenta, the development and commercialization of those future product candidates could be delayed or terminated.

Should Magenta resume development of product candidates, to the extent that Magenta relies on third party individuals or other companies to manage the day-to-day conduct of its clinical trials or to manufacture, sell or market any future product candidates, Magenta will be dependent on the timeliness and effectiveness of their efforts. If a clinical research management organization that Magenta might utilize is unable to allocate sufficient qualified personnel to clinical trials or if the work performed by it does not fully satisfy the rigorous requirements of the FDA, Magenta may encounter substantial delays and increased costs in completing its clinical trials. If a firm producing product candidates or a manufacturer of the raw material or finished product for clinical trials is unable to meet its time schedules or cost parameters, the timing of such clinical trials and development of those product candidates may be adversely affected. Any manufacturer that Magenta selects may encounter difficulties in scaling-up the manufacture of new products in commercial quantities, including problems involving product yields, product stability or shelf life, quality control, adequacy of control procedures and policies, compliance with FDA regulations and the need for further FDA approval of any new manufacturing processes and facilities. The manufacture of clinical supplies for trials and commercial quantities of product candidates it may seek to develop are likely to be inherently more difficult and costly than typical chemical pharmaceuticals. This could delay commercialization of any product candidates, if approved, or reduce the profitability of these candidates for Magenta. If any of these occur, the development and commercialization of such product candidates could be delayed, curtailed or terminated because Magenta may not have sufficient financial resources or capabilities to continue such development and commercialization on its own.

Risks Related to Employee Matters, Managing Growth and Other Risks Related to Magenta’s Business

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of any other highly infectious disease could have a material adverse effect on Magenta’s business, financial condition, results of operations and cash flows.

The extent to which the COVID-19 pandemic, or any future pandemic, epidemic or outbreak of any highly infectious disease, impacts Magenta’s business, financial condition and results of operations will depend on future developments, which are uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others. For example, the COVID-19 pandemic, including the emergence of various variants, has caused, and could continue to cause, widespread disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic has affected, and may continue to adversely affect, its business, financial condition and results of operations, and it has had, and may continue to have, the effect of heightening many of the risks described in Magenta’s Annual Report on Form 10-K for the year ended December 31, 2022. Should Magenta resume development of product candidates, the COVID-19 pandemic may have an adverse impact on various aspects of its clinical trials and preclinical studies and these risks include but are not limited to the following:

 

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Impacts on patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, and interruption or delays in the operations of the FDA, among other reasons related to the COVID-19 pandemic. If the COVID-19 pandemic continues, other aspects of Magenta’s future clinical trials will likely be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from Magenta’s studies or Magenta may choose to, or be required to, pause enrollment and or patient dosing in clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue.

 

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Magenta will rely on third parties, including CROs, CDMOs, and other contractors and consultants to, among other things, conduct preclinical and clinical trials, manufacture raw materials, manufacture and supply product candidates, ship investigational drugs and clinical trial samples, perform quality testing and supply other goods and services to run its business. If any such third party is adversely impacted by restrictions resulting from the COVID-19 pandemic, including staffing shortages, production slowdowns and disruptions in delivery systems, its supply chain may be disrupted, which could limit its ability to manufacture future product candidates for clinical trials and to conduct research and development operations.

 

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Magenta has established a hybrid work-from-home policy for all employees. Magenta’s increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact its business. In addition, this could increase its cyber security risk, create data accessibility concerns and make Magenta more susceptible to communication disruptions, any of which could adversely impact its business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors.

 

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Employees and contractors conducting non-business critical research and development activities may not be able to access necessary laboratory space for an extended period of time as a result of the COVID-19 pandemic. This could delay timely completion of preclinical activities, including completing investigational new drug (“IND”), enabling studies or its ability to select future development candidates, and initiation of additional clinical trials for other product candidates.

 

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Certain government agencies, such as health regulatory agencies and patent offices, within the United States or internationally have experienced, and may continue to experience, disruptions in their operations as a result of the COVID-19 pandemic. The FDA and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor clinical trials and, as a result, review, inspection and other timelines may be materially delayed. It is unknown how long these disruptions could continue. Any elongation or de-prioritization of its clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of product candidates. For example, regulatory authorities may require that Magenta not distribute a product candidate lot until the relevant agency authorizes its release. Such release authorization may be delayed as a result of the COVID-19 pandemic, which would likely result in delays to clinical trials.

 

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The trading prices for its common stock and those of other biopharmaceutical companies have been highly volatile, partly due to the COVID-19 pandemic. As a result, Magenta may face difficulties raising capital through sales of its common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event could materially and adversely affect its business and the value of its common stock.

Should Magenta resume development of product candidates, it will need to grow the size of its organization, and it may experience difficulties in managing this growth.

As of June 30, 2023, Magenta had six full-time employees. If Magenta resumes development of product candidates, as its development, manufacturing and commercialization plans and strategies develop, and as it continues to operate as a public company, Magenta would expect to need additional managerial, technical, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:

 

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identifying, recruiting, integrating, maintaining and motivating additional employees;

 

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managing its internal development efforts effectively, including the clinical, FDA and international regulatory review process for product candidates, while complying with contractual obligations to contractors and other third parties; and

 

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improving its operational, financial and management controls, reporting systems and procedures.

 

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Magenta’s future financial performance and its ability to develop, manufacture and commercialize any product candidates will depend, in part, on its ability to effectively manage any future growth, and its management may also have to divert financial and other resources, and a disproportionate amount of their attention away from day-to-day activities in order to devote a substantial amount of time, to managing these growth activities.

Magenta may rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including core aspects of regulatory approval, clinical management and manufacturing. Magenta cannot assure you that the services of independent organizations, advisors and consultants will continue to be available to Magenta on a timely basis when needed, or that Magenta can find qualified replacements. Magenta may also overextend consultants in certain roles. If Magenta is unable to effectively manage its outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, clinical trials may be extended, delayed or terminated, and Magenta may not be able to obtain regulatory approval for product candidates or otherwise advance its business. Magenta cannot assure you that it will be able to manage its existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.

Should Magenta resume development of product candidates, if Magenta is not able to effectively expand its organization by hiring new employees and expanding its groups of consultants and contractors, Magenta may not be able to successfully implement the tasks necessary to further develop and commercialize such product candidates and, accordingly, may not achieve its research, development and commercialization goals.

Should Magenta lose key personnel or should resume development of product candidates, and if it fails to recruit additional highly skilled personnel, Magenta’s ability to develop product candidates will be impaired and its business may be harmed.

Magenta is highly dependent on its management team. Its ability to compete in the highly competitive biotechnology and pharmaceutical industries will depend upon its ability to attract and retain highly qualified managerial, scientific and medical personnel with particular subject matter expertise. The loss of the services of such key personnel, and if Magenta resumes development of product candidates, its inability to find suitable replacements could result in delays in the development of product candidates and harm its business. Further, unless Magenta is able to replace departed employees effectively, it may require current employees to fill additional roles, and this could overextend their responsibilities. As a result, Magenta may experience increased turnover due to employees being overworked. Employees also may be unable to perform these multiple roles effectively due to time and resource constraints.

Additionally, if Magenta is unable to retain key personnel, it may be required to cover the roles previously performed by such employees with consultants. These consultants may lack the same skills and performance of departed employees and, as a result, its clinical trials may be extended, delayed or terminated, and Magenta may not be able to obtain regulatory approval of any product candidates or otherwise advance its business.

Magenta conducts its business in Cambridge, Massachusetts. This region is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in its market is intense and may limit its ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain at Magenta, in addition to salary and cash incentives, Magenta may grant equity awards that vest over time or vest upon the achievement of certain pre-established milestones. The value to employees of equity awards has been, and may continue to be, significantly affected by movements in its stock price that are beyond its control, and these equity awards may at any time be insufficient to counteract more lucrative offers from other companies. Despite its efforts to retain valuable employees, they may terminate their employment with Magenta on short notice. Although Magenta has employment agreements with its key employees, these agreements provide for at-will employment, which means that any of Magenta’s employees could leave its employment at any time, with or without notice. Magenta does not maintain “key man” insurance policies on the lives of these individuals or the lives of any of its other employees.

 

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If product liability lawsuits are brought against Magenta, it may incur substantial liabilities and may be required to limit the potential development and commercialization of any product candidates.

Magenta face an inherent risk of product liability as a result of the clinical testing of product candidates and will face an even greater risk if it commercializes any products. For example, Magenta may be sued if any product candidates it develops cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If Magenta cannot successfully defend itself against product liability claims, Magenta may incur substantial liabilities or be required to limit commercialization of such product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

 

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decreased demand for products;

 

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injury to its reputation;

 

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withdrawal of clinical trial participants and inability to continue clinical trials;

 

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initiation of investigations by regulators;

 

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costs to defend the related litigation;

 

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a diversion of management’s time and its resources;

 

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substantial monetary awards to trial participants or patients;

 

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product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

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loss of revenue;

 

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exhaustion of any available insurance and its capital resources;

 

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the inability to commercialize any product candidate; and

 

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a decline in its share price.

Magenta’s inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products it develops, alone or with collaborators. Although Magenta currently carries clinical trial insurance, the amount of such insurance coverage may not be adequate, it may be unable to maintain such insurance, or Magenta may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Magenta’s insurance policies may also have various exclusions, and it may be subject to a product liability claim for which Magenta has no coverage. Magenta may have to pay any amounts awarded by a court or negotiated in a settlement that exceed its coverage limitations or that are not covered by its insurance, and Magenta may not have, or be able to obtain, sufficient capital to pay such amounts. Even if its agreements with any future corporate collaborators entitle Magenta to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Magenta’s internal computer and information technology systems and infrastructure, or those of its collaborators, other contractors or consultants, may fail or suffer security compromises or breaches, which could result in a material disruption of its business.

Magenta’s internal computer and information technology systems and infrastructure and those of its current and any future collaborators and other contractors or consultants are vulnerable to breakdown or damage or interruption or otherwise may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, system malfunction, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. Magenta could also be subject to risks caused by

 

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misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems, infrastructure and networks of Magenta and its vendors, including personal information of its employees and study subjects, and company and vendor confidential or proprietary data, whether stored on its systems or on those of third parties. In addition, outside parties may attempt to penetrate its systems or those of its vendors or fraudulently induce its personnel or the personnel of its vendors to disclose sensitive information in order to gain access to its data and/or systems. Magenta may experience threats to its data and systems, including malicious codes and viruses, phishing and other cyber-attacks. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include wrongful conduct by insider employees, vendors or other third parties, hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud or cyber-attacks, including the deployment of harmful malware, ransomware, denial-of-service attacks, unauthorized access to or deletion of files, phishing attacks and social engineering and business email compromises, and other means to affect service reliability and threaten or compromise systems, infrastructure, or the security, confidentiality, integrity and availability of information. Because the techniques used by threat actors who may attempt to penetrate and sabotage its computer systems or those of its collaborators or other contractors or consultants change frequently and may not be recognized until launched against a target, Magenta may be unable to anticipate these techniques. Accordingly, if its cybersecurity measures or those of its service providers fail, the market perception of the effectiveness of its security measures could be harmed and its reputation, credibility, customer trust, business, results of operations and financial condition could be damaged.

While Magenta has not experienced any such material system failure, accident, cyber-attack or security compromise or breach to date, if such an event were to occur and cause interruptions in its operations, it could result in a disruption of its development programs and its business operations, whether due to a loss of its trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from future clinical trials could result in delays in its regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security compromise or breach were to result in a loss of, damage to, unauthorized access or acquisition, or misuse of its data, systems, infrastructure or applications, or inappropriate disclosure of confidential or proprietary information, Magenta could incur liability (including in connection with or resulting from litigation or governmental investigations and enforcement actions), its competitive position could be harmed and its business could be otherwise adversely affected.

Magenta could be required to expend significant amounts of money and other resources to repair or replace information systems, infrastructure or networks, and Magenta may need to devote significant resources to defend against, respond to and recover from cybersecurity incidents, diverting resources from the growth and expansion of its business. In addition, Magenta could be subject to regulatory actions, regulatory inquiry or investigation and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although Magenta develops and maintains systems and controls designed to prevent these events from occurring, and Magenta has a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite its efforts, the possibility of these events occurring cannot be eliminated entirely. As Magenta outsources more of its information systems to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-based information systems, the related security risks will increase, and Magenta will need to expend additional resources to protect its technology and information systems. In addition, there can be no assurance that its internal information technology systems or those of its third-party contractors, or its consultants’ efforts to implement adequate security and control measures, will be sufficient to protect Magenta against breakdowns, service disruption, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyberattack, security compromise or breach, industrial espionage attacks or insider threat attacks which could result in financial, legal, business or reputational harm.

 

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Magenta and the third parties with whom it works are increasingly utilizing social media tools as a means of communication both internally and externally, and noncompliance with applicable requirements, policies or contracts due to social media use or negative posts or comments could have an adverse effect on Magenta’s business.

Social media is increasingly being used to communicate about clinical development programs and the diseases its therapeutics are being developed to treat, and Magenta intends to utilize appropriate social media in connection with its commercialization efforts following approval of any product candidates. Social media practices in the biopharmaceutical industry continue to evolve and regulations and regulatory guidance relating to such use are evolving and not always clear. In addition, its employees or third parties with whom Magenta contracts or may contract, such as CROs or CDMOs, may knowingly or inadvertently make use of social media in ways that may not comply with legal or contractual requirements, which may give rise to liability, lead to the loss of trade secrets or other intellectual property or result in public exposure of personal information of its employees, clinical trial patients and others or information regarding any product candidates or clinical trials along with the potential for litigation related to off-label marketing or other prohibited activities. For example, clinical trial patients may use social media channels to comment on their experience in an ongoing blinded clinical trial or to report an alleged adverse event. When such disclosures occur, there is a risk that trial enrollment may be adversely impacted, Magenta fails to monitor and comply with applicable adverse event reporting obligations or that Magenta may not be able to defend its business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what Magenta may say about any product candidate, should Magenta resume the development of product candidates.

There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about Magenta on any social networking website. Furthermore, negative posts or comments about it or any product candidates on social media could seriously damage its reputation, brand image and goodwill. If any of these events were to occur or Magenta otherwise fails to comply with applicable regulations, Magenta could incur liability, face regulatory actions or incur other harm to its business.

Magenta’s ability to utilize its net operating loss carryforwards and certain other tax attributes is expected to be limited.

As of December 31, 2022, Magenta had net operating loss carryforwards for federal income tax purposes of $272.9 million, of which $17.5 million begin to expire in 2035 and $255.4 million can be carried forward indefinitely. As of December 31, 2022, Magenta had net operating loss carryforwards for state income tax purposes of $272.6 million, which begin to expire in 2035. As of December 31, 2022, Magenta also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $12.9 million and $3.4 million, respectively, which begin to expire in 2035 and 2030, respectively. Under current law, federal net operating losses generated in taxable years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal net operating losses may be limited to 80% of its taxable income annually for tax years beginning after December 31, 2020. Net operating losses generated prior to December 31, 2017, however, have a 20-year carryforward period, but are not subject to the 80% limitation.

In addition, in general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who own at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage (by value) within a rolling three-year period. These ownership changes may limit the amount of net operating loss carryforwards and research and orphan drug tax credit carryforwards that can be utilized annually to offset future taxable income. While Magenta has not conducted a formal study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since inception due to the significant complexity and cost associated with such a study, the merger is expected to result in an ownership change for

 

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purposes of Sections 382 and 383 of the Code. There is also a risk that due to regulatory changes, such as suspensions on the use of net operating losses by federal or state taxing authorities or other unforeseen reasons, Magenta’s existing net operating losses could expire or otherwise be unavailable to reduce future income tax liabilities. For these reasons, Magenta does not expect to be able to utilize a material portion of the net operating losses and research and orphan drug tax credit carryforwards reflected on its balance sheet, even if it attains profitability, which could potentially result in increased future tax liability to it and could adversely affect its operating results and financial condition.

Risks Related to Magenta’s Common Stock

An active trading market for Magenta’s common stock may not be sustained.

In June 2018, Magenta closed its IPO. Prior to Magenta’s IPO, there was no public market for its common stock. Although Magenta has completed its IPO and shares of its common stock are listed and trading on Nasdaq, an active trading market for Magenta’s shares may not be sustained. If an active market for its common stock does not continue, it may be difficult for its stockholders to sell their shares without depressing the market price for the shares, sell their shares at or above the prices at which they acquired their shares or sell their shares at the time they would like to sell. Any inactive trading market for its common stock may also impair its ability to raise capital to continue to fund its operations by selling shares and may impair its ability to acquire other companies or technologies by using its shares as consideration.

Magenta’s failure to meet Nasdaq’s continued listing requirements could result in a delisting of its common stock.

If Magenta fails to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the requirement to maintain a minimum bid price of $1.00 per share of its common stock pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”), Nasdaq may take steps to delist its common stock. Such a delisting would likely have a negative effect on the price of Magenta’s common stock and would impair your ability to sell or purchase Magenta’s common stock when you wish to do so. Any such delisting could also adversely impact Magenta’s ability to raise additional capital or enter into strategic transactions.

On January 31, 2023, Magenta received a written notice from the staff (the “Staff”), of Nasdaq’s Listing Qualifications Department, notifying it that, for the 30 consecutive business day period between December 15, 2022 through January 30, 2023, its common stock had not complied with the Minimum Bid Price Requirement. Nasdaq’s written notice did not result in the immediate delisting of its common stock from Nasdaq.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Magenta had 180 calendar days, or until July 31, 2023 (the “Compliance Date”), to regain compliance with the Minimum Bid Price Requirement. According to the written notice, if, at any time during this 180-day period, the closing bid price for its common stock was at least $1.00 per share for a minimum of ten consecutive business days, the Staff would have provided written confirmation of compliance and the common stock would have remained listed on The Nasdaq Global Market.

Because Magenta did not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, on July 24, 2023, Magenta applied to transfer its listing from The Nasdaq Global Market to The Nasdaq Capital Market in order to be eligible for an additional 180 calendar day compliance period. To qualify, Magenta would be required to meet the continued listing requirement for the market value of publicly held shares and all other applicable initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice to Nasdaq of its intention to cure the deficiency during the additional 180-day compliance period, such as by effecting a reverse stock split, if necessary.

As part of its review process, the Staff will make a determination of whether it believes Magenta will be able to cure this deficiency. If the Staff determines that Magenta will not be able to cure the deficiency, then the

 

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Staff will provide it written notice that its common stock will be subject to delisting. At that time, Magenta may appeal the Staff’s delisting determination to a Nasdaq Hearing Panel. There can no assurance that, if Magenta receives a delisting notice and appeals the delisting determination by the Staff to the Nasdaq Hearing Panel, such appeal would be successful.

Magenta intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, including by effecting a reverse stock split. However, Magenta can provide no assurance that actions taken or not taken by it will restore compliance with Nasdaq’s listing requirements, stabilize the market price of its common stock, improve the liquidity of its common stock or prevent future non-compliance with Nasdaq’s listing requirements.

Additionally, if its common stock is not listed on, or becomes delisted from, Nasdaq for any reason, trading its common stock could be conducted only in the over-the-counter (“OTC”), market or on an electronic bulletin board established for unlisted securities such as the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, and the liquidity and price of its common stock may be more limited than if Magenta was quoted or listed on Nasdaq or another national securities exchange. In such circumstances, you may be unable to sell your common stock unless a market can be established or sustained.

The trading price of Magenta’s common stock has been, and will likely continue to be, highly volatile.

The trading price of Magenta’s common stock may be highly volatile. The stock market in general, and the market for smaller pharmaceutical and biotechnology companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the purchase price, and you may lose some or all of your investment. The market price for its common stock may be, and has been, influenced by many factors, including but not limited to:

 

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the status of its review of strategic alternatives, including an acquisition, merger, business combination or other transaction;

 

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whether Magenta is able to pursue or consummate the merger, or whether it pursues a dissolution and liquidation;

 

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the recruitment or departure of key personnel;

 

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the success of existing or new competitive products or technologies;

 

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regulatory actions with respect to product candidates or its competitors’ products and product candidates;

 

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announcements by Magenta or competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

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the timing and results of preclinical studies for any of product candidates;

 

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the timing and results of clinical trials of product candidates;

 

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commencement or termination of collaborations for any programs and product candidates;

 

•

failure or discontinuation of any development programs;

 

•

results of clinical trials of product candidates of competitors;

 

•

regulatory or legal developments in the United States and other countries;

 

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developments or material disputes concerning patent applications, issued patents or other proprietary rights;

 

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•

the level of expenses related to product candidates or clinical development programs;

 

•

the results of efforts to develop additional product candidates or products;

 

•

actual or anticipated changes in estimates as to financial results or development timelines;

 

•

announcement or expectation of additional financing efforts;

 

•

sales of its common stock by Magenta, its insiders or other stockholders;

 

•

variations in its financial results or those of companies that are perceived to be similar to Magenta;

 

•

changes in estimates or recommendations by securities analysts, if any, that cover Magenta;

 

•

changes in the structure of healthcare payment systems;

 

•

market conditions in the pharmaceutical and biotechnology sectors;

 

•

disruptions to political, governmental or regulatory systems, including shutdowns of the government and its agencies;

 

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general economic, industry and market conditions; and

 

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the other factors described in this “Risk Factors” section.

Magenta is an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make its common stock less attractive to investors.

Magenta is an emerging growth company, as defined in the JOBS Act. For as long as Magenta continues to be an emerging growth company, it may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. Magenta could be an emerging growth company for up to five years following the year in which it completed its IPO, although circumstances could cause Magenta to lose that status earlier. Magenta will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of its IPO, (b) in which Magenta has total annual gross revenue of at least $1.235 billion or (c) in which Magenta is deemed to be a large accelerated filer, as defined in Rule 12b-2 under the Exchange Act, and (2) the date on which Magenta has issued more than $1.0 billion in non-convertible debt during the prior three-year period. Magenta will no longer qualify as an emerging growth company after December 31, 2023.

Even after Magenta no longer qualifies as an emerging growth company, it may still qualify as a “smaller reporting company” which would allow Magenta to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. Magenta cannot predict if investors will find its common stock less attractive because it may rely on these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Magenta has elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different

 

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application dates for public or private companies, Magenta will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that it either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

Magenta does not anticipate paying any cash dividends on its capital stock in the foreseeable future. Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.

Magenta has never declared nor paid cash dividends on its capital stock. Magenta currently plans to retain all of its future earnings, if any, to finance the operation, development and growth of its business. In addition, the terms of any future debt or credit agreements may preclude Magenta from paying dividends. As a result, capital appreciation, if any, of its common stock will be the sole source of gain for its stockholders for the foreseeable future.

Concentration of ownership of Magenta’s common stock among its existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Magenta’s executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 44% of its capital stock as of June 30, 2023. This concentration of ownership control could delay, defer or prevent a change in control, entrench its management or the board of directors, or impede a merger, consolidation, takeover or other business combination involving Magenta that other stockholders may desire.

Provisions in Magenta’s charter documents and provisions under Delaware law may prevent or frustrate attempts by its stockholders to change its management or hinder efforts to acquire a controlling interest in Magenta.

Provisions in Magenta’s charter and bylaws may discourage, delay or prevent a merger, acquisition or other change in control of Magenta that stockholders may consider favorable, including transactions in which its stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of its common stock, thereby depressing the market price of its common stock. In addition, because its board of directors is responsible for appointing the members of its management team, these provisions may frustrate or prevent any attempts by its stockholders to replace or remove its current management by making it more difficult for stockholders to replace members of its board of directors. Among other things, these provisions:

 

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establish a classified board of directors such that all members of the board are not elected at one time;

 

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allow the authorized number of its directors to be changed only by resolution of its board of directors;

 

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limit the manner in which stockholders can remove directors from the board;

 

•

establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at stockholder meetings;

 

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require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by its stockholders by written consent;

 

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limit who may call a special meeting of stockholders;

 

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authorize its board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by its board of directors; and

 

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require the approval of the holders of at least 66.67% of the votes that all its stockholders would be entitled to cast to amend or repeal certain provisions of its charter or bylaws.

 

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Moreover, because Magenta is incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits a person who owns 15% or more of its outstanding voting stock from merging or combining with Magenta for a period of three years after the date of the transaction in which the person acquired 15% or more of its outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring Magenta or merging with it, whether or not it is desired by, or beneficial to, its stockholders. This could also have the effect of discouraging others from making tender offers for its common stock, including transactions that may be in the best interest of its stockholders. These provisions may also prevent changes in its management or limit the price that investors are willing to pay for its stock.

In connection with Magenta’s review of strategic alternatives, on March 31, 2023, Magenta’s board of directors adopted a stockholder rights plan, or “poison pill,” as amended on May 2, 2023, in order to protect the best interests of Magenta and its stockholders, to help ensure that all interested parties have the opportunity to participate fairly in the strategic review process to and provide the board of directors and stockholders time to make informed decisions.

Magenta’s bylaws provide that, unless Magenta consents in writing to the selection of an alternative forum, certain designated courts will be the sole and exclusive forum for certain legal actions between Magenta and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Magenta or its directors, officers, employees or agents.

Magenta’s bylaws provide that, unless it consents in writing to an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on its behalf, (ii) any action asserting a claim of or based on a breach of a fiduciary duty owed by any of its current or former directors, officers, or other employees to Magenta or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, its charter or its bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, which Magenta refers to herein as the “Delaware Forum Provision.” The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act and the Exchange Act. Magenta’s bylaws further provide that, unless it consents in writing to an alternative forum, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which Magenta refers to herein as the “Federal Forum Provision.” In addition, Magenta’s bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of its capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived its compliance with the U.S. federal securities laws and the rules and regulations thereunder.

Magenta recognizes that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the forum selection clauses in Magenta’s bylaws may limit its stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with Magenta or its directors, officers or employees, which may discourage such lawsuits against Magenta and its directors, officers and employees even though an action, if successful, might benefit its stockholders.

 

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Risks Related to Dianthus

Risks Related to Dianthus’ Limited Operating History, Financial Position and Capital Requirements

Dianthus has a limited operating history, has not completed any clinical trials, and has no products approved for commercial sale, which may make it difficult for you to evaluate its current business and likelihood of success and viability.

Dianthus is a clinical-stage biotechnology company with limited operating history. Since its inception in 2019, Dianthus has incurred significant operating losses and has utilized substantially all of its resources to conduct research and development activities (including with respect to its DNTH103 program) and undertake preclinical studies of product candidates, conducting a clinical trial of Dianthus’ most advanced product candidate and the manufacturing of the product candidates, business planning, developing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these activities. Dianthus has no significant experience as a company in initiating, conducting or completing clinical trials. In part because of this lack of experience, Dianthus cannot be certain that its current and planned clinical trials will begin or be completed on time, if at all. In addition, while Dianthus is evaluating DNTH103 in an ongoing Phase 1 clinical trial, Dianthus has not completed a clinical trial for any product candidate. Dianthus has not yet demonstrated its ability to successfully complete clinical trials (including Phase 3 or other pivotal clinical trials), obtain regulatory or marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on its behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Additionally, Dianthus expects its financial condition and operating results to continue to fluctuate significantly from period to period due to a variety of factors, many of which are beyond its control. Consequently, any predictions made about Dianthus’ future success or viability may not be as accurate as they could be if Dianthus had a longer operating history.

In addition, as its business grows, Dianthus may encounter unforeseen expenses, restrictions, difficulties, complications, delays and other known and unknown factors. Dianthus will need to transition at some point from a company with an early research and development focus to a company capable of supporting larger scale clinical trials and eventually commercial activities. Dianthus may not be successful in such a transition.

Even if the merger and Dianthus pre-closing financing are successful, Dianthus will require substantial additional capital to finance its operations in the future. If Dianthus is unable to raise such capital when needed, or on acceptable terms, Dianthus may be forced to delay, reduce or eliminate clinical trials, product development programs or future commercialization efforts.

Developing biotechnology products is a very long, time-consuming, expensive and uncertain process that takes years to complete. Since its inception, Dianthus has funded its operations primarily through private financings and has incurred significant recurring losses, including net losses of $7.1 million for the three months ended March 31, 2023 and $28.5 million and $13.1 million for the years ended December 31, 2022 and 2021, respectively. Dianthus expects its expenses to increase in connection with its ongoing activities, particularly as Dianthus conducts its ongoing Phase 1 clinical trial of DNTH103, initiates additional clinical trials, and continues to research, develop and conduct preclinical studies of its other potential product candidates, and transitions into a public company. In addition, if Dianthus obtains regulatory approval for any product candidate for commercial sale, including DNTH103, Dianthus anticipates incurring significant commercialization expenses related to product manufacturing, marketing, sales and distribution activities to launch any such product. Dianthus’ expenses could increase beyond expectations if Dianthus is required by the FDA or other regulatory agencies to perform preclinical studies or clinical trials in addition to those that Dianthus currently anticipates. Because the design and outcome of its current, planned and anticipated clinical trials are highly uncertain, Dianthus cannot reasonably estimate the actual amount of funding that will be necessary to successfully complete the development and commercialization of any product candidate Dianthus develops. Dianthus’ future capital requirements depend on many factors, including factors that are not within its control.

 

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Following the merger and Dianthus pre-closing financing, Dianthus will also incur additional costs associated with operating as a public company. Accordingly, Dianthus will require substantial additional funding to continue its operations. Based on its current operating plan, and assuming the merger and Dianthus pre-closing financing are successfully completed, Dianthus believes that its existing cash, cash equivalents and short-term investments should be sufficient to fund its operations into the second quarter of 2026. This estimate is based on assumptions that may prove to be materially wrong, and Dianthus could use its available capital resources sooner than it currently expects. Dianthus’ future capital requirements will depend on many factors, including:

 

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the timing and progress of preclinical and clinical development activities;

 

•

the number and scope of preclinical and clinical programs Dianthus pursues;

 

•

its ability to establish an acceptable safety profile with IND-enabling toxicology studies to enable clinical trials;

 

•

successful patient enrollment in, and the initiation and completion of, larger and later-stage clinical trials;

 

•

per subject trial costs;

 

•

the number and extent of trials required for regulatory approval;

 

•

the countries in which the trials are conducted;

 

•

the length of time required to enroll eligible subjects in clinical trials;

 

•

the number of subjects that participate in the trials;

 

•

the drop-out and discontinuation rate of subjects;

 

•

potential additional safety monitoring requested by regulatory agencies;

 

•

the duration of subject participation in the trials and follow-up;

 

•

the extent to which Dianthus encounters any serious adverse events in its clinical trials;

 

•

the timing of receipt of regulatory approvals from applicable regulatory authorities;

 

•

the timing, receipt and terms of any marketing approvals and post-marketing approval commitments from applicable regulatory authorities;

 

•

the extent to which Dianthus establishes collaborations, strategic partnerships, or other strategic arrangements with third parties, if any, and the performance of any such third party;

 

•

hiring and retaining research and development personnel;

 

•

its arrangements with its CDMOs and CROs;

 

•

development and timely delivery of commercial-grade drug formulations that can be used in its planned clinical trials and for commercial launch;

 

•

the impact of any business interruptions to its operations or to those of the third parties with whom Dianthus works, particularly in light of the current COVID-19 pandemic environment; and

 

•

obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights.

Dianthus does not have any committed external sources of funds and adequate additional financing may not be available to it on acceptable terms, or at all. Dianthus may be required to seek additional funds sooner than planned through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. Such financing may dilute its stockholders or the failure to obtain such financing may restrict its operating activities. Any additional fundraising efforts may divert Dianthus’ management from their day-to-day activities, which may adversely affect its business. To the extent that Dianthus raises additional capital through

 

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the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences and anti-dilution protections that adversely affect your rights as a stockholder. Debt financing may result in imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect Dianthus’ business. If Dianthus raises additional funds through upfront payments or milestone payments pursuant to future collaborations with third parties, Dianthus may have to relinquish valuable rights to product development programs, or grant licenses on terms that are not favorable to it. Dianthus’ ability to raise additional capital may be adversely impacted by global macroeconomic conditions and volatility in the credit and financial markets in the United States and worldwide, over which Dianthus may have no or little control. Its failure to raise capital as and when needed or on acceptable terms would have a negative impact on its financial condition and its ability to pursue its business strategy, and Dianthus may have to delay, reduce the scope of, suspend or eliminate clinical trials, product development programs or future commercialization efforts.

Dianthus has incurred significant losses since inception, and expects to incur significant losses for the foreseeable future and may not be able to achieve or sustain profitability in the future. Dianthus has no products for sale, has not generated any product revenue and may never generate product revenue or become profitable.

Investment in biotechnology product development is a highly speculative undertaking and entails substantial upfront expenditures and significant risks that any program will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. Dianthus has no products approved for commercial sale, Dianthus has not generated any revenue from product sales to date, and Dianthus continues to incur significant research and development and other expenses related to its ongoing operations. Dianthus does not expect to generate product revenue unless or until Dianthus successfully completes clinical development and obtains regulatory approval of, and then successfully commercializes, at least one product candidate. Dianthus may never succeed in these activities and, even if Dianthus does, may never generate product revenue or revenues that are significant or large enough to achieve profitability. If Dianthus is unable to generate sufficient revenue through the sale of any approved products, Dianthus may be unable to continue operations without additional funding.

Dianthus has incurred significant net losses in each period since Dianthus commenced operations in 2019. Dianthus’ net loss was $7.1 million for the three months ended March 31, 2023 and $28.5 million for the year ended December 31, 2022. Dianthus expects to continue to incur significant losses for the foreseeable future. Its operating expenses and net losses may fluctuate significantly from quarter to quarter and year to year. Dianthus anticipates that its expenses will increase substantially if and as Dianthus:

 

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advances its existing and future programs through preclinical and clinical development, including expansion into additional indications;

 

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seeks to identify additional programs and additional product candidates;

 

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maintains, expands, enforces, defends and protects its intellectual property portfolio;

 

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seeks regulatory and marketing approvals for product candidates;

 

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seeks to identify, establish and maintain additional collaborations and license agreements;

 

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ultimately establishes a sales, marketing and distribution infrastructure to commercialize any drug products for which Dianthus may obtain marketing approval, either by itself or in collaboration with others;

 

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generates revenue from commercial sales of products for which Dianthus receives marketing approval;

 

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hires additional personnel including research and development, clinical and commercial;

 

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adds operational, financial and management information systems and personnel, including personnel to support product development;

 

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acquires or in-licenses products, intellectual property and technologies; and

 

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establishes commercial-scale current good manufacturing practices (“cGMP”) capabilities through a third-party or its own manufacturing facility.

In addition, Dianthus’ expenses will increase if, among other things, it is required by the FDA or other regulatory authorities to perform trials or studies in addition to, or different than, those that Dianthus currently anticipates, there are any delays in completing its clinical trials or the development of any product candidates, or there are any third-party challenges to its intellectual property or Dianthus needs to defend against any intellectual property-related claim.

Even if Dianthus obtains marketing approval for, and is successful in commercializing, one or more product candidates, Dianthus expects to incur substantial additional research and development and other expenditures to develop and market additional programs and/or to expand the approved indications of any marketed product. Dianthus may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The size of its future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenue.

Dianthus’ failure to become profitable would decrease the value of the company and could impair its ability to raise capital, maintain its research and development efforts, expand its business and/or continue its operations. A decline in the value of the company could also cause you to lose all or part of your investment.

In addition, management have evaluated adverse conditions and events that raise substantial doubt about Dianthus’ ability to continue as a going concern, and its independent registered public accounting firm included an explanatory paragraph in its report on its financial statements as of and for the year ended December 31, 2022 included elsewhere herein with respect to this uncertainty. This substantial doubt about Dianthus’ ability to continue as a going concern could materially limit Dianthus’ ability to raise additional funds through the issuance of new debt or equity securities or otherwise. Future reports on its financial statements may include an explanatory paragraph with respect to its ability to continue as a going concern. Even if the merger and Dianthus pre-closing financing are successfully completed, there is no assurance that adequate additional financing needed to allow Dianthus to continue as a going concern will be available to Dianthus on acceptable terms, or at all. The perception that Dianthus may not be able to continue as a going concern may cause others to choose not to do business with Dianthus due to concerns about its ability to meet its contractual obligations.

Risks Related to Discovery, Development and Commercialization

Dianthus faces competition from entities that have developed or may develop programs for the diseases it plans to address with DNTH103 or other product candidates.

The development and commercialization of drugs is highly competitive. If approved, DNTH103 or other product candidates will face significant competition and Dianthus’ failure to effectively compete may prevent it from achieving significant market penetration. Dianthus competes with a variety of multinational biopharmaceutical companies, specialized biotechnology companies and emerging biotechnology companies, as well as academic institutions, governmental agencies, and public and private research institutions, among others. Many of the companies with which Dianthus is currently competing or will compete against in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than Dianthus does. Mergers and acquisitions in the pharmaceutical and biotechnology industry may result in even more resources being concentrated among a smaller number of its competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with Dianthus in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites, patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, DNTH103 or other product candidates.

 

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Dianthus’ competitors have developed, are developing or may develop programs and processes competitive with DNTH103 or other product candidates and processes. Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments. Dianthus’ success will depend partially on its ability to develop and commercialize products that have a competitive safety, efficacy, dosing and/or presentation profile. Dianthus’ commercial opportunity and success will be reduced or eliminated if competing products are safer, more effective, have a more attractive dosing profile or presentation or are less expensive than any products Dianthus may develop, if any, or if competitors develop competing products or if biosimilars enter the market more quickly than Dianthus is able to, if at all, and are able to gain market acceptance.

DNTH103 and Dianthus’ other programs are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability. If Dianthus or its current or future collaborators are unable to complete development of, or commercialize, Dianthus’ product candidates, or experience significant delays in doing so, its business will be materially harmed.

Dianthus has no products on the market and DNTH103 and Dianthus’ other programs are in early stages of development. As a result, Dianthus expects it will be many years before it commercializes any product candidate, if any. Dianthus’ ability to achieve and sustain profitability depends on obtaining regulatory approvals for, and successfully commercializing, DNTH103 or other product candidates either alone or with third parties, and Dianthus cannot guarantee that it will ever obtain regulatory approval for any product candidates. Dianthus has limited experience as a company in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA or comparable foreign regulatory authorities. Dianthus has also not yet demonstrated its ability to obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product commercialization. Before obtaining regulatory approval for the commercial distribution of product candidates, Dianthus or an existing or future collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of such product candidates.

Dianthus or its collaborators may experience delays in initiating or completing clinical trials. Dianthus or its collaborators also may experience numerous unforeseen events during, or as a result of, any current or future clinical trials that Dianthus could conduct that could delay or prevent its ability to receive marketing approval or commercialize DNTH103 or any other product candidates, including:

 

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regulators or IRBs, the FDA or ethics committees may not authorize Dianthus or its investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

 

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Dianthus may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

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clinical trial sites deviating from trial protocol or dropping out of a trial;

 

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clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results and Dianthus may decide, or regulators may require Dianthus, to conduct additional preclinical studies or clinical trials or Dianthus may decide to abandon product development programs;

 

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the number of subjects required for clinical trials of any Dianthus’ product candidates may be larger than it anticipates, especially if regulatory bodies require completion of non-inferiority or superiority trials, enrollment in these clinical trials may be slower than Dianthus anticipates or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than Dianthus anticipates;

 

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Dianthus’ third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to Dianthus in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that Dianthus add new clinical trial sites or investigators;

 

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Dianthus may elect to, or regulators, IRBs or ethics committees may require that Dianthus or its investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants in its trials are being exposed to unacceptable health risks;

 

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the cost of clinical trials of any of Dianthus’ product candidates may be greater than it anticipates;

 

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the quality of Dianthus’ product candidates or other materials necessary to conduct clinical trials of its product candidates may be inadequate to initiate or complete a given clinical trial;

 

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Dianthus’ inability to manufacture sufficient quantities of its product candidates for use in clinical trials;

 

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reports from clinical testing of other therapies may raise safety or efficacy concerns about its product candidates;

 

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Dianthus’ failure to establish an appropriate safety profile for a product candidate based on clinical or preclinical data for such product candidate as well as data emerging from other therapies in the same class as its product candidates; and

 

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the FDA or other regulatory authorities may require Dianthus to submit additional data such as long-term toxicology studies, or impose other requirements before permitting Dianthus to initiate a clinical trial.

Commencing clinical trials in the United States is subject to acceptance by the FDA of an investigational IND or similar application and finalizing the trial design. In the event that the FDA requires Dianthus to complete additional preclinical studies or Dianthus is required to satisfy other FDA requests prior to commencing clinical trials, the start of its clinical trials may be delayed. Even after Dianthus receives and incorporates guidance from these regulatory authorities, the FDA or other regulatory authorities could disagree that Dianthus has satisfied their requirements to commence any clinical trial or change their position on the acceptability of its trial design or the clinical endpoints selected, which may require Dianthus to complete additional preclinical studies or clinical trials, delay the enrollment of its clinical trials or impose stricter approval conditions than Dianthus currently expects. There are equivalent processes and risks applicable to clinical trial applications in other countries, including countries in the European Union.

Dianthus may not have the financial resources to continue development of, or to modify existing or enter into new collaborations for, a product candidate if Dianthus experiences any issues that delay or prevent regulatory approval of, or its ability to commercialize, DNTH103 or any other product candidates. Dianthus or its current or future collaborators’ inability to complete development of, or commercialize, DNTH103 or any other product candidates or significant delays in doing so, could have a material and adverse effect on its business, financial condition, results of operations and prospects.

Dianthus is substantially dependent on the success of its most advanced product candidate, DNTH103, and its anticipated clinical trials of such candidate may not be successful.

Dianthus’ future success is substantially dependent on its ability to timely obtain marketing approval for, and then successfully commercialize, its most advanced product candidate, DNTH103. Dianthus is investing a majority of its efforts and financial resources into the research and development of this candidate. Dianthus is currently conducting a Phase 1 clinical trial in healthy volunteers of DNTH103 and, if topline results from its Phase 1 clinical trial of DNTH103 are successful and pending clearance of any IND application that Dianthus plans to submit, anticipates initiating a Phase 2 clinical trial in the first quarter of 2024. The success of DNTH103 may depend on having a comparable safety and efficacy profile and a more favorable dosing schedule (i.e., less frequent dosing) and more patient-friendly administration (i.e., S.C. self-administration using a pen or other prefilled device) to products currently approved or in development for the indications Dianthus plans to pursue.

 

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DNTH103 will require additional clinical development, evaluation of clinical, preclinical and manufacturing activities, marketing approval in multiple jurisdictions, substantial investment and significant marketing efforts before Dianthus generates any revenues from product sales, if any. Dianthus is not permitted to market or promote this product candidate, or any other product candidates, before it receives marketing approval from the FDA and/or comparable foreign regulatory authorities, and Dianthus may never receive such marketing approvals.

The success of DNTH103 will depend on a variety of factors. Dianthus does not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to its intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator. Accordingly, Dianthus cannot guarantee that Dianthus will ever be able to generate revenue through the sale of this candidate, even if approved. If Dianthus is not successful in commercializing DNTH103, or is significantly delayed in doing so, its business will be materially harmed.

If Dianthus does not achieve its projected development goals in the time frames Dianthus announces and expects, the commercialization of DNTH103 or any other product candidates may be delayed.

From time to time, Dianthus estimates the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other product development goals, which Dianthus sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies, preclinical studies and clinical trials and the submission of regulatory filings. From time to time, Dianthus may publicly announce the expected timing of some of these milestones. All of these milestones are and will be based on numerous assumptions. The actual timing of these milestones can vary dramatically compared to its estimates, in some cases for reasons beyond its control. If Dianthus does not meet these milestones as publicly announced, or at all, the commercialization of DNTH103 or any other product candidates may be delayed or never achieved.

Dianthus’ approach to the discovery and development of product candidates is unproven, and Dianthus may not be successful in its efforts to build a pipeline of product candidates with commercial value.

Dianthus’ approach to the discovery and development of DNTH103 leverages clinically validated mechanisms of action and incorporates advanced antibody engineering properties designed to overcome limitations of existing therapies. DNTH103 is purposefully designed to improve upon currently approved products and existing product candidates while maintaining the same, clinically-validated mechanisms of action. However, the scientific research that forms the basis of its efforts to develop a product candidate using only the classical complement pathway and half-life extension technologies is ongoing and may not result in viable product candidates. The long-term safety and efficacy of these technologies and exposure profile of DNTH103 compared to currently approved products is unknown.

Dianthus may ultimately discover that its technologies for its specific targets and indications and DNTH103 or any product candidates resulting therefrom do not possess certain properties required for therapeutic effectiveness. Dianthus currently has only preclinical and early data from its ongoing Phase 1 clinical trial regarding properties of DNTH103 and the same results may not be seen in humans. In addition, product candidates using technologies may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. This technology and DNTH103 or any product candidates resulting therefrom may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective or possibly harmful ways.

In addition, Dianthus may in the future seek to discover and develop product candidates that are based on novel targets and technologies that are unproven. If its discovery activities fail to identify novel targets or technologies for drug discovery, or such targets prove to be unsuitable for treating human disease, Dianthus may not be able to develop viable additional product candidates. Dianthus and its existing or future collaborators may never receive approval to market and commercialize DNTH103 or any other product candidates. Even if

 

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Dianthus or an existing or future collaborator obtains regulatory approval, the approval may be for targets, disease indications or patient populations that are not as broad as Dianthus intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. If the products resulting from DNTH103 or any other product candidates prove to be ineffective, unsafe or commercially unviable, Dianthus’ product candidates and pipeline may have little, if any, value, which may have a material and adverse effect on its business, financial condition, results of operations and prospects.

Preclinical and clinical development involves a lengthy and expensive process that is subject to delays and with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. If Dianthus’ preclinical studies and clinical trials are not sufficient to support regulatory approval of any of its product candidates, Dianthus may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, Dianthus must complete preclinical studies and then conduct extensive clinical trials to demonstrate the safety and efficacy of its product candidate in humans. Dianthus’ clinical trials may not be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the preclinical study or clinical trial process. For example, Dianthus depends on the availability of non-human primates (“NHPs”) to conduct certain preclinical studies that Dianthus is required to complete prior to submitting an IND and initiating clinical development. There is currently a global shortage of NHPs available for drug development. This could cause the cost of obtaining NHPs for its future preclinical studies to increase significantly and, if the shortage continues, could also result in delays to Dianthus’ development timelines. Furthermore, a failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. In addition, Dianthus expects to rely on patients to provide feedback on measures, which are subjective and inherently difficult to evaluate. These measures can be influenced by factors outside of its control, and can vary widely from day to day for a particular patient, and from patient to patient and from site to site within a clinical trial.

Dianthus cannot be sure that the FDA or comparable foreign regulatory authorities will agree with its clinical development plan. Dianthus plans to use the data from its ongoing Phase 1 clinical trial of DNTH103 in healthy volunteers to support Phase 2 clinical trials in MG, MMN, CIDP and other indications. If the FDA or comparable regulatory authorities requires Dianthus to conduct additional trials or enroll additional patients, its development timelines may be delayed. Dianthus cannot be sure that submission of an IND application, CTA or similar application will result in the FDA or comparable foreign regulatory authorities, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these trials begin, issues may arise that could cause regulatory authorities to suspend or terminate such clinical trials. Events that may prevent successful or timely initiation or completion of clinical trials include: inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation or continuation of clinical trials; delays in reaching a consensus with regulatory authorities on study design or implementation of the clinical trials; delays or failure in obtaining regulatory authorization to commence a trial; delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; delays in identifying, recruiting and training suitable clinical investigators; delays in obtaining required IRB approval at each clinical trial site; difficulties in patient enrollment in Dianthus’ clinical trials for a variety of reasons; delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of its product candidates for use in clinical trials or the inability to do any of the foregoing; failure by its CROs, other third parties or Dianthus to adhere to clinical trial protocols; failure to perform in accordance with the FDA’s or any other regulatory authority’s Good Clinical Practices (“GCPs”) or regulations or applicable regulations or regulatory guidelines in other countries; changes to the clinical trial protocols; clinical sites deviating from trial protocol or dropping out of a trial; changes in

 

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regulatory requirements and guidance that require amending or submitting new clinical protocols; selection of clinical endpoints that require prolonged periods of observation or analyses of resulting data; transfer of manufacturing processes to larger-scale facilities operated by a CMO and delays or failure by its CMOs or Dianthus to make any necessary changes to such manufacturing process; and third parties being unwilling or unable to satisfy their contractual obligations to Dianthus.

Dianthus could also encounter delays if a clinical trial is placed on clinical hold, suspended or terminated by Dianthus, the FDA, the competent authorities of the EU Member States or other regulatory authorities or the IRBs or ethics committees of the institutions in which such trials are being conducted, if a clinical trial is recommended for suspension or termination by the data safety monitoring board (“DSMB”) or equivalent body for such trial, or on account of changes to federal, state, or local laws. If Dianthus is required to conduct additional clinical trials or other testing of DNTH103 or any other product candidates beyond those that Dianthus contemplates, if Dianthus is unable to successfully complete clinical trials of DNTH103 or any other product candidates, if the results of these trials are not positive or are only moderately positive or if there are safety concerns, its business and results of operations may be adversely affected and Dianthus may incur significant additional costs.

Dianthus may not be successful in its efforts to identify or discover additional product candidates in the future.

A key part of Dianthus’ business strategy is to identify and develop additional product candidates. Its preclinical research and clinical trials may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons. For example, Dianthus may be unable to identify or design additional product candidates with the pharmacological and pharmacokinetic drug properties that Dianthus desires, including, but not limited to, extended half-life, acceptable safety profile or the potential for the product candidate to be delivered in a convenient formulation. Research programs to identify new product candidates require substantial technical, financial, and human resources. If Dianthus is unable to identify suitable active selective complement targets for preclinical and clinical development, Dianthus may not be able to successfully implement its business strategy, and may have to delay, reduce the scope of, suspend or eliminate one or more of its product candidates, clinical trials or future commercialization efforts, which would negatively impact its financial condition.

If Dianthus encounters difficulties enrolling patients in its future clinical trials, its clinical development activities could be delayed or otherwise adversely affected.

Dianthus may experience difficulties in patient enrollment in its future clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on its ability to enroll a sufficient number of patients who remain in the trial until its conclusion. The enrollment of patients in future trials for DNTH103 or any other product candidates will depend on many factors, including if patients choose to enroll in clinical trials, rather than using approved products, or if its competitors have ongoing clinical trials for product candidates that are under development for the same indications as Dianthus’ product candidates, and patients instead enroll in such clinical trials. Additionally, the number of patients required for clinical trials of DNTH103 or any other product candidates may be larger than Dianthus anticipates, especially if regulatory bodies require the completion of non-inferiority or superiority trials. Even if Dianthus is able to enroll a sufficient number of patients for its future clinical trials, Dianthus may have difficulty maintaining patients in its clinical trials. Its inability to enroll or maintain a sufficient number of patients would result in significant delays in completing clinical trials or receipt of marketing approvals and increased development costs or may require Dianthus to abandon one or more clinical trials altogether.

 

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Preliminary, “topline” or interim data from its clinical trials that Dianthus announces or publishes from time to time may change as more patient data becomes available and are subject to audit and verification procedures.

From time to time, Dianthus may publicly disclose preliminary or topline data from its preclinical studies and clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data. Dianthus also makes assumptions, estimations, calculations and conclusions as part of its analyses of these data without the opportunity to fully and carefully evaluate complete data. As a result, the preliminary or topline results that Dianthus report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated or subsequently made subject to audit and verification procedures.

Any preliminary or topline data should be viewed with caution until the final data is available. From time to time, Dianthus may also disclose interim data from its preclinical studies and clinical trials. Interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from its clinical trials continue other treatments. Further, others, including regulatory agencies, may not accept or agree with its assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular product candidate, the approvability or commercialization of a particular product candidate and Dianthus in general. In addition, the information Dianthus chooses to publicly disclose regarding a particular preclinical study or clinical trial is based on what is typically extensive information, and you or others may not agree with what Dianthus determines is material or otherwise appropriate information to include in its disclosure. If the preliminary, topline or interim data that Dianthus reports differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, Dianthus’ ability to obtain approval for, and commercialize, DNTH103 or any other product candidate may be harmed, which could harm its business, operating results, prospects or financial condition.

Dianthus’ current or future clinical trials or those of its future collaborators may reveal significant adverse events or undesirable side effects not seen in its preclinical studies and may result in a safety profile that could halt clinical development, inhibit regulatory approval or limit commercial potential or market acceptance of any of DNTH103 or any other product candidates or result in potential product liability claims.

Results of Dianthus’ clinical trials could reveal a high and unacceptable severity and prevalence of side effects, adverse events or unexpected characteristics. While its completed and ongoing preclinical studies in NHPs and its ongoing Phase 1 clinical trial in humans have not shown any such characteristics to date, Dianthus has not yet completed its clinical trial in humans. If significant adverse events or other side effects are observed in any of its current or future clinical trials, Dianthus may have difficulty recruiting patients to such trials, patients may drop out of its trials, patients may be harmed, or Dianthus may be required to abandon the trials or its development efforts of one or more product candidates altogether, including DNTH103. Dianthus, the FDA, EU Member States, or other applicable regulatory authorities, or an IRB or ethics committee, may suspend any clinical trials of DNTH103 or any other product candidates at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential products developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Other potential products have shown side effects in preclinical studies that do not present themselves in clinical trials in humans. Even if the side effects do not preclude a product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of an approved product due to its tolerability versus other therapies. In addition, a half-life extension could prolong the duration of undesirable side effects, which could also inhibit market acceptance. Treatment-emergent adverse events could also affect patient recruitment or the ability of enrolled subjects to complete its clinical trials or could result in potential product liability claims. Potential side effects associated with DNTH103 or any other product candidates may not be appropriately

 

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recognized or managed by the treating medical staff, as toxicities resulting from DNTH103 or any other product candidates may not be normally encountered in the general patient population and by medical personnel. Any of these occurrences could harm Dianthus’ business, financial condition, results of operations and prospects significantly.

In addition, even if Dianthus successfully advances DNTH103 or any other product candidates through clinical trials, such trials will only include a limited number of patients and limited duration of exposure to such product candidates. As a result, Dianthus cannot be assured that adverse effects of DNTH103 or any other product candidates will not be uncovered when a significantly larger number of patients are exposed to such product candidate after approval. Further, any clinical trials may not be sufficient to determine the effect and safety consequences of using Dianthus’ product candidate over a multi-year period.

If any of the foregoing events occur or if DNTH103 or any other product candidates prove to be unsafe, Dianthus’ entire pipeline could be affected, which would have a material adverse effect on its business, financial condition, results of operations and prospects.

Dianthus may expend its limited resources to pursue a particular product candidate, such as DNTH103, and fail to capitalize on candidates that may be more profitable or for which there is a greater likelihood of success.

Because Dianthus has limited financial and managerial resources, Dianthus intends to focus its research and development efforts on certain selected product candidates. For example, Dianthus is initially focused on its most advanced product candidate, DNTH103. As a result, Dianthus may forgo or delay pursuit of opportunities with other potential candidates that may later prove to have greater commercial potential. Dianthus’ resource allocation decisions may cause Dianthus to fail to capitalize on viable commercial products or profitable market opportunities. Dianthus’ spending on current and future research and development programs for specific indications may not yield any commercially viable product candidates. If Dianthus does not accurately evaluate the commercial potential or target market for a particular product candidate, Dianthus may relinquish valuable rights to that candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for Dianthus to retain sole development and commercialization rights to such candidate.

Even if regulatory approval is obtained, any approved products resulting from DNTH103 or any other product candidate may not achieve adequate market acceptance among clinicians, patients, healthcare third-party payors and others in the medical community necessary for commercial success and Dianthus may not generate any future revenue from the sale or licensing of such products.

Even if regulatory approval is obtained for DNTH103 or any other product candidates, they may not gain market acceptance among physicians, patients, healthcare payors or the medical community. Dianthus may not generate or sustain revenue from sales of the product due to factors such as whether the product can be sold at a competitive cost and whether it will otherwise be accepted in the market. There are several approved products and product candidates in later stages of development for the treatment of gMG, MMN and CIDP. Market participants with significant influence over acceptance of new treatments, such as clinicians and third-party payors, may not adopt a biologic with a target product profile such as that of DNTH103 or for its targeted indications, and Dianthus may not be able to convince the medical community and third-party payors to accept and use, or to provide favorable reimbursement for, any product candidates developed by Dianthus or its existing or future collaborators. Market acceptance of DNTH103 or any other product candidates will depend on many factors, including factors that are not within its control.

Sales of products also depend on the willingness of clinicians to prescribe the treatment. Dianthus cannot predict whether clinicians, clinicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that any of its approved products are safe, therapeutically effective, cost

 

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effective or less burdensome as compared with competing treatments. If DNTH103 or any other product candidate is approved but does not achieve an adequate level of acceptance by such parties, Dianthus may not generate or derive sufficient revenue from that product and may not become or remain profitable.

Dianthus has never commercialized a product candidate and may lack the necessary expertise, personnel and resources to successfully commercialize a product candidate on its own or together with suitable collaborators.

Dianthus has never commercialized a product candidate, and Dianthus currently has no sales force, marketing or distribution capabilities. To achieve commercial success for a product candidate, which Dianthus may license to others, Dianthus may rely on the assistance and guidance of those collaborators. For a product candidate for which Dianthus retains commercialization rights and marketing approval, Dianthus will have to develop its own sales, marketing and supply organization or outsource these activities to a third party. Factors that may affect its ability to commercialize a product candidate, if approved, on its own include recruiting and retaining adequate numbers of effective sales and marketing personnel, developing adequate educational and marketing programs to increase public acceptance of its approved product candidate, ensuring regulatory compliance of Dianthus, employees and third parties under applicable healthcare laws and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales and marketing organization will be expensive and time-consuming and could delay the launch of a product candidate upon approval. Dianthus may not be able to build an effective sales and marketing organization. If Dianthus is unable to build its own distribution and marketing capabilities or to find suitable partners for the commercialization of an approved product candidate, Dianthus may not generate revenues from them or be able to reach or sustain profitability.

Dianthus has never completed any late-stage clinical trials and Dianthus may not be able to file an IND, a CTA or other applications for regulatory approval to commence additional clinical trials on the timelines Dianthus expect, and, even if Dianthus is able to, the FDA, EMA or comparable foreign regulatory authorities may not permit Dianthus to proceed and could also suspend/terminate the trial after it has been initiated.

Dianthus is early in its development efforts and will need to successfully complete later-stage and pivotal clinical trials in order to obtain FDA, EMA or comparable foreign regulatory approval to market its product candidates. Carrying out clinical trials and the submission of a successful IND or CTA is a complicated process. As an organization, Dianthus has not yet completed a Phase 1 clinical trial and has limited experience as a company in preparing, submitting and prosecuting regulatory filings. If topline results from its Phase 1 clinical trial of DNTH103 are successful, Dianthus intends to submit an IND in the United States in the fourth quarter of 2023 to support the initiation of a global Phase 2 clinical trial in gMG, and, subsequently, a CTA in the European Union to support the initiation of a global Phase 2 clinical trial in gMG in the first quarter of 2024. However, Dianthus may not be able to file the IND or CTA in accordance with its desired timelines. For example, Dianthus may experience manufacturing delays or other delays with IND- or CTA-enabling studies, including with suppliers, study sites, or third-party contractors and vendors on whom Dianthus depends. Moreover, Dianthus cannot be sure that submission of an IND or a CTA or submission of a trial to an IND or a CTA will result in the FDA or EMA or comparable foreign regulatory authorities allowing further clinical trials to begin, or that, once begun, issues will not arise that lead Dianthus to suspend or terminate clinical trials. For example, upon submission of its IND or CTA for a Phase 2 clinical trial of DNTH103, the FDA or EMA may recommend changes to its proposed study designs, including the number and size of registrational clinical trials required to be conducted in such Phase 2 programs. Consequently, Dianthus may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to regulatory submission and approval of its product candidates. Additionally, even if regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND or a CTA, such regulatory authorities may change their requirements in the future. The FDA, EMA or comparable foreign regulatory authorities may require the analysis of data from trials assessing different doses of the product candidate alone or in combination with other therapies to justify the selected dose prior to the initiation of large trials in a specific indication. Any delays or failure to file INDs or CTAs, initiate clinical trials, or obtain regulatory approvals for its trials may prevent Dianthus from completing

 

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its clinical trials or commercializing its products on a timely basis, if at all. Dianthus is subject to similar risks related to the review and authorization of its protocols and amendments by comparable foreign regulatory authorities.

Risks Related to Its Reliance on Third Parties

Dianthus currently relies and expect to rely in the future on the use of manufacturing suites in third-party facilities or on third parties to manufacture DNTH103 and any other product candidates, and Dianthus may rely on third parties to produce and process its products, if approved. Dianthus’ business could be adversely affected if it is unable to use third-party manufacturing suites or if the third-party manufacturers encounter difficulties in production.

Dianthus does not currently lease or own any facility that may be used as its clinical-scale manufacturing and processing facility and currently relies on a CMO, WuXi Biologics (as defined below), to manufacture Dianthus’ product candidate used in its Phase 1 clinical trial. Dianthus currently has a sole source relationship with WuXi Biologics for its supply of DNTH103 (see the section titled “Dianthus’ Business—Collaboration, License and Services Agreements” for additional information on Dianthus’ relationship with WuXi Biologics). If there should be any disruption in such supply arrangement, including any adverse events affecting Dianthus’ sole supplier, Wuxi Biologics, it could have a negative effect on the clinical development of Dianthus’ product candidates and other operations while Dianthus works to identify and qualify an alternate supply source. Dianthus may not control the manufacturing process of, and may be completely dependent on, its contract manufacturing partner for compliance with cGMP requirements and any other regulatory requirements of the FDA or comparable foreign regulatory authorities for the manufacture of a product candidate. Dianthus performs periodic audits of each CMO facility that supports its supply of DNTH103 and reviews/approves all DNTH103 cGMP-related documentation. Dianthus also has a quality agreement with WuXi Biologics that documents its mutual agreement on compliance with cGMPs and expectations on quality-required communications to Dianthus. Beyond this, Dianthus has no control over the ability of its CMO to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities and the associated Quality Management System for the manufacture of a product candidate or if it withdraws any approval in the future, Dianthus may need to find alternative manufacturing facilities, which would require the incurrence of significant additional costs and materially adversely affect Dianthus’ ability to develop, obtain regulatory approval for or market such product candidate, if approved. Similarly, Dianthus’ failure, or the failure of its CMO, to comply with applicable regulations could result in sanctions being imposed on Dianthus, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of a product candidate or drug and harm Dianthus’ business and results of operations. In addition, Dianthus has not yet caused any product candidates to be manufactured on a commercial scale and may not be able to do so for any of its product candidates, if approved.

Moreover, Dianthus’ CMO may experience manufacturing difficulties due to resource constraints, governmental restrictions or as a result of labor disputes or unstable political environments. Supply chain issues, including those resulting from the COVID-19 pandemic and the ongoing military conflict between Russian and Ukraine, may affect Dianthus’ third-party vendors and cause delays. Furthermore, since Dianthus has engaged WuXi Biologics, a manufacturer located in China, Dianthus is exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the United States or Chinese governments or political unrest or unstable economic conditions in China. If Dianthus is required to change manufacturers for any reason, Dianthus will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. For example, in the event that Dianthus needs to transfer from WuXi Biologics, which is Dianthus’ sole manufacturing source for DNTH103, Dianthus anticipates that the complexity of the manufacturing process may materially impact the amount of time it would take to secure a replacement manufacturer. The delays associated with the verification of a new manufacturer, if Dianthus is able to identify an alternative source, could negatively affect Dianthus’ ability to

 

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supply product candidates, including DNTH103, in a timely manner or within budget. If any CMO on which Dianthus will rely fails to manufacture quantities of a product candidate at quality levels necessary to meet regulatory requirements and at a scale sufficient to meet anticipated demand at a cost that allows Dianthus to achieve profitability, Dianthus’ business, financial condition and prospects could be materially and adversely affected. In addition, Dianthus’ CMO and/or distribution partners are responsible for transporting temperature-controlled materials that can be inadvertently degraded during transport due to several factors, rendering certain batches unsuitable for trial use for failure to meet, among others, Dianthus’ integrity and purity specifications. Dianthus and its CMO may also face product seizure or detention or refusal to permit the import or export of products. Dianthus’ business could be materially adversely affected by business disruptions to its third-party providers that could materially adversely affect its anticipated timelines, potential future revenue and financial condition and increase Dianthus’ costs and expenses. Each of these risks could delay or prevent the completion of Dianthus’ preclinical studies and clinical trials or the approval of any of its product candidates by the FDA, result in higher costs or adversely impact commercialization of Dianthus’ products.

If Dianthus’ CMO, WuXi Biologics, is unable to obtain sufficient raw and intermediate materials on a timely basis or if Dianthus’ CMO experiences other supply difficulties, Dianthus’ business may be materially and adversely affected.

Dianthus works closely with its CMO, WuXi Biologics, to ensure their suppliers have continuity of supply of raw and intermediate materials but cannot guarantee these efforts will always be successful. Dianthus’ CMO has experienced, and may experience in the future, raw and intermediate materials supply shortages, including those resulting from the COVID-19 pandemic, which could contribute to manufacturing delays and impact the progress of Dianthus’ clinical trials. Further, while Dianthus works with its CMO to diversify their sources of raw and intermediate materials, in certain instances they acquire raw and intermediate materials from a sole supplier, and there can be no assurance that they will be able to quickly establish additional or replacement sources for some materials. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect Dianthus’ ability to manufacture its product candidates in a timely or cost-effective manner and could delay completion of Dianthus’ clinical trials, product testing, and potential regulatory approval of Dianthus’ product candidates.

Dianthus currently relies, and plans to rely in the future, on third parties to conduct and support its preclinical studies and clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, Dianthus may not be able to obtain regulatory approval of or commercialize its product candidates.

Dianthus has utilized and plan to continue to utilize and depend upon independent investigators and collaborators, such as medical institutions, CROs, contract testing labs and strategic partners, to conduct and support its preclinical studies and clinical trials under agreements with Dianthus. Dianthus will rely heavily on these third parties over the course of its preclinical studies and clinical trials, and Dianthus controls only certain aspects of their activities. As a result, Dianthus will have less direct control over the conduct, timing and completion of these preclinical studies and clinical trials and the management of data developed through preclinical studies and clinical trials than would be the case if Dianthus were relying entirely upon its own staff. Nevertheless, Dianthus is responsible for ensuring that each of its studies and trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and its reliance on these third parties does not relieve Dianthus of its regulatory responsibilities. Dianthus and its third-party contractors and CROs are required to comply with GCP regulations, which are guidelines enforced by the FDA and comparable foreign regulatory authorities for any product candidate in clinical development. If Dianthus or any of these third parties fail to comply with applicable GCP guidelines, the clinical data generated in its clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require Dianthus to perform additional clinical trials before approving its marketing applications. Dianthus cannot provide assurance that upon inspection by a given regulatory authority, such regulatory authority will determine that any of its clinical trials comply with GCP regulations. In addition, its clinical trials must be conducted with product generated under

 

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cGMP regulations. Dianthus’ failure to comply with these regulations may require it to repeat clinical trials, which would delay the regulatory approval process. Moreover, its business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

Any third parties conducting Dianthus’ clinical trials will not be its employees and, except for remedies available to Dianthus under its agreements with such third parties, Dianthus cannot control whether they devote sufficient time and resources to its product candidates. These third parties may be involved in acquisitions or similar transactions and may have relationships with other commercial entities, including its competitors, for whom they may also be conducting clinical trials or other product development activities, which could negatively affect their performance on its behalf and the timing thereof and could lead to products that compete directly or indirectly with its current or future product candidates. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to its clinical protocols or regulatory requirements or for other reasons, its clinical trials may be extended, delayed or terminated and Dianthus may not be able to complete development of, obtain regulatory approval of or successfully commercialize DNTH103 or other product candidates.

Dianthus has collaborations with third parties, including its existing licenses and development collaboration with Zenas BioPharma. If Dianthus is unable to maintain these collaborations, or if these collaborations are not successful, segments of its business could be adversely affected.

Dianthus has various collaboration and license arrangements, including with Zenas BioPharma for the development and commercialization of DNTH103 in the greater area of China, and Dianthus currently holds exclusive licenses for worldwide (excluding the greater area of China) development and commercialization rights for certain potential product candidates. Further, Dianthus may in the future form or seek strategic alliances, create joint ventures or collaborations, or enter into licensing arrangements with third parties that Dianthus believes will complement or augment its development and commercialization efforts with respect to its product candidates. Collaborations or licensing arrangements that Dianthus enters into may not be successful, and any success will depend heavily on the efforts and activities of such collaborators or licensors. If any of Dianthus’ collaborators, licensors or licensees experience delays in performance of, or fail to perform their obligations under, their applicable agreements with Dianthus, disagree with its interpretation of the terms of such agreement or terminate their agreement with Dianthus, its pipeline of product candidates would be adversely affected. If Dianthus fails to comply with any of the obligations under its collaborations or license agreements, including payment terms and diligence terms, its collaborators, licensors or licensees may have the right to terminate its agreements, in which event Dianthus may lose intellectual property rights and may not be able to develop, manufacture, market or sell the products covered by such agreements or may face other penalties under its agreements. Dianthus’ collaborators, licensors or licensees may also fail to properly maintain or defend the intellectual property Dianthus has licensed from, if required by its agreement with them, or even infringe upon its intellectual property rights, leading to the potential invalidation of its intellectual property or subjecting Dianthus to litigation or arbitration, any of which would be time-consuming and expensive and could harm its ability to commercialize its product candidates. Further, any of these relationships may require Dianthus to increase its near and long-term expenditures, issue securities that dilute its existing stockholders or disrupt its management and business. In addition, collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with its product candidates and products if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than Dianthus’.

As part of its strategy, Dianthus plans to evaluate additional opportunities to enhance its capabilities and expand its development pipeline or provide development or commercialization capabilities that complement its own. Dianthus may not realize the benefits of such collaborations, alliances or licensing arrangements. Any of these relationships may require Dianthus to incur non-recurring and other charges, increase its near and long-term expenditures, issue securities that dilute its existing stockholders or disrupt its management and business.

 

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Dianthus may face significant competition in attracting appropriate collaborators, and more established companies may also be pursuing strategies to license or acquire third-party intellectual property rights that Dianthus considers attractive. These companies may have a competitive advantage over Dianthus due to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive Dianthus to be a competitor may be unwilling to assign or license rights to Dianthus. Whether Dianthus reaches a definitive agreement for a collaboration will depend, among other things, upon its assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Collaborations are complex and time-consuming to negotiate, document and execute. In addition, consolidation among large pharmaceutical and biotechnology companies has reduced the number of potential future collaborators. Dianthus may not be able to negotiate additional collaborations on a timely basis, on acceptable terms or at all. If Dianthus fails to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, Dianthus may not be able to further develop its product candidates or bring them to market.

Risks Related to Dianthus’ Business and Operations

In order to successfully implement its plans and strategies, Dianthus will need to grow the size of its organization and it may experience difficulties in managing this growth.

Dianthus expects to experience significant growth in the number of its employees and the scope of its operations, particularly in the areas of preclinical and clinical drug development, technical operations, clinical operations, regulatory affairs and, potentially, sales and marketing. To manage its anticipated future growth, Dianthus must continue to implement and improve its managerial, operational and financial personnel and systems, expand its facilities and continue to recruit and train additional qualified personnel. Due to its limited financial resources and the limited experience of its management team working together in managing a company with such anticipated growth, Dianthus may not be able to effectively manage the expansion of its operations or recruit and train additional qualified personnel.

Dianthus is highly dependent on its key personnel and anticipates hiring new key personnel. If Dianthus is not successful in attracting and retaining highly qualified personnel, it may not be able to successfully implement its business strategy.

Dianthus’ ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon its ability to attract and retain highly qualified managerial, scientific and medical personnel. Dianthus is highly dependent on its managerial, scientific and medical personnel, including its Chief Executive Officer, Chief Medical Officer, Chief Financial Officer, Chief Accounting Officer and other members of its leadership team. Although Dianthus has entered into employment agreements with its executive officers, each of them may terminate their employment with Dianthus at any time. Dianthus does not maintain “key person” insurance for any of its executives or other employees. The loss of the services of its executive officers or other key employees could impede the achievement of its research, development and commercialization objectives and seriously harm its ability to successfully implement its business strategy. Furthermore, replacing executive officers and key personnel may be difficult and may take an extended period of time. If Dianthus does not succeed in attracting and retaining qualified personnel, it could materially and adversely affect its business, financial condition and results of operations. Dianthus could in the future have difficulty attracting and retaining experienced personnel and may be required to expend significant financial resources on its employee recruitment and retention efforts.

Its future growth may depend, in part, on its ability to operate in foreign markets, where Dianthus would be subject to additional regulatory burdens and other risks and uncertainties.

Its future growth may depend, in part, on its ability to develop and commercialize DNTH103 or other product candidates in foreign markets for which Dianthus may rely on collaboration with third parties. Dianthus

 

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is not permitted to market or promote any product candidates before Dianthus receives regulatory approval from the applicable foreign regulatory authority, and may never receive such regulatory approval for any product candidates. To obtain separate regulatory approval in many other countries, Dianthus must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of DNTH103 or other product candidates, and Dianthus cannot predict success in these jurisdictions. If Dianthus fails to comply with the regulatory requirements in international markets or to receive applicable marketing approvals, its target market will be reduced and its ability to realize the full market potential of DNTH103 or other product candidates will be harmed and its business will be adversely affected. Moreover, even if Dianthus obtains approval of DNTH103 or other product candidates and ultimately commercialize such product candidates in foreign markets, Dianthus would be subject to the risks and uncertainties, including the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements and reduced protection of intellectual property rights in some foreign countries.

Dianthus’ employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, CMOs, suppliers and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

Dianthus is exposed to the risk that its employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, CMOs, suppliers and vendors acting for or on its behalf may engage in misconduct or other improper activities. It is not always possible to identify and deter misconduct by these parties and the precautions Dianthus takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Dianthus from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

Dianthus’ internal computer systems, or those of any of its CROs, manufacturers, other contractors, third party service providers or consultants or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of its proprietary or confidential data, employee data or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to its brand and material disruption of its operations.

Despite the implementation of security measures in an effort to protect systems that store its information, given their size and complexity and the increasing amounts of information maintained on its internal information technology systems and those of its third-party CROs, other contractors (including sites performing its clinical trials), third party service providers and supply chain companies, and consultants, as well as other partners, these systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by its employees, contractors, consultants, business partners and/or other third parties, or from cyber-attacks by malicious third parties, which may compromise its system infrastructure or lead to the loss, destruction, alteration or dissemination of, or damage to, its data. To the extent that any disruption or security breach were to result in a loss, destruction, unavailability, alteration or dissemination of, or damage to, Dianthus’ data or applications, or for it to be believed or reported that any of these occurred, Dianthus could incur liability and reputational damage and the development and commercialization of DNTH103 or other product candidates could be delayed.

As its employees work remotely and utilize network connections, computers, and devices outside its premises or network, including working at home, while in transit and in public locations, there are risks to its information technology systems and data. Additionally, business transactions (such as acquisitions or integrations) could expose Dianthus to additional cybersecurity risks and vulnerabilities, as its systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

While Dianthus has implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. Dianthus may be unable in the future to detect

 

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vulnerabilities in its information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred. Further, Dianthus may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Applicable data privacy and security obligations may require Dianthus to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.

Dianthus relies on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts. Its ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If its third-party service providers experience a security incident or other interruption, Dianthus could experience adverse consequences. While Dianthus may be entitled to damages if its third-party service providers fail to satisfy their privacy or security-related obligations to Dianthus, any award may be insufficient to cover its damages, or Dianthus may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and Dianthus cannot guarantee that third parties’ infrastructure in its supply chain or its third-party partners’ supply chains have not been compromised.

If Dianthus (or a third party upon whom Dianthus relies) experience a security incident or are perceived to have experienced a security incident, Dianthus may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in its operations (including availability of data); increased investigation and compliance costs; financial loss; and other similar harms. Security incidents and attendant consequences may cause stakeholders (including investors and potential customers) to stop supporting its platform, deter new customers from products, and negatively impact its ability to grow and operate its business.

Dianthus’ contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in its contracts are sufficient to protect Dianthus from liabilities, damages, or claims related to its data privacy and security obligations. Dianthus cannot be sure that its insurance coverage will be adequate or sufficient to protect Dianthus from or to mitigate liabilities arising out of its privacy and security practices or from disruptions in, or failure or security breach of, its systems or third-party systems where information important to its business operations or commercial development is stored, or that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

Dianthus is subject to stringent and changing laws, regulations and standards, and contractual obligations relating to privacy, data protection, and data security. The actual or perceived failure to comply with such obligations could lead to government enforcement actions (which could include civil or criminal penalties), fines and sanctions, private litigation and/or adverse publicity and could negatively affect its operating results and business.

Dianthus, and third parties with whom Dianthus works, are or may become subject to numerous domestic and foreign laws, regulations, and standards relating to privacy, data protection, and data security, the scope of which are changing, subject to differing applications and interpretations, and may be inconsistent among countries, or conflict with other rules. Dianthus is or may become subject to the terms of contractual obligations related to privacy, data protection, and data security. Dianthus’ obligations may also change or expand as its business grows. The actual or perceived failure by Dianthus or third parties related to Dianthus to comply with such laws, regulations and obligations could increase its compliance and operational costs, expose Dianthus to regulatory scrutiny, actions, fines and penalties, result in reputational harm, lead to a loss of customers, result in litigation and liability, and otherwise cause a material adverse effect on its business, financial condition, and results of operations. See the sections titled “Dianthus’ Business—Government Regulation—Data Privacy and Security” and “—Other Regulatory Matters” for a more detailed description of the laws that may affect its ability to operate.

 

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If Dianthus fails to comply with environmental, health and safety laws and regulations, Dianthus could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

Dianthus is subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Its operations may involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. In addition, Dianthus may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair Dianthus’ research, development or commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Dianthus’ ability to utilize its net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2022, Dianthus had net operating loss carryforwards for federal and state income tax purposes of $24.5 million and $20.1 million, respectively. The federal net operating losses will not be subject to expiration and can be carried forward indefinitely; however, they are limited to a deduction of 80% of annual taxable income. The state net operating losses begin to expire in 2038. To the extent that Dianthus’ taxable income exceeds any current year operating losses, its plans to use its carryforwards to offset income that would otherwise be taxable. Also, for state income tax purposes, the extent to which states will conform to the federal laws is uncertain and there may be periods during which the use of net operating loss carryforwards are suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. In addition, under Section 382 of the Code, changes in Dianthus’ ownership may limit the amount of its net operating loss carryforwards and tax credit carryforwards that could be utilized annually to offset its future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of Dianthus of more than 50% (as measured by value) among a stockholder or one or more groups of stockholders who own at least 5% of its stock within a three-year period. Dianthus has not performed an analysis to determine whether there has been such an ownership change pursuant to Section 382 of the Code, or whether such an ownership change would result from the merger. Any such limitation may significantly reduce Dianthus’ ability to utilize its net operating loss carryforwards and tax credit carryforwards before they expire. Any such limitation, whether as the result of a public offering, private placements, sales of its common stock by existing stockholders or additional sales of its common stock by Dianthus, could have a material adverse effect on its results of operations in future years.

Dianthus may acquire businesses or products, or form strategic alliances, in the future, and may not realize the benefits of such acquisitions.

Dianthus may acquire additional businesses or products, form strategic alliances, or create joint ventures with third parties that Dianthus believes will complement or augment its existing business. If Dianthus acquires businesses with promising markets or technologies, Dianthus may not be able to realize the benefit of acquiring such businesses if Dianthus is unable to successfully integrate them with its existing operations and company culture. Dianthus may encounter numerous difficulties in developing, manufacturing and marketing any new product candidates or products resulting from a strategic alliance or acquisition that delay or prevent Dianthus from realizing their expected benefits or enhancing its business. There is no assurance that, following any such acquisition, Dianthus will achieve the synergies expected in order to justify the transaction, which could result in a material adverse effect on its business and prospects.

Dianthus maintains its cash at financial institutions, at times in balances that exceed federally-insured limits. The failure of financial institutions could adversely affect Dianthus’ ability to pay its operational expenses or make other payments.

Dianthus’ cash held in non-interest-bearing and interest-bearing accounts can at times exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, Dianthus

 

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could lose all or a portion of those amounts held in excess of such insurance limitations. For example, the FDIC took control of Silicon Valley Bank on March 10, 2023. The Federal Reserve subsequently announced that account holders would be made whole. However, the FDIC may not make all account holders whole in the event of future bank failures. In addition, even if account holders are ultimately made whole with respect to a future bank failure, account holders’ access to their accounts and assets held in their accounts may be substantially delayed. For example, Dianthus’ could not access its assets held in its account with Silicon Valley Bank for a period in March 2023, which required Dianthus to obtain a short-term loan to fund its operations (see “Certain Relationships and Related Party Transactions of the Combined Company—Dianthus Transactions—Promissory Notes” for information on the short-term loan). Any material loss that Dianthus may experience in the future or inability for a material time period to access its cash and cash equivalents could have an adverse effect on its ability to pay its operational expenses or make other payments, which could adversely affect its business.

As a private company, Dianthus has not been required to document and test its internal controls over financial reporting nor has its management been required to certify the effectiveness of its internal controls and its auditors have not been required to opine on the effectiveness of its internal control over financial reporting. Dianthus has identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect the reliability of its financial statements and have other adverse consequences.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements would not be prevented or detected on a timely basis.

Dianthus has identified material weaknesses in its internal control over financial reporting that it is currently working to remediate, which relate to: (a) Dianthus’ general segregation of duties, including the review and approval of journal entries as well as system access that has not been designed to allow for effective segregation of duties; and (b) Dianthus’ accounting software system has certain system limitations that do not allow for an effective control environment.

Dianthus’ management has concluded that these material weaknesses in its internal control over financial reporting are due to the fact that Dianthus is a company with limited resources and does not have the necessary business processes and related internal controls formally designed and implemented coupled with the appropriate resources to oversee Dianthus’ business processes and controls.

Dianthus’ management is in the process of developing a remediation plan. The material weaknesses will be considered remediated when Dianthus’ management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Dianthus’ management will monitor the effectiveness of its remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could result in material misstatements to Dianthus’ annual or interim financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If Dianthus is unable to assert that its internal control over financial reporting is effective, or, if required in the future, its Independent Registered Public Accounting Firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of the Dianthus’ financial reports, the market price of the Dianthus’ common stock could be adversely affected and Dianthus could become subject to litigation or investigations by the Nasdaq, the SEC, or other regulatory authorities, all of which could require additional financial and management resources.

 

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Risks Related to Intellectual Property

Dianthus’ ability to protect its patents and other proprietary rights is uncertain, exposing Dianthus to the possible loss of competitive advantage.

Dianthus relies or may rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements to protect the intellectual property related to its product candidates and technologies and to prevent third parties from competing with it. Dianthus’ success depends in large part on its ability to obtain and maintain patent protection for platform technologies, product candidates and their uses, as well as the ability to operate without infringing on or violating the proprietary rights of others. Dianthus owns five pending patent applications and expects to continue to file patent applications in the United States and abroad related to discoveries and technologies that are important to its business. However, Dianthus may not be able to protect its intellectual property rights throughout the world and the legal systems in certain countries may not favor enforcement or protection of patents, trade secrets and other intellectual property. Filing, prosecuting and defending patents on product candidates worldwide would be prohibitively expensive and Dianthus’ intellectual property rights in some foreign jurisdictions may be less extensive than those in the United States. As such, Dianthus does not have patents in all countries or all major markets and may not be able to obtain patents in all jurisdictions even if it applies for them. Competitors may operate in countries where Dianthus does not have patent protection and could then freely use Dianthus’ technologies and discoveries in such countries to the extent such technologies and discoveries are publicly known or disclosed in countries where patent protection has not been requested.

Dianthus’ intellectual property portfolio is at an early stage. Dianthus does not currently own or in-license any issued patents. Dianthus’ pending and future patent applications may not result in patents being issued. Any issued patents may not afford sufficient protection of Dianthus product candidates or their intended uses against competitors, nor can there be any assurance that the patents issued will not be infringed, designed around, invalidated by third parties, or effectively prevent others from commercializing competitive technologies, products or product candidates. Even if these patents are granted, they may be difficult to enforce. Further, any issued patents that may be licensed or are owned covering Dianthus product candidates could be narrowed or found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad, including the United States Patent and Trademark Office (“USPTO”). Further, if Dianthus encounters delays in any clinical trials or delays in obtaining regulatory approval, the period of time during which Dianthus could market product candidates under patent protection would be reduced. Thus, the patents that Dianthus may own or license may not afford any meaningful competitive advantage.

In addition to seeking patents for some of its technology and product candidates, Dianthus may also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain its competitive position. Any disclosure, either intentional or unintentional, by its employees, the employees of third parties with whom Dianthus shares facilities or third-party consultants and vendors that Dianthus engages to perform researches, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of its trade secrets or proprietary information could enable competitors to duplicate or surpass Dianthus’ technological achievements, thus eroding its competitive position in the market. In order to protect its proprietary technology and processes, Dianthus relies in part on confidentiality agreements with collaborators, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Dianthus may need to share its proprietary information, including trade secrets, with future business partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors and those affiliated with or controlled by state actors. In addition, while Dianthus undertakes efforts to protect its trade secrets and other confidential information from disclosure, others may independently discover trade secrets and proprietary information, and in such cases, Dianthus may not be able to assert any trade secret rights against such party. Costly and time-consuming litigation could be

 

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necessary to enforce and determine the scope of its proprietary rights and failure to obtain or maintain trade secret protection could adversely affect Dianthus’ competitive business position.

Lastly, if Dianthus’ trademarks and trade names are not registered or adequately protected, then Dianthus may not be able to build name recognition in markets of interest and its business may be adversely affected.

Dianthus may not be successful in obtaining or maintaining necessary rights to product candidates through acquisitions and in-licenses.

Because Dianthus’ development programs may in the future require the use of proprietary rights held by third parties, the growth of its business may depend in part on Dianthus’ ability to acquire, in-license, or use these third-party proprietary rights. Dianthus may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that it identifies as necessary for product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies may pursue strategies to license or acquire third-party intellectual property rights that Dianthus may consider attractive or necessary. These established companies may have a competitive advantage over Dianthus due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive Dianthus to be a competitor may be unwilling to assign or license rights to Dianthus. Dianthus also may be unable to license or acquire third-party intellectual property rights on terms that would allow it to make an appropriate return on investment or at all. If Dianthus is unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights Dianthus has, it may have to abandon development of the relevant product candidate, which could have a material adverse effect on Dianthus’ business, financial condition, results of operations, and prospects.

While Dianthus will normally seek to obtain the right to control prosecution, maintenance and enforcement of the patents relating to a product candidate, there may be times when the filing and prosecution activities for patents and patent applications relating to a product candidate are controlled by future licensors or collaboration partners. If any of these future licensors or collaboration partners fail to prosecute, maintain and enforce such patents and patent applications in a manner consistent with the best interests of Dianthus’ business, including by payment of all applicable fees for patents covering a product candidate, Dianthus could lose rights to the intellectual property or exclusivity with respect to those rights, Dianthus’ ability to develop and commercialize such candidate may be adversely affected and it may not be able to prevent competitors from making, using and selling competing products. In addition, even where Dianthus has the right to control patent prosecution of patents and patent applications which may be licensed to and from third parties, Dianthus may still be adversely affected or prejudiced by actions or inactions of licensees, future licensors and their counsel that took place prior to the date upon which Dianthus assumed control over patent prosecution.

Dianthus’ future licensors may rely on third-party consultants or collaborators or on funds from third parties such that future licensors are not the sole and exclusive owners of the patents Dianthus in-licenses. If other third parties have ownership rights to future in-licensed patents, they may be able to license such patents to Dianthus’ competitors, and the competitors could market competing products and technology. This could have a material adverse effect on Dianthus’ competitive position, business, financial conditions, results of operations, and prospects.

It is possible that Dianthus may be unable to obtain licenses at a reasonable cost or on reasonable terms, if at all. Even if Dianthus is able to obtain a license, it may be non-exclusive, thereby giving competitors access to the same technologies licensed to Dianthus. In that event, Dianthus may be required to expend significant time and resources to redesign its technology, product candidates, or the methods for manufacturing the same, or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If Dianthus is unable to do so, it may be unable to develop or commercialize the affected product candidates, which could harm Dianthus’ business, financial condition, results of operations, and prospects significantly.

 

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Dianthus cannot provide any assurances that third-party patents do not exist which might be enforced against Dianthus’ current technology or manufacturing methods, its product candidates, or future methods or product candidates, resulting in either an injunction prohibiting manufacture or future sales, or, with respect to future sales, an obligation on Dianthus’ part to pay royalties and/or other forms of compensation to third parties, which could be significant. For example, Dianthus is aware of a certain U.S. patent owned by a third party with claims that are directed to a method of inhibiting complement C1s activity in an individual with an antibody that selectively binds active form of complement component C1s compared to inactive C1s and inhibits complement C1s activity by at least 60% in a protease assay. Although Dianthus does not believe that this is a valid patent, this patent could be construed to cover its anti-C1s antibodies.

Disputes may arise between Dianthus and its future licensors regarding intellectual property subject to a license agreement, including: the scope of rights granted under the license agreement and other interpretation-related issues; whether and to what extent to which Dianthus’ technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; Dianthus’ right to sublicense patents and other rights to third parties; Dianthus’ right to transfer or assign the license; the inventorship and ownership of inventions and know-how resulting from the joint creations or use of intellectual property by future licensors and Dianthus and/or its partners; and the priority date of an invention of patented technology.

Dianthus may be subject to patent infringement claims or may need to file claims to protect its intellectual property, which could result in substantial costs and liability and prevent it from commercializing potential products.

Because the intellectual property landscape in the biotechnology industry is rapidly evolving and interdisciplinary, it is difficult to conclusively assess Dianthus’ freedom to operate and guarantee that it can operate without infringing on or violating third party rights. If certain of Dianthus’ product candidates are ultimately granted regulatory approval, patent rights held by third parties, if found to be valid and enforceable, could be alleged to render one or more of such product candidates infringing. If a third party successfully brings a claim against Dianthus, Dianthus may be required to pay substantial damages, be forced to abandon any affected product candidate and/or seek a license from the patent holder. In addition, any intellectual property claims (e.g. patent infringement or trade secret theft) brought against Dianthus, whether or not successful, may cause Dianthus to incur significant legal expenses and divert the attention of Dianthus’ management and key personnel from other business concerns. Dianthus cannot be certain that patents owned or licensed by it will not be challenged by others in the course of litigation. Some of competitors may be able to sustain the costs of complex intellectual property litigation more effectively than Dianthus can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on Dianthus’ ability to raise funds and on the market price of Dianthus’ common stock.

Competitors may infringe or otherwise violate Dianthus’ patents, trademarks, copyrights or other intellectual property. To counter infringement or other violations, Dianthus may be required to file claims, which can be expensive and time-consuming. Any such claims could provoke these parties to assert counterclaims against Dianthus, including claims alleging that it infringes their patents or other intellectual property rights. In addition, in a patent infringement proceeding, a court or administrative body may decide that one or more of the patents Dianthus asserts is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to prevent the other party from using the technology at issue on the grounds that Dianthus’ patents do not cover the technology. Similarly, if Dianthus asserts trademark infringement claims, a court or administrative body may determine that the marks asserted are invalid or unenforceable or that the party against whom Dianthus has asserted trademark infringement has superior rights to the marks in question. In such a case, Dianthus could ultimately be forced to cease use of such marks. In any intellectual property litigation, even if Dianthus is successful, any award of monetary damages or other remedy received may not be commercially valuable.

Further, Dianthus may be required to protect its patents through procedures created to attack the validity of a patent at the USPTO. An adverse determination in any such submission or proceeding could reduce the scope or

 

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enforceability of, or invalidate, Dianthus’ patent rights, which could adversely affect its competitive position. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.

In addition, if Dianthus’ product candidates are found to infringe the intellectual property rights of third parties, these third parties may assert infringement claims against Dianthus’ future licensees and other parties with whom it has business relationships and Dianthus may be required to indemnify those parties for any damages they suffer as a result of these claims, which may require Dianthus to initiate or defend protracted and costly litigation on behalf of licensees and other parties regardless of the merits of such claims. If any of these claims succeed, Dianthus may be forced to pay damages on behalf of those parties or may be required to obtain licenses for the products they use.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other legal proceedings relating to Dianthus’ intellectual property rights, there is a risk that some of Dianthus’ confidential information could be compromised by disclosure during this type of litigation or other proceedings.

Dianthus may be subject to claims that it has wrongfully hired an employee from a competitor or that employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

As is common in the biotechnology industry, in addition to Dianthus’ employees, Dianthus engages and may engage in the services of consultants to assist in the development of its product candidates. Many of these consultants, and many of Dianthus’ employees, were or may have been previously employed at, or may have previously provided or may be currently providing consulting services to, other biotechnology or pharmaceutical companies including Dianthus’ competitors or potential competitors. Dianthus could in the future be subject to claims that it or its employees have inadvertently or otherwise used or disclosed alleged trade secrets or other confidential information of former employers or competitors. Although Dianthus tries to ensure that its employees and consultants do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for Dianthus, Dianthus may become subject to claims that it caused an employee to breach the terms of his or her non-competition or non-solicitation agreement, or that Dianthus or these individuals have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former employer or competitor.

While Dianthus may litigate to defend itself against these claims, even if Dianthus is successful, litigation could result in substantial costs and could be a distraction to management. If Dianthus’ defenses to these claims fail, in addition to requiring Dianthus to pay monetary damages, a court could prohibit it from using technologies or features that are essential to Dianthus’ product candidates, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. Moreover, any such litigation or the threat thereof may adversely affect Dianthus’ reputation, its ability to form strategic alliances or sublicense Dianthus’ rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on Dianthus’ business, its operations and financial condition. Even if Dianthus is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Changes to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Dianthus’ ability to protect its products.

Changes in either the patent laws or interpretation of patent laws in the United States, including patent reform legislation such as the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) could increase the

 

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uncertainties and costs surrounding the prosecution of Dianthus’ owned and any future in-licensed patent applications and the maintenance, enforcement or defense of Dianthus owned and any future in-licensed issued patents. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 16, 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of Dianthus’ patent applications and the enforcement or defense of Dianthus’ issued patents, all of which could have a material adverse effect on Dianthus’ business, financial condition, its operations and prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. U.S. Supreme Court and U.S. Court of Appeals for the Federal Circuit rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations, including in the antibody arts. This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on Dianthus’ patent rights and its ability to protect, defend and enforce Dianthus’ patent rights in the future.

Geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of patent applications and the maintenance, enforcement or defense of issued patents. For example, the United States and foreign government actions related to Russia’s invasion of Ukraine may limit or prevent filing, prosecution and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on Dianthus’ business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees that have citizenship or nationality in, are registered in, or have predominately primary place of business or profit-making activities in the United States and other countries that Russia has deemed unfriendly without consent or compensation. Consequently, Dianthus would not be able to prevent third parties from practicing its inventions in Russia or from selling or importing products made using its inventions in and into Russia. Accordingly, Dianthus’ competitive position may be impaired, and its business, financial condition, operations and prospects may be adversely affected.

In addition, a European Unified Patent Court has come into force June 1, 2023. The UPC will be a common patent court to hear patent infringement and revocation proceedings effective for member states of the European Union. This could enable third parties to seek revocation of a European patent in a single proceeding at the UPC rather than through multiple proceedings in each of the jurisdictions in which the European patent is validated. Although Dianthus does not currently own any European patents or applications, if Dianthus obtains such patents and applications in the future, any such revocation and loss of patent protection could have a material adverse impact on Dianthus’ business and its ability to commercialize or license its technology and products. Moreover, the controlling laws and regulations of the UPC will develop over time, and may adversely affect Dianthus’ ability to enforce or defend the validity of any European patents obtained. Dianthus may decide to opt out from the UPC for any future European patent applications that it may file and any patents it may obtain. If certain formalities and requirements are not met, however, such European patents and patent applications could be

 

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challenged for non-compliance and brought under the jurisdiction of the UPC. Dianthus cannot be certain that future European patents and patent applications will avoid falling under the jurisdiction of the UPC, if Dianthus decides to opt out of the UPC.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and Dianthus’ patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuities fees and various other governmental fees on patents and/or patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent and/or patent application. The USPTO and various foreign governmental patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If Dianthus fails to maintain the patents and patent applications covering its product candidates, Dianthus’ competitive position would be adversely affected.

Dianthus may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect Dianthus’ ability to develop and market its products.

Dianthus cannot guarantee that any of its patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can Dianthus be certain that it has identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of its product candidates in any jurisdiction. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Dianthus’ interpretation of the relevance or the scope of a patent or a pending application may be incorrect. For example, Dianthus may incorrectly determine that its products are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Dianthus’ determination of the expiration date of any patent in the United States or abroad that it considers relevant may be incorrect. Dianthus’ failure to identify and correctly interpret relevant patents may negatively impact its ability to develop and market Dianthus’ products.

In addition, because some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, and publications in the scientific literature often lag behind actual discoveries, Dianthus cannot be certain that others have not filed patent applications for technology covered by Dianthus’ pending applications or any future issued patents, or that Dianthus was the first to invent the technology. Dianthus’ competitors may have filed, and may in the future file, patent applications covering its products or technology similar to Dianthus’. Any such patent application may have priority over Dianthus’ patent applications or patents, which could require Dianthus to obtain rights to issued patents covering such technologies.

Dianthus may become subject to claims challenging the inventorship or ownership of its patents and other intellectual property.

Dianthus may be subject to claims that former employees, collaborators or other third parties have an interest in Dianthus’ patents or other intellectual property as an inventor or co-inventor. The failure to name the

 

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proper inventors on a patent application can result in the patents issuing thereon being unenforceable. Inventorship disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties involved in developing Dianthus’ product candidates or as a result of questions regarding co-ownership of potential joint inventions. Litigation may be necessary to resolve these and other claims challenging inventorship and/or ownership. Alternatively, or additionally, Dianthus may enter into agreements to clarify the scope of its rights in such intellectual property. If Dianthus fails in defending any such claims, in addition to paying monetary damages, Dianthus may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on Dianthus’ business. Even if Dianthus is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Dianthus’ current or future licensors may have relied on third-party consultants or collaborators or on funds from third parties, such as the U.S. government or academic institutions, such that its licensors are not the sole and exclusive owners of the patents Dianthus in-licensed. If other third parties have ownership rights or other rights to Dianthus’ in-licensed patents, they may be able to license such patents to Dianthus’ competitors, and its competitors could market competing products and technology. This could have a material adverse effect on Dianthus’ competitive position, business, financial conditions, operations, and prospects.

Patent terms may be inadequate to protect Dianthus’ competitive position on its product candidates for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering Dianthus’ product candidates are obtained, once the patent life has expired, Dianthus may be open to competition from competitive products, including generics or biosimilars. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, Dianthus’ owned and future licensed patent portfolio may not provide it with sufficient rights to exclude others from commercializing products similar or identical to Dianthus’.

Dianthus’ technology licensed from various third parties may be subject to retained rights.

Dianthus’ future licensors may retain certain rights under the relevant agreements with Dianthus, including the right to use the underlying technology for noncommercial academic and research use, to publish general scientific findings from research related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology. It is difficult to monitor whether Dianthus’ licensors limit their use of the technology to these uses, and Dianthus could incur substantial expenses to enforce its rights to the licensed technology in the event of misuse.

In addition, the U.S. federal government retains certain rights in inventions produced with its financial assistance under the Patent and Trademark Law Amendments Act (the “Bayh-Dole Act”). The federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself. Dianthus may in the future collaborate with academic institutions to accelerate Dianthus’ preclinical research or development. While it is Dianthus’ policy to avoid engaging university partners in projects in which there is a risk that federal funds may be commingled, Dianthus cannot be sure that any co-developed intellectual property will be free from government rights pursuant to the

 

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Bayh-Dole Act. If, in the future, Dianthus co-owns or licenses in-technology which is critical to its business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, Dianthus’ ability to enforce or otherwise exploit patents covering such technology may be adversely affected.

Risks Related to Government Regulation

The regulatory approval processes of the FDA and other comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. If Dianthus is not able to obtain, or if there are delays in obtaining, required regulatory approvals for its product candidates, Dianthus will not be able to commercialize, or will be delayed in commercializing, such product candidates, and its ability to generate revenue will be materially impaired.

The process of obtaining regulatory approvals, both in the United States and abroad, is unpredictable, expensive and typically takes many years following commencement of clinical trials, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Dianthus cannot commercialize product candidates in the United States without first obtaining regulatory approval from the FDA. Similarly, Dianthus cannot commercialize product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of its product candidates, including its most advanced product candidate, DNTH103, Dianthus must demonstrate through lengthy, complex and expensive preclinical and clinical trials that such product candidates are both safe and effective for each targeted indication. Securing regulatory approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Further, a product candidate may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude its obtaining marketing approval. The FDA and comparable foreign regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that its data are insufficient for approval and require additional preclinical, clinical or other data. A product candidate could be delayed in receiving, or fail to receive, regulatory approval for many reasons, including: the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of its clinical trials; Dianthus may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication; the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; serious and unexpected drug-related side effects may be experienced by participants in its clinical trials or by individuals using drugs similar to a product candidate; Dianthus may be unable to demonstrate that a candidate’s clinical and other benefits outweigh its safety risks; the FDA or comparable foreign regulatory authorities may disagree with its interpretation of data from preclinical studies or clinical trials; the data collected from clinical trials of a product candidate may not be acceptable or sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere, and Dianthus may be required to conduct additional clinical trials; the FDA or the applicable foreign regulatory authority may disagree regarding the formulation, labeling and/or the specifications of a product candidate; the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which Dianthus contract for clinical and commercial supplies; and the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering Dianthus’ clinical data insufficient for approval.

Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in Dianthus failing to obtain regulatory approval to market DNTH103 or other product candidates, which would significantly harm its business, results of operations and prospects.

 

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If Dianthus were to obtain approval, regulatory authorities may approve any such product candidate for fewer or more limited indications than Dianthus request, including failing to approve the most commercially promising indications, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. If Dianthus is not able to obtain, or if there are delays in obtaining, required regulatory approvals for a product candidate, Dianthus will not be able to commercialize, or will be delayed in commercializing, such product candidate and its ability to generate revenue may be materially impaired.

Disruptions at the FDA and other government agencies could negatively affect the review of Dianthus’ regulatory submissions, which could negatively impact its business.

The ability of the FDA to review and approve regulatory submissions can be affected by a variety of factors, including disruptions caused by government shutdowns and public health crises. Such disruptions could significantly impact the ability of the FDA or other regulatory authorities to timely review and process its regulatory submissions, which could have a material adverse effect on Dianthus’ business.

Dianthus may not be able to meet requirements for the chemistry, manufacturing and control of its product candidates.

In order to receive approval of its products by the FDA and comparable foreign regulatory authorities, Dianthus must show that Dianthus and its contract manufacturing partners are able to characterize, control and manufacture its drug products safely and in accordance with regulatory requirements. This includes synthesizing the active ingredient, developing an acceptable formulation, performing tests to adequately characterize the formulated product, documenting a repeatable manufacturing process, and demonstrating that its drug products meet stability requirements. Meeting these chemistry, manufacturing and control (“CMC”) requirements is a complex task that requires specialized expertise. If Dianthus is not able to meet the CMC requirements, Dianthus may not be successful in getting its products approved.

Dianthus intends to deliver its product candidates via a drug delivery device that will have its own regulatory, development, supply and other risks.

Dianthus intends to deliver its product candidates via a drug delivery device, such as an injector or other delivery system. There may be unforeseen technical complications related to the development activities required to bring such a product to market, including primary container compatibility and/or dose volume requirements. Dianthus’ product candidates may not be approved or may be substantially delayed in receiving approval if the devices do not gain and/or maintain their own regulatory approvals or clearances. Where approval of the drug product and device is sought under a single application, the increased complexity of the review process may delay approval. In addition, some drug delivery devices are provided by single-source unaffiliated third-party companies. Dianthus may be dependent on the sustained cooperation and effort of those third-party companies both to supply the devices and, in some cases, to conduct the studies required for approval or other regulatory clearance of the devices. Even if approval is obtained, Dianthus may also be dependent on those third-party companies continuing to maintain such approvals or clearances once they have been received. Failure of third-party companies to supply the devices, to successfully complete studies on the devices in a timely manner, or to obtain or maintain required approvals or clearances of the devices could result in increased development costs, delays in or failure to obtain regulatory approval and delays in product candidates reaching the market or in gaining approval or clearance for expanded labels for new indications.

Dianthus currently and may in the future conduct clinical trials for its product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations.

Dianthus’ Phase 1 clinical trial for DNTH103 is currently being conducted in New Zealand, and Dianthus may in the future choose to conduct more of its clinical trials outside the United States. Dianthus currently

 

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intends to conduct its Phase 2 clinical trial for DNTH103 in the United States and outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that Dianthus conducts outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and would delay or permanently halt its development of the applicable product candidates. Even if the FDA accepted such data, it could require Dianthus to modify its planned clinical trials to receive clearance to initiate such trials in the United States or to continue such trials once initiated.

Other risks inherent in conducting international clinical trials include: foreign regulatory requirements, differences in healthcare services, and differences in cultural customs that could restrict or limit its ability to conduct its clinical trials; administrative burdens of conducting clinical trials under multiple sets of foreign regulations; foreign exchange fluctuations; diminished protection of intellectual property in some countries; and political and economic risks relevant to foreign countries.

Dianthus’ product candidates for which it intends to seek approval as biologics may face competition sooner than anticipated.

The Patient Protection and Affordable Care Act, as amended by the ACA, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a highly similar or “biosimilar” product may not be submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product.

Dianthus’ investigational biological products, if approved, could be considered reference products entitled to the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider a product candidate to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Even if Dianthus receives regulatory approval of DNTH103 or other product candidates, Dianthus will be subject to extensive ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and Dianthus may be subject to penalties if Dianthus fails to comply with regulatory requirements or experience unanticipated problems with its product candidates.

Any regulatory approvals that Dianthus may receive for DNTH103 or other product candidates will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of such product candidates, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk

 

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management requirements. For example, the FDA may require a risk evaluation and mitigation strategy in order to approve a product candidate, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or comparable foreign regulatory authorities approve a product candidate, the products and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export will be subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable foreign regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as ongoing compliance with current cGMPs and GCPs for any clinical trials that Dianthus conduct following approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMPs.

If Dianthus or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturing facility or Dianthus, including requiring recall or withdrawal of the product from the market or suspension of manufacturing, restrictions on its ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials, restrictions on the manufacturing process, warning or untitled letters, civil and criminal penalties, injunctions, product seizures, detentions or import bans, voluntary or mandatory publicity requirements and imposition of restrictions on operations, including costly new manufacturing requirements. The occurrence of any event or penalty described above may inhibit Dianthus’ ability to commercialize DNTH103 or other product candidates and generate revenue and could require Dianthus to expend significant time and resources in response and could generate negative publicity.

Dianthus may face difficulties from healthcare legislative reform measures.

Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of DNTH103 or other product candidates. Dianthus cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If Dianthus is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Dianthus is not able to maintain regulatory compliance, Dianthus may lose any marketing approval that Dianthus may have obtained and Dianthus may not achieve or sustain profitability. See the section titled “Dianthus’ Business—Government Regulation—Healthcare Reform” for a more detailed description of healthcare reforms measures that may prevent Dianthus from being able to generate revenue, attain profitability, or commercialize product candidates.

Dianthus’ business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose Dianthus to penalties.

Dianthus’ business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers may expose Dianthus to broadly-applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which Dianthus conducts its operations, including how Dianthus researches, markets, sells and distributes its product candidates, if approved. See the section titled “Dianthus’ Business—Government Regulation—Other Healthcare Laws and Compliance Requirements” for a more detailed description of the laws that may affect its ability to operate.

Ensuring that its internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. If Dianthus’ operations are found to be

 

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in violation of any of these laws or any other governmental laws and regulations that may apply to it, Dianthus may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of its operations. Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources. Therefore, even if Dianthus is successful in defending against any such actions that may be brought against Dianthus, its business may be impaired.

Even if Dianthus is able to commercialize DNTH103 or other product candidates, due to unfavorable pricing regulations and/or third-party coverage and reimbursement policies, Dianthus may not be able to offer such products at competitive prices which would seriously harm its business.

Dianthus intends to seek approval to market DNTH103 and other product candidates in both the United States and in selected foreign jurisdictions. If Dianthus obtains approval in one or more foreign jurisdictions for such product candidates, Dianthus will be subject to rules and regulations in those jurisdictions. Its ability to successfully commercialize any product candidates that Dianthus may develop will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. These entities may create preferential access policies for a competitor’s product, including a branded or generic/biosimilar product, over its products in an attempt to reduce their costs, which may reduce its commercial opportunity. Additionally, if any of its product candidates are approved and Dianthus is found to have improperly promoted off-label uses of those programs, Dianthus may become subject to significant liability, which would materially adversely affect its business and financial condition. See the sections titled “Dianthus’ Business—Government Regulation—Coverage and Reimbursement” and “—Regulation in the European Union” for a more detailed description of the government regulations and third-party payor practices that may affect Dianthus’ ability to commercialize its product candidates.

Dianthus is subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Dianthus can face criminal liability and other serious consequences for violations, which can harm its business.

Dianthus is subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which Dianthus conducts activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to or from recipients in the public or private sector. Dianthus may engage third parties to sell products outside the United States, to conduct clinical trials, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. Dianthus has direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. Dianthus can be held liable for the corrupt or other illegal activities of its employees, agents, contractors, and other collaborators, even if Dianthus does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

 

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Governments outside the United States tend to impose strict price controls, which may adversely affect Dianthus’ revenue, if any.

In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a therapeutic. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. To obtain coverage and reimbursement or pricing approvals in some countries, Dianthus or current or future collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of a product to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, its business, financial condition, results of operations or prospects could be materially and adversely affected. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations, including those related to the pricing of prescription pharmaceuticals, as the UK determines which EU laws to replicate or replace. If the UK were to significantly alter its regulations affecting the pricing of prescription pharmaceuticals, Dianthus could face significant new costs.

If Dianthus decides to pursue a Fast Track Designation or Orphan Drug Designation by the FDA, it may not lead to a faster development or regulatory review or approval process.

Dianthus may seek Fast Track Designation or Orphan Drug Designation for one or more product candidates. The FDA has broad discretion whether or not to grant such designations, so even if Dianthus believes a particular product candidate is eligible for such designations, it cannot guarantee you that the FDA would decide to grant it. Even if Dianthus does receive Fast Track Designation or Orphan Drug Designation, it may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation or Orphan Drug Designation if it believes that the designation is no longer supported by data from a clinical development program. See the section titled “Dianthus’ Business—Government Regulation—Expedited Development and Review Programs” for a more detailed description of the process for seeking Fast Track Designation or Orphan Drug Designation.

General Risk Factors

Dianthus’ estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which Dianthus compete achieve the forecasted growth, its business may not grow at similar rates, or at all.

Dianthus’ market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Its estimates and forecasts relating to size and expected growth of its target market may prove to be inaccurate. Even if the markets in which Dianthus competes meet its size estimates and growth forecasts, its business may not grow at similar rates, or at all. Dianthus’ growth is subject to many factors, including its success in implementing its business strategy, which is subject to many risks and uncertainties.

Dianthus’ revenue will be dependent, in part, upon the size of the markets in the territories for which Dianthus gains regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement and whether Dianthus owns the commercial rights for that territory. If the number of its addressable patients is not as significant as Dianthus estimates, the indication approved by regulatory authorities is narrower than Dianthus expects or the treatment population is narrowed by competition, physician choice or treatment guidelines, Dianthus may not generate significant revenue from sales of such products, even if approved.

 

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Dianthus may become exposed to costly and damaging liability claims, either when testing a product candidate in the clinical or at the commercial stage, and its product liability insurance may not cover all damages from such claims.

Dianthus is exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing, and use of pharmaceutical products. While Dianthus currently has no products that have been approved for commercial sale, the current and future use of a product candidate in clinical trials, and the sale of any approved products in the future, may expose Dianthus to liability claims. These claims may be made by patients that use the product, healthcare providers, pharmaceutical companies, or others selling such product. Any claims against Dianthus, regardless of their merit, could be difficult and costly to defend and could materially and adversely affect the market for its products or any prospects for commercialization of its products. Although Dianthus believes it currently maintains adequate product liability insurance for DNTH103 and other product candidates, it is possible that its liabilities could exceed its insurance coverage or that in the future Dianthus may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against Dianthus for uninsured liabilities or in excess of insured liabilities, its assets may not be sufficient to cover such claims and its business operations could be impaired.

Litigation costs and the outcome of litigation could have a material adverse effect on Dianthus’ business.

From time to time Dianthus may be subject to litigation claims through the ordinary course of its business operations regarding, but not limited to, employment matters, security of patient and employee personal information, contractual relations with collaborators and intellectual property rights. Litigation to defend itself against claims by third parties, or to enforce any rights that Dianthus may have against third parties, may continue to be necessary, which could result in substantial costs and diversion of its resources, causing a material adverse effect on its business, financial condition, results of operations or cash flows.

Dianthus’ business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises such as the COVID-19 pandemic, political crises, geopolitical events, such as conflict between Russia and Ukraine, or other macroeconomic conditions, which could have a material and adverse effect on its results of operations and financial condition.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including, among other things, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, increases in inflation rates, higher interest rates, and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. The Federal Reserve has raised interest rates multiple times in response to concerns about inflation and it may raise them again. Higher interest rates, coupled with reduced government spending and volatility in financial markets, may increase economic uncertainty and affect consumer spending. Similarly, the ongoing military conflict between Russia and Ukraine and rising tensions with China have created extreme volatility in the global capital markets and may have further global economic consequences, including disruptions of the global supply chain. Any such volatility and disruptions may adversely affect its business or the third parties on whom Dianthus relies. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more costly, more dilutive, or more difficult to obtain in a timely manner or on favorable terms, if at all. Increased inflation rates can adversely affect Dianthus by increasing its costs, including labor and employee benefit costs.

Dianthus may in the future experience disruptions as a result of such macroeconomic conditions, including delays or difficulties in initiating or expanding clinical trials and manufacturing sufficient quantities of materials. Any one or a combination of these events could have a material and adverse effect on its results of operations and financial condition.

 

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Risks Related to the Combined Company

If any of the events described in “Risks Related to Magenta” or “Risks Related to Dianthus” occur, those events could cause potential benefits of the merger not to be realized.

Following completion of the merger, the combined company will be susceptible to many of the risks described in the sections herein entitled “Risks Related to Magenta” and “Risks Related to Dianthus.” To the extent any of the events in the risks described in those sections occur, the potential benefits of the merger may not be realized and the results of operations and financial condition of the combined company could be adversely affected in a material way. This could cause the market price of the combined company’s common stock to decline.

The market price of the combined company’s common stock is expected to be volatile, and the market price of the common stock may drop following the merger.

The market price of the combined company’s common stock following the merger could be subject to significant fluctuations. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:

 

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results of clinical trials and preclinical studies of the combined company’s product candidates, or those of the combined company’s competitors or the combined company’s existing or future collaborators;

 

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failure to meet or exceed financial and development projections the combined company may provide to the public;

 

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failure to meet or exceed the financial and development projections of the investment community;

 

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if the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts;

 

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announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by the combined company or its competitors;

 

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actions taken by regulatory agencies with respect to the combined company’s product candidates, clinical studies, manufacturing process or sales and marketing terms;

 

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disputes or other developments relating to proprietary rights, including patents, litigation matters, and the combined company’s ability to obtain patent protection for its technologies;

 

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additions or departures of key personnel;

 

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significant lawsuits, including patent or stockholder litigation;

 

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if securities or industry analysts do not publish research or reports about the combined company’s business, or if they issue adverse or misleading opinions regarding its business and stock;

 

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changes in the market valuations of similar companies;

 

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general market or macroeconomic conditions or market conditions in the pharmaceutical and biotechnology sectors;

 

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sales of securities by the combined company or its securityholders in the future;

 

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if the combined company fails to raise an adequate amount of capital to fund its operations or continued development of its product candidates;

 

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trading volume of the combined company’s common stock;

 

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announcements by competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;

 

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•

adverse publicity relating to precision medicine product candidates, including with respect to other products in such markets;

 

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the introduction of technological innovations or new therapies that compete with the products and services of the combined company; and

 

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period-to-period fluctuations in the combined company’s financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock. In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the combined company’s business and the value of its common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies. Furthermore, market volatility may lead to increased shareholder activism if the combined company experiences a market valuation that activists believe is not reflective of its intrinsic value. Activist campaigns that contest or conflict with the combined company’s strategic direction or seek changes in the composition of its board of directors could have an adverse effect on its operating results, financial condition and cash flows.

The combined company may incur losses for the foreseeable future and might never achieve profitability.

The combined company may never become profitable, even if the combined company is able to complete clinical development for one or more product candidates and eventually commercialize such product candidates. The combined company will need to successfully complete significant research, development, testing and regulatory compliance activities that, together with projected general and administrative expenses, is expected to result in substantial increased operating losses for at least the next several years. Even if the combined company does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

Following the merger, the combined company may be unable to integrate successfully the businesses of Magenta and Dianthus and realize the anticipated benefits of the merger.

The merger involves the combination of two companies which currently operate as independent companies. Following the merger, the combined company will be required to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounter in the integration process include the following:

 

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the inability to successfully combine the businesses of Magenta and Dianthus in a manner that permits the combined company to achieve the anticipated benefits from the merger, which would result in the anticipated benefits of the merger not being realized partly or wholly in the time frame currently anticipated or at all;

 

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creation of uniform standards, controls, procedures, policies and information systems; and

 

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potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger.

In addition, Magenta and Dianthus have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process also could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect the combined company’s ability to maintain its business relationships or the ability to achieve the anticipated benefits of the merger, or could otherwise adversely affect the business and financial results of the combined company.

 

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If the combined company fails to attract and retain management and other key personnel, it may be unable to continue to successfully develop or commercialize its product candidates or otherwise implement its business plan.

The combined company’s ability to compete in the highly competitive pharmaceuticals industry depends on its ability to attract and retain highly qualified managerial, scientific, medical, legal, sales and marketing and other personnel. The combined company will be highly dependent on its management and scientific personnel. The loss of the services of any of these individuals could impede, delay, or prevent the successful development of the combined company’s product pipeline, completion of its planned clinical trials, commercialization of its product candidates or in-licensing or acquisition of new assets and could impact negatively its ability to implement successfully its business plan. If the combined company loses the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and its business could be harmed as a result. The combined company might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses.

The combined company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.

The combined company will require substantial additional funds to conduct the costly and time-consuming clinical efficacy trials necessary to pursue regulatory approval of each potential product candidate and to continue the development of DNTH103, Dianthus’ other product candidates and future product candidates. The combined company’s future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could, for example, through the sale of common stock or securities convertible or exchangeable into common stock, significantly dilute its stockholders’ ownership interests or inhibit the combined company’s ability to achieve its business objectives. If the combined company raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely the rights of its common stockholders. In addition, any debt financing may subject the combined company to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the combined company raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, the combined company may have to relinquish certain valuable intellectual property or other rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if the combined company were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to the combined company or its stockholders.

The combined company will incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined company will incur significant legal, accounting and other expenses as a public company that Dianthus did not incur as a private company, including costs associated with public company reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The combined company’s management team will consist of the executive officers of Dianthus prior to the merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise related to public company reporting requirements and compliance with applicable laws and regulations to ensure that the combined company complies with all of these requirements. Any changes the combined company makes to comply with these

 

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obligations may not be sufficient to allow it to satisfy its obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for the combined company to attract and retain qualified persons to serve on the board of directors or on board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

Upon completion of the merger, failure by the combined company to comply with the initial listing standards of Nasdaq will prevent its stock from being listed on Nasdaq.

Upon completion of the merger, Magenta, under the new name “Dianthus Therapeutics, Inc.,” will be required to meet the initial listing requirements to maintain the listing and continued trading of its shares on Nasdaq. These initial listing requirements are more difficult to achieve than the continued listing requirements. Pursuant to the Merger Agreement, Magenta agreed to use its commercially reasonable efforts to cause the shares of Magenta common stock being issued in the merger to be approved for listing on Nasdaq at or prior to the effective time of the merger. Based on information currently available to Magenta, Magenta anticipates that its stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement at the closing of the merger unless it effects a reverse stock split. The board of directors of Magenta intends to effect a reverse stock split of the shares of Magenta common stock at a ratio of between 1:10 to 1:18. In addition, often times a reverse stock split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. Following the merger, if the combined company is unable to satisfy Nasdaq listing requirements, Nasdaq may notify the combined company that its shares of common stock will not be listed on Nasdaq.

Upon a potential delisting from Nasdaq, if the common stock of the combined company is not then eligible for quotation on another market or exchange, trading of the shares could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of the common stock of the combined company; decreases in institutional and other investor demand for the shares, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute trades in the common stock of the combined company. Also, it may be difficult for the combined company to raise additional capital if the combined company’s common stock is not listed on a major exchange. The occurrence of any of these events could result in a further decline in the market price of the common stock of the combined company and could have a material adverse effect on the combined company.

Once the combined company is no longer an emerging growth company, a smaller reporting company or otherwise no longer qualifies for applicable exemptions, the combined company will be subject to additional laws and regulations affecting public companies that will increase the combined company’s costs and the demands on management and could harm the combined company’s operating results and cash flows.

The combined company will be subject to the reporting requirements of the Exchange Act, which requires, among other things, that the combined company file with the SEC, annual, quarterly and current reports with respect to the combined company’s business and financial condition as well as other disclosure and corporate governance requirements. However, as an emerging growth company, the combined company may take advantage of exemptions from various requirements such as an exemption from the requirement to have the combined company’s independent auditors attest to the combined company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 as well as an exemption from the “say on pay” voting requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The combined company will no longer qualify as an emerging growth company after December 31, 2023. After the combined company no longer qualifies as an emerging growth company, Magenta and Dianthus expects the combined company to still qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, in at least the near term, which will allow the combined company to take advantage of many

 

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of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this proxy statement/prospectus and in the combined company’s periodic reports and proxy statements. Once the combined company is no longer an emerging growth company or a smaller reporting company or otherwise no longer qualifies for these exemptions, the combined company will be required to comply with these additional legal and regulatory requirements applicable to public companies and will incur significant legal, accounting and other expenses to do so. If the combined company is not able to comply with the requirements in a timely manner or at all, the combined company’s financial condition or the market price of the combined company’s common stock may be harmed. For example, if the combined company or its independent auditor identifies deficiencies in the combined company’s internal control over financial reporting that are deemed to be material weaknesses the combined company could face additional costs to remedy those deficiencies, the market price of the combined company’s stock could decline or the combined company could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

If the combined company fails to maintain proper and effective internal controls, its ability to produce accurate financial statements on a timely basis could be impaired.

Provided the combined company continues to be listed on Nasdaq, the combined company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that the combined company maintain effective disclosure controls and procedures and internal control over financial reporting. The combined company must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. As a private company, Dianthus has never been required to test its internal controls within a specified period. This will require that the combined company incur substantial professional fees and internal costs to expand its accounting and finance functions and that it expends significant management efforts. The combined company may experience difficulty in meeting these reporting requirements in a timely manner. For additional information related to the risks and uncertainties of the combined company’s compliance with the Sarbanes-Oxley Act, see “Risk Factors—Risks Related to Dianthus—Risks Related to Dianthus’ Business and Operations—As a private company, Dianthus has not been required to document and test its internal controls over financial reporting nor has its management been required to certify the effectiveness of its internal controls and its auditors have not been required to opine on the effectiveness of its internal control over financial reporting. Dianthus has identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect the reliability of its financial statements and have other adverse consequences.”

In addition to the material weaknesses described above in the context of Dianthus being a private company, the combined company may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. The combined company’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If the combined company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if it is unable to maintain proper and effective internal controls, the combined company may not be able to produce timely and accurate financial statements. If that were to happen, the market price of its common stock could decline and it could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

 

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The unaudited pro forma condensed combined financial information for Magenta and Dianthus included in this proxy statement/prospectus are preliminary, and the combined company’s actual financial position and operations after the merger may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.

The unaudited pro forma financial information for Magenta and Dianthus included in this proxy statement/prospectus are presented for illustrative purposes only and is not necessarily indicative of the combined company’s actual financial condition or results of operations of future periods, or the financial condition or results of operations that would have been realized had the entities been combined during the period presented. The combined company’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma financial information included in this proxy statement/prospectus. The Exchange Ratio reflected in this proxy statement/prospectus is preliminary. The final exchange ratio could differ materially from the preliminary Exchange Ratio used to prepare the pro forma adjustments. For more information see the section titled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 374.

The combined company’s certificate of incorporation and bylaws and provisions under Delaware law could make an acquisition of the combined company more difficult and may prevent attempts by its stockholders to replace or remove its management.

If the merger is completed, Magenta’s bylaws and Magenta’s charter, as amended by the amendments thereto attached to this proxy statement/prospectus as Annex G and H, assuming Proposal Nos. 2 and 3 are approved by Magenta stockholders at the Magenta special meeting, will become the combined company’s bylaws and certificate of incorporation. Provisions that will be included in the combined company’s certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control of the combined company that stockholders may consider favorable, including transactions in which its common stockholders might otherwise receive a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of the combined company’s common stock, thereby depressing the market price of its common stock. In addition, because the combined company’s board of directors will be responsible for appointing the members of the combined company’s management team, these provisions may frustrate or prevent any attempts by the combined company’s stockholders to replace or remove its current management by making it more difficult for stockholders to replace members of the combined company’s board of directors. Among other things, these provisions:

 

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establish a classified board of directors such that all members of the board are not elected at one time;

 

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allow the authorized number of its directors to be changed only by resolution of its board of directors;

 

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limit the manner in which stockholders can remove directors from the board;

 

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establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at stockholder meetings;

 

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require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by its stockholders by written consent;

 

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limit who may call a special meeting of stockholders;

 

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authorize its board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by its board of directors; and

 

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require the approval of the holders of at least 66.67% of the votes that all its stockholders would be entitled to cast to amend or repeal certain provisions of its charter or bylaws.

Moreover, because the combined company will be incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of the

 

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outstanding combined company voting stock from merging or combining with the combined company. Although Magenta and Dianthus believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the combined company’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the combined company’s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

The bylaws of the combined company will provide that, unless the combined company consents in writing to the selection of an alternative forum, certain designated courts will be the sole and exclusive forum for certain legal actions between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers, employees or agents.

The bylaws of the combined company will provide that, unless it consents in writing to an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on its behalf, (ii) any action asserting a claim of or based on a breach of a fiduciary duty owed by any of its current or former directors, officers, or other employees to the combined company or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, its charter or its bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, which for purposes of this risk factor refers to herein as the “Delaware Forum Provision.” The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act and the Exchange Act. The bylaws of the combined company will further provide that, unless it consents in writing to an alternative forum, federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which for purposes of this risk factor refers to herein as the “Federal Forum Provision.” In addition, the bylaws of the combined company will provide that any person or entity purchasing or otherwise acquiring any interest in shares of its capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived its compliance with the U.S. federal securities laws and the rules and regulations thereunder.

The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders of the combined company in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the forum selection clauses in the bylaws of the combined company may limit its stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with the combined company or its directors, officers or employees, which may discourage such lawsuits against the combined company and its directors, officers and employees even though an action, if successful, might benefit its stockholders.

Magenta and Dianthus do not anticipate that the combined company will pay any cash dividends in the foreseeable future.

The current expectation is that the combined company will retain its future earnings, if any, to fund the growth of the combined company’s business as opposed to paying dividends. As a result, capital appreciation, if any, of the common stock of the combined company will be your sole source of gain, if any, for the foreseeable future.

An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.

Prior to the merger, there had been no public market for shares of Dianthus capital stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active

 

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market for the combined company’s common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.

If existing securityholders of Magenta and Dianthus sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after legal restrictions on resale discussed in this proxy statement/prospectus lapse, the trading price of the common stock of the combined company could decline. Based on shares outstanding as of June 30, 2023, after giving effect to the estimated exchange ratio and the shares of Dianthus common stock and the Dianthus pre-funded warrants to be issued in the Dianthus pre-closing financing and shares expected to be issued upon completion of the merger and prior to giving effect to the anticipated Magenta reverse stock split, the combined company is expected to have outstanding a total of approximately 242,789,221 shares of common stock immediately following the completion of the merger. Of the shares of common stock, approximately 128,799,195 shares are freely tradeable upon completion of the merger and approximately 113,990,026 shares will be available for sale in the public market beginning 180 days after the closing of the merger as a result of the expiration of lock-up agreements between Magenta and Dianthus on the one hand and certain securityholders of Magenta and Dianthus on the other hand (and without giving effect to any restrictions on resale under securities laws). All other outstanding shares of common stock, other than shares held by affiliates of the combined company, shares of Magenta common stock issued in exchange for shares of Dianthus common stock issued in the Dianthus pre-closing financing and shares of Magenta common stock issued upon the exercise of the pre-funded warrants issued in exchange for the Dianthus pre-funded warrants issued in the Dianthus pre-closing financing, will be freely tradable, without restriction, in the public market (other than restrictions under applicable securities laws). In addition, shares of common stock that are subject to outstanding options or warrants of Dianthus (excluding the pre-funded warrants issued in the Dianthus pre-closing financing) will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act. If these shares are sold, the trading price of the combined company’s common stock could decline.

After completion of the merger, the combined company’s executive officers, directors and principal stockholders will have the ability to control or significantly influence all matters submitted to the combined company’s stockholders for approval.

Upon the completion of the merger, and giving effect to the issuance of the shares of Dianthus common stock and the Dianthus pre-funded warrants prior to the closing of the merger pursuant to the Dianthus pre-closing financing, it is anticipated that the combined company’s executive officers, directors and principal stockholders will, in the aggregate, beneficially own approximately 77.6% of the combined company’s outstanding shares of common stock, subject to certain assumptions, including, but not limited to, Magenta’s net cash as of closing being not less than $59.5 million or greater than $60.5 million. Magenta management currently anticipates Magenta’s net cash as of closing will be approximately $65.0 million and the currently estimated ownership percentages reflect this projection. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined company’s stockholders for approval, as well as the combined company’s management and affairs. For example, these stockholders, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the combined company’s assets. This concentration of voting power could delay or prevent an acquisition of the combined company on terms that other stockholders may desire.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the combined company, its business or its market, its stock price and trading volume could decline.

The trading market for the combined company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect to not provide research coverage of the combined company’s common stock after the completion of the merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the combined company will not have any control over the analysts or the content and opinions included in their reports. The price of the combined company’s common stock could

 

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decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the combined company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.

The combined company will have broad discretion in the use of the cash and cash equivalents of the combined company and the proceeds from the Dianthus pre-closing financing and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

The combined company will have broad discretion over the use of the cash and cash equivalents of the combined company and the proceeds from the Dianthus pre-closing financing. You may not agree with the combined company’s decisions, and its use of the proceeds may not yield any return on your investment. The combined company’s failure to apply these resources effectively could compromise its ability to pursue its growth strategy and the combined company might not be able to yield a significant return, if any, on its investment of these net proceeds. You will not have the opportunity to influence its decisions on how to use the combined company’s cash resources.

The combined company may be subject to adverse legislative or regulatory tax changes that could negatively impact its financial condition.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect the combined company or its stockholders. The combined company will assess the impact of various tax reform proposals and modifications to existing tax treaties in all jurisdictions where the combined company has operations to determine the potential effect on its business and any assumptions the combined company will make about its future taxable income. It cannot predict whether any specific proposals will be enacted, the terms of any such proposals or what effect, if any, such proposals would have on its business if they were to be enacted. For example, the United States recently enacted the Inflation Reduction Act of 2022 (“IRA”), which implements, among other changes, a 1% excise tax on certain stock buybacks. In addition, beginning in 2022, the Tax Act eliminates the currently available option to deduct research and development expenditures and requires taxpayers to amortize them generally over five years. The U.S. Congress is considering legislation that would restore the current deductibility of research and development expenditures, however, there is no assurance that the provision will be repealed or otherwise modified. Such changes, among others, may adversely affect its effective tax rate, results of operation and general business condition.

The combined company’s ability to use net operating loss carryforwards and other tax attributes may be limited, including as a result of the merger.

Under current law, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to federal law. In addition, under Sections 382 and 383 of the Code, U.S. federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in ownership. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The combined company’s ability to utilize its net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including, as discussed above, in connection with the merger or other transactions. Similar rules may apply under state tax laws. If the combined company earns taxable income, such limitations could result in increased future income tax liability to the combined company, and the combined company’s future cash flows could be adversely affected.

 

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Unfavorable global economic conditions could adversely affect the combined company’s business, financial condition, results of operations or cash flows.

The combined company’s results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A severe or prolonged economic downturn could result in a variety of risks to the combined company’s business, including, weakened demand for the combined company’s product candidates and the combined company’s ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain the combined company’s suppliers, possibly resulting in supply disruption, or cause the combined company’s customers to delay making payments for its services. Any of the foregoing could harm the combined company’s business and the combined company cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact its business.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws in relation to Magenta, Dianthus, the merger and the other proposed transactions contemplated thereby. Any express or implied statements that do not relate to historical or current facts or matters are forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements include, but are not limited to, express or implied statements regarding Magenta’s or Dianthus’ expectations, hopes, beliefs, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “seeks,” “target,” “endeavor,” “possible,” “potential,” “continue,” “contemplate” or the negative of these terms or other comparable terminology, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are based on current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting Magenta, Dianthus or the proposed transaction will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Magenta’s or Dianthus’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. In addition to other factors and matters contained in or incorporated by reference in this document, Magenta and Dianthus believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements: the risk that the conditions to the closing of the transaction are not satisfied, including the failure to obtain stockholder approval for the transaction;

 

•

the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the merger that could cause the parties to abandon the merger;

 

•

Magenta’s and Dianthus’ ability to meet expectations regarding the timing and completion of the merger;

 

•

the risk that the Dianthus pre-closing financing is not completed in a timely manner or at all;

 

•

uncertainties as to the timing and costs of the consummation of the transaction and the ability of each of Magenta and Dianthus to consummate the transaction, including the Dianthus pre-closing financing;

 

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risks related to Magenta’s continued listing on the Nasdaq until closing of the proposed transaction;

 

•

expectations regarding the strategies, prospects, plans, expectations and objectives of management of Magenta or Dianthus for future operations of the combined company following the closing of the merger;

 

•

the ability of the combined company to recognize the benefits that may be derived from the merger, including the commercial or market opportunity of, the product candidates of Magenta, Dianthus and the combined company;

 

•

risks related to Magenta’s and Dianthus’ ability to correctly estimate their respective operating expenses and expenses associated with the transaction, uncertainties regarding the impact any delay in the closing would have on the anticipated cash resources of the combined company upon closing and other events and unanticipated spending and costs that could reduce the combined company’s cash resources;

 

•

the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Merger Agreement;

 

•

the fact that under the terms of the Merger Agreement, Magenta is restrained from soliciting other acquisition proposals during the pendency of the merger, except in certain circumstances;

 

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the effect of the announcement or pendency of the merger on Magenta’s or Dianthus’ business relationships, operating results and business generally, including disruption of Magenta’s and Dianthus’ management’s attention from ongoing business operations due to the merger and potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction;

 

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the risk that the Merger Agreement may be terminated in circumstances that require Magenta to pay a termination fee;

 

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the outcome of any legal proceedings that may be instituted against Magenta, Dianthus or any of their respective directors or officers related to the Merger Agreement or the transactions contemplated thereby;

 

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the ability of Magenta or Dianthus to protect their respective intellectual property rights;

 

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competitive responses to the merger;

 

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legislative, regulatory, political and economic developments beyond the parties’ control;

 

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the initiation, timing and success of clinical trials for Magenta’s and Dianthus’ product candidates;

 

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success in retaining, or changes required in, Magenta’s and Dianthus’ officers, key employees or directors;

 

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Magenta’s public securities’ potential liquidity and trading;

 

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regulatory actions with respect to Magenta’s and Dianthus’ product candidates or their respective competitors’ products and product candidates;

 

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Magenta’s and Dianthus’ ability to manufacture its product candidates in conformity with the FDA’s requirements and to scale up manufacturing of its product candidates to commercial scale, if approved;

 

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Magenta’s and Dianthus’ reliance on third-party contract development and manufacturer organizations to manufacture and supply product candidates;

 

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Magenta’s and Dianthus’ ability to successfully commercialize product candidates, if approved, and the rate and degree of market acceptance of such product candidates; and

 

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developments and projections relating to Magenta’s and Dianthus’ competitors or industry.

Should one or more of these risks or uncertainties materialize, or should any of Magenta’s or Dianthus’ assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. There may be additional risks that Magenta considers immaterial or which are unknown. You are urged to carefully review the disclosures Magenta and Dianthus make concerning these risks and other factors that may affect Magenta’s and Dianthus’ business and operating results under the section titled “Risk Factors” beginning on page 29 of this proxy statement/prospectus. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Magenta and incorporated by reference herein. Please see the section titled “Where You Can Find More Information” beginning on page 412 of this proxy statement/prospectus. There can be no assurance that the merger will be completed, or if it is completed, that it will be completed within the anticipated time period or that the expected benefits of the merger will be realized.

If any of these risks or uncertainties materialize or any of these assumptions prove incorrect, the results of Magenta, Dianthus or the combined company could differ materially from the forward-looking statements. Any public statements or disclosures by Magenta and Dianthus following this proxy statement/prospectus that modify or impact any of the forward-looking statements contained in this proxy statement/prospectus will be deemed to modify or supersede such statements in this proxy statement/prospectus. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document and are qualified in their entirety by reference to the cautionary statements herein. Magenta and Dianthus do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.

 

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THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF MAGENTA STOCKHOLDERS

Date, Time and Place

The Magenta special meeting will be held on Friday, September 8, 2023, commencing at 8:00 a.m. Eastern Time, unless postponed or adjourned to a later date. The Magenta special meeting will be held entirely online. Magenta is sending this proxy statement/prospectus to its stockholders in connection with the solicitation of proxies by Magenta’s board of directors for use at the Magenta special meeting and any adjournments or postponements of the Magenta special meeting. This proxy statement/prospectus is first being furnished to Magenta stockholders on or about August 1, 2023.

Purposes of the Magenta Special Meeting

The purposes of the Magenta special meeting are:

 

1.

To approve (i) the issuance of shares of common stock of Magenta, which will represent more than 20% of the shares of Magenta common stock outstanding immediately prior to the merger, to stockholders of Dianthus, pursuant to the terms of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus, and (ii) the change of control of Magenta resulting from the merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively;

 

2.

To approve an amendment to the amended and restated certificate of incorporation of Magenta (“Magenta’s charter”) to effect a reverse stock split of Magenta’s issued and outstanding common stock at a ratio in the range between 1:10 to 1:18, inclusive, with the final ratio and effectiveness of such amendment and the abandonment of such amendment to be mutually agreed by the Magenta board of directors and the Dianthus board of directors prior to the effective time or, if the Nasdaq Stock Issuance Proposal is not approved by Magenta stockholders, determined solely by the Magenta board of directors, in the form attached as Annex G to this proxy statement/prospectus;

 

3.

To approve an amendment to Magenta’s charter to provide for the exculpation of officers, in the form attached as Annex H to this proxy statement/prospectus;

 

4.

To elect three Class II director nominees named in this proxy statement/prospectus to Magenta’s board of directors, to serve until Magenta’s 2026 annual meeting of stockholders and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal;

 

5.

To ratify the selection of KPMG LLP as Magenta’s independent registered public accounting firm for the fiscal year ending December 31, 2023, provided that Deloitte & Touche LLP is expected to be appointed for the fiscal year if the merger is completed;

 

6.

To approve an adjournment of the Magenta special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Nasdaq Stock Issuance Proposal and/or the Reverse Stock Split Proposal; and

 

7.

To transact such other business as may properly come before the stockholders at the Magenta special meeting or any adjournment or postponement thereof.

Each of Proposal Nos. 1 and 2 is a condition to completion of the merger. The issuance of Magenta common stock in connection with the merger and the change of control resulting from the merger, or Proposal No. 1, will not take place unless Proposal No. 1 is approved by Magenta stockholders and the merger is consummated. The amendment to the Magenta charter to effect a reverse stock split of Magenta’s issued and outstanding common stock, or Proposal No. 2, will not take place unless Proposal No. 2 is approved by the requisite Magenta stockholders.

 

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Recommendation of Magenta’s Board of Directors

 

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Magenta’s board of directors has determined and believes that the issuance of shares of Magenta’s common stock pursuant to the Merger Agreement is fair to, in the best interests of, and advisable to, Magenta and its stockholders and has approved such proposal. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” the Nasdaq Stock Issuance Proposal as described in this proxy statement/prospectus.

 

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Magenta’s board of directors has determined and believes that it is fair to, in the best interests of, and advisable to, Magenta and its stockholders to approve the amendment to Magenta’s charter to effect the reverse stock split, as described in this proxy statement/prospectus. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” the Reverse Stock Split Proposal as described in this proxy statement/prospectus.

 

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Magenta’s board of directors has determined and believes that it is advisable to, and in the best interests of, Magenta and its stockholders to approve the amendment to Magenta’s charter to provide for the exculpation of officers, as described in this proxy statement/prospectus. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” the Officer Exculpation Proposal as described in this proxy statement/prospectus.

 

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Magenta’s board of directors has determined and believes that it is advisable to, and in the best interests of, Magenta and its stockholders to elect each Jeffrey W. Albers, Anne McGeorge and David T. Scadden, M.D. serve on Magenta’s board of directors in the class of directors with terms expiring at Magenta’s 2026 annual meeting of stockholders. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” each of the director nominees named in the Director Election Proposal as described in this proxy statement/prospectus.

 

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Magenta’s board of directors has determined and believes that it is advisable to, and in the best interests of, Magenta and its stockholders to ratify the selection of KPMG LLP as Magenta’s independent registered public accounting firm for the fiscal year ending December 31, 2023, provided that Deloitte & Touche LLP is expected to be appointed for that fiscal year if the merger is completed. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” the Auditor Ratification Proposal as described in this proxy statement/prospectus.

 

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Magenta’s board of directors has determined and believes that adjourning the Magenta special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Nasdaq Stock Issuance Proposal and/or the Reverse Stock Split Proposal is fair to, in the best interests of, and advisable to, Magenta and its stockholders and has approved and adopted the proposal. Magenta’s board of directors unanimously recommends that Magenta stockholders vote “FOR” the Adjournment Proposal, if necessary, as described in this proxy statement/prospectus.

Record Date and Voting Power

Only holders of record of Magenta common stock at the close of business on the record date of July 18, 2023, are entitled to notice of, and to vote at, the Magenta special meeting. At the close of business on the record date, there were four registered holders of record of Magenta common stock and there were 60,652,197 shares of Magenta common stock issued and outstanding. Each share of Magenta common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval.

Voting and Revocation of Proxies

The proxy accompanying this proxy statement/prospectus is solicited on behalf of Magenta’s board of directors for use at the Magenta special meeting.

If, as of the record date referred to above, your shares were registered directly in your name with the transfer agent for Magenta common stock, Computershare Trust Company, N.A., then you are a stockholder of record.

 

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Whether or not you plan to attend the Magenta special meeting online, Magenta urges you to fill out and return the proxy card or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.

The procedures for voting are as follows:

If you are a stockholder of record, you may vote at the Magenta special meeting. Alternatively, you may vote by proxy by using the accompanying proxy card, over the internet or by telephone. Whether or not you plan to attend the Magenta special meeting, Magenta encourages you to vote by proxy to ensure your vote is counted. Even if you have submitted a proxy before the Magenta special meeting, you may still attend the Magenta special meeting and vote. In such case, your previously submitted proxy will be disregarded.

 

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To vote at the Magenta special meeting, attend the Magenta special meeting online and follow the instructions posted at www.proxydocs.com/MGTA.

 

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To vote using the proxy card, simply complete, sign and date the accompanying proxy card and return it promptly in the envelope provided. If you return your signed proxy card before the Magenta special meeting, Magenta will vote your shares in accordance with the proxy card.

 

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To vote by proxy over the internet, follow the instructions provided on the proxy card.

 

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To vote by telephone, you may vote by proxy by calling the toll free number found on the proxy card.

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from that organization rather than from Magenta. Simply complete and mail the voting instruction card to ensure that your vote is counted. To vote at the Magenta special meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

Magenta provides internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

If you hold shares beneficially in street name and do not provide your broker or other agent with voting instructions, your shares may constitute “broker non-votes.” A “broker non-vote” occurs when shares held by a broker that are represented at the meeting are not voted with respect to a particular proposal because the broker has not received voting instructions from its client(s) with respect to such shares on how to vote and does not have or did not exercise discretionary authority to vote on the matter. Broker non-votes, if any, will be treated as shares that are present at the Magenta special meeting for purposes of determining whether a quorum exists but will not have any effect for the purpose of voting on Proposal Nos. 1 (Nasdaq Stock Issuance Proposal), 4 (Director Election Proposal), 5 (Auditor Ratification Proposal) and 6 (Adjournment Proposal). Broker non-votes, if any, will have the same effect as “AGAINST” votes for Proposal Nos. 2 (Reverse Stock Split Proposal) and 3 (Officer Exculpation Proposal). If a Magenta stockholder does not return voting instructions to their broker on how to vote their shares of Magenta common stock, such broker may be prevented from voting, or may otherwise choose not to vote, such shares held by such broker, resulting in broker non-votes with respect to such shares. To make sure that your vote is counted, you should instruct your broker to vote your shares of Magenta common stock, following the procedures provided by your broker.

All properly executed proxies that are not revoked will be voted at the Magenta special meeting and at any adjournments or postponements of the Magenta special meeting in accordance with the instructions contained in the proxy. If a holder of Magenta common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” all of the proposals in accordance with the recommendation of Magenta’s board of directors.

 

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If you are a stockholder of record of Magenta and you have not executed a support agreement, you may change your vote at any time before your proxy is voted at the Magenta special meeting in any one of the following ways:

 

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You may submit another properly completed proxy with a later date by mail or via the internet.

 

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You can provide your proxy instructions via telephone at a later date.

 

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You may send a written notice that you are revoking your proxy over the internet, following the instructions provided on the Notice of Internet Availability.

 

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You may attend the Magenta special meeting online and vote during the meeting by following the instructions at www.proxydocs.com/MGTA. Simply attending the Magenta special meeting will not, by itself, revoke your proxy and/or change your vote.

If your shares are held by your broker, bank or other agent, you should follow the instructions provided by them.

Required Vote

The presence at the Magenta special meeting of the holders of a majority of the shares of Magenta common stock outstanding and entitled to vote at the Magenta special meeting is necessary to constitute a quorum at the meeting. Abstentions and broker non-votes, if any, will be counted towards the presence of a quorum. The affirmative vote of a majority of the votes properly cast by the holders of Magenta common stock, assuming a quorum is present, is required for approval of Proposal Nos. 1, 5 and 6. The affirmative vote of a majority of the outstanding shares of Magenta common stock entitled to vote at the Magenta special meeting is required for approval of Proposal Nos. 2 and 3. With respect to Proposal No. 4, directors are elected by a plurality of the votes properly cast at the Magenta special meeting, and the three nominees for director receiving the highest number of affirmative votes properly cast will be elected. Each of Proposal No. 1 and Proposal No. 2 is a condition to completion of the merger. Therefore, the merger cannot be consummated without the approval of Proposal Nos. 1 and 2. The issuance of Magenta common stock in connection with the merger and the change of control of Magenta resulting from the merger, or Proposal No. 1, will not take place unless Proposal Nos. 1 and 2 are approved by Magenta stockholders and the reverse stock split is effected and the merger is consummated. The amendment to Magenta’s charter to effect a reverse stock split of Magenta’s issued and outstanding common stock, or Proposal No. 2, will not take place unless Proposal No. 2 is approved by the requisite Magenta stockholders. Magenta may still elect to proceed with the reverse stock split if Proposal No. 2 is approved by Magenta stockholders even if Proposal No. 1 is not approved, or even if approved, the merger is not consummated.

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Broker non-votes, if any, will be treated as shares that are present at the Magenta special meeting for purposes of determining whether a quorum exists but will not have any effect for the purpose of voting on Proposal Nos. 1 (Nasdaq Stock Issuance Proposal), 4 (Director Election Proposal), 5 (Auditor Ratification Proposal) and 6 (Adjournment Proposal). Broker non-votes, if any, will have the same effect as “AGAINST” votes for Proposal Nos. 2 (Reverse Stock Split Proposal) and 3 (Officer Exculpation Proposal).

As of June 30, 2023, the directors and executive officers of Magenta owned or controlled 8.8% of the outstanding shares of Magenta common stock entitled to vote at the Magenta special meeting. As of June 30, 2023, the Magenta stockholders that are party to a support agreement, including the directors and certain executive officers of Magenta, owned an aggregate number of shares of Magenta common stock representing approximately 6.9% of the outstanding shares of Magenta common stock. Each stockholder that entered into a support agreement, including the directors and certain executive officers of Magenta, has agreed to vote all shares of Magenta common stock owned by him or her as of the record date in favor of the adoption of the

 

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Merger Agreement and the approval of the merger and related transactions contemplated by the Merger Agreement and against any competing “Acquisition Proposal” (as defined below).

Solicitation of Proxies

In addition to solicitation by mail, the directors, officers, employees and agents of Magenta may solicit proxies from Magenta stockholders by personal interview, telephone, email, fax or otherwise. Magenta and Dianthus will share equally the costs of printing and filing this proxy statement/prospectus and proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Magenta common stock for the forwarding of solicitation materials to the beneficial owners of Magenta common stock. Magenta will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out of pocket expenses they incur in connection with the forwarding of solicitation materials. Magenta has retained Innisfree M&A Incorporated (“Innisfree”) to assist it in soliciting proxies using the means referred to above. Magenta will pay the fees of Innisfree, which Magenta expects to be up to $50,000, plus reimbursement of out-of-pocket expenses.

Other Matters

As of the date of this proxy statement/prospectus, Magenta’s board of directors does not know of any business to be presented at the Magenta special meeting other than as set forth in the notice accompanying this proxy statement/prospectus. If any other matters should properly come before the Magenta special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 

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THE MERGER

This section and the section titled “The Merger Agreement” beginning on page 180 of this proxy statement/prospectus describe the material aspects of the merger and the Merger Agreement. While Magenta and Dianthus believe that this description covers the material terms of the merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus for a more complete understanding of the merger and the Merger Agreement and the other documents to which you are referred in this proxy statement/prospectus. See the section titled “Where You Can Find More Information” beginning on page 412 of this proxy statement/prospectus.

Background of the Merger

The following chronology is a summary description of the background of the negotiations and the proposed merger and does not purport to catalogue every conversation among representatives of Magenta, Dianthus and other parties. In addition to formal Magenta board of directors and Transaction Committee meetings, Magenta management (including Stephen Mahoney, President, Chief Financial and Operating Officer, Thomas Beetham, Chief Legal Officer and Secretary, and Lisa Olson, former Head of Research and Chief Scientific Officer) had informal discussions with the Magenta board of directors and Transaction Committee members throughout the process. Further, the Magenta board of directors routinely held executive sessions among the independent directors without members of Magenta’s management in attendance. The terms of the Merger Agreement are the result of extensive arm’s-length negotiations among Magenta’s and Dianthus’ management and members of Magenta’s and Dianthus’ board of directors, along with Magenta’s financial advisors (Wedbush Securities Inc. (“Wedbush”) and Houlihan Lokey) and their respective legal counsel.

In an effort to enhance stockholder value, the Magenta board of directors and Magenta management regularly review and discuss Magenta’s business, performance, financial condition, near and long-term operations and strategic priorities. These reviews and discussions have included, among other things, the risks associated with Magenta’s product candidates, current and anticipated business and industry trends, the competitive landscape, regulatory conditions, the financial markets and macroeconomic environment (including the financing challenges associated with the broad weakness in biopharmaceutical market), opportunities for strategic relationships, collaborations and other potential long-term strategic options to strengthen Magenta’s balance sheet, obtaining financing to support the clinical development of Magenta’s product candidates and product discovery and development efforts.

In early 2022, the FDA required Magenta to conduct its first-in-human clinical trial for MGTA-117 in relapsed/refractory acute myeloid leukemia (“AML”) or myelodysplastic syndrome with excessive blasts (“MDS”) patients. This directive from the FDA was intended to evaluate the safety profile of MGTA-117 in a patient population that has few remaining clinical options available due to their resistance to prior therapies, their current active disease characterized by high numbers of cancer blast cells in the bone marrow and bloodstream and often with multiple accompanying co-morbidities. The FDA’s mandate was contrary to Magenta’s proposal to evaluate both safety and efficacy in the product candidate’s target patient population of transplant-eligible patients who are generally considered to have stable disease with lower cancer blast cell numbers and who have been responsive to prior therapy.

Based on the FDA’s feedback, Magenta’s management reassessed its projected timelines and anticipated costs necessary to generate clinical data from the relapsed/refractory AML or MDS portion of the trial, the time it would take to engage with the FDA to move into the transplant-eligible patient population, and the amount of time it would take before Magenta could generate sufficient clinical data to raise additional capital. In light of that review, as well as the challenges in the capital equity markets at that time, Magenta’s board of directors and management undertook an effort to review Magenta’s development activities and pipeline programs in an effort to reduce its capital expenditures and extend its projected cash runway.

 

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On March 3, 2022, the Magenta board of directors held a meeting by videoconference, at which representatives of Goodwin Procter LLP (“Goodwin”), Magenta’s outside legal counsel, and members of management were in attendance. The participants considered Magenta’s strategy, financing alternatives and possible efforts to extend Magenta’s cash runway. The Magenta board of directors determined that, in connection with these efforts, Magenta management should commence a process to evaluate business development, strategic or other transactions regarding Magenta and its product candidates, related assets and intellectual property (including partnerships, licensing transactions and asset sales) and authorized Magenta management to identify and engage in discussions with various third parties. The participants considered, among other things, the formation of a special committee of independent and disinterested directors for the purpose of evaluating potential business development, strategic or other transactions. A discussion ensued pursuant to which the Magenta board of directors, in consultation with Goodwin, determined that Jeff Albers, Thomas Daniel and Alison F. Lawton were each disinterested with respect to a potential transaction and free of any relationship that, in the opinion of the Magenta board of directors, would interfere with their exercise of independent judgment as a member of such special committee. Following this discussion, the Magenta board of directors (i) established a special committee of the Magenta board of directors (the “Special Committee”) to, among other things, consider and evaluate potential business development, strategic or other transactions; (ii) determined that each of Mr. Albers, Mr. Daniel and Ms. Lawton do not have any relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibility in considering and evaluating potential transactions; and (iii) designated Mr. Albers, Mr. Daniel and Ms. Lawton as members of the Special Committee, as independent and disinterested directors, based on their experience and expertise in strategic matters.

As Magenta was considering ways it might extend its cash runway, in March 2022 and continuing over the remainder of 2022, Magenta management, at the direction and oversight of the Special Committee, engaged in discussions with companies regarding potential business development transaction with respect to Magenta and one or more of its MGTA-117, MGTA-45 (formerly referred to as CD45) and MGTA-145 assets and related intellectual property. Magenta had early-stage conversations with four companies during this period and advanced to substantial discussions under customary confidentiality agreements with two of such companies (which did not contain standstill provisions). The Special Committee and Magenta management identified criteria that Magenta considered important in reviewing potential transactions, including overlap in business strategy and potential for a combination of product portfolios between the companies, timing of clinical and regulatory data inflection points, operational efficiencies, cash position, investor overlap and additional financing needs to further its pipeline, among other factors. After discussions with the Special Committee, in June 2022, Magenta terminated discussions with three of the four companies, as they did not meet a sufficient number of Magenta’s pre-identified criteria for a partner or merger candidate at such time. In addition, following preliminary discussions, the fourth company informed Magenta management that it was focused on internal priorities and was not interested in a strategic transaction with Magenta at such time.

In April 2022, the Magenta board of directors approved a restructuring plan, which included a reprioritization of its programs and development plans to more narrowly focus its capital allocation on the MGTA-117, MGTA-45 and MGTA-145 programs. In connection with the restructuring plan, Magenta reduced its workforce by 14%. As a result of such activities, Magenta projected a six-month extension of its cash runway, into the second quarter of 2024.

In April 2022, following the implementation of Magenta’s restructuring plan (which included the deprioritization of developing MGTA-145 for multiple myeloma), Magenta contacted two more companies regarding a potential partnership to share in the costs to develop MGTA-145 in multiple myeloma. In May 2022, another company reached out to Magenta to discuss the potential use of MGTA-145 in certain new applications of gene therapy. Magenta entered into customary confidentiality agreements (which did not contain standstill provisions) with these companies, but discussions did not advance for MGTA-145 in multiple myeloma as those companies did not have sufficient interest in funding the clinical development of MGTA-145. Discussions continued with the third company in gene therapy, but progress was slow due to the limited potential economics for MGTA-145.

 

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In addition, through June 2022, Magenta met with 11 companies it knew to be developing ex vivo hematopoietic stem cell (“HSC”) gene therapies to explore the potential for partnerships with MGTA-117. Meetings and discussions with eight of the 11 companies were conducted under customary confidentiality agreements (which did not contain standstill provisions). Each of these companies indicated that they were not interested in pursuing a partnership on terms favorable to Magenta due to the early-stage nature of MGTA-117, and certain of these companies expressed a desire to see clinical data demonstrating safety and efficacy prior to considering a partnership. Moreover, many of these companies indicated that they needed to establish their own product candidates’ safety and efficacy profile with current standard of care conditioning in the clinic before introducing a novel agent such as MGTA-117. During the latter half of 2022, Magenta again approached nine of these companies to share emerging clinical data from its MGTA-117 Phase 1/2 clinical trial.

In November 2022, Magenta entered into a customary confidentiality agreement (which did not contain a standstill provision) with an existing investor for the purpose of disclosing the emerging MGTA-117 clinical data to such investor prior to the data’s planned public disclosure at the American Society of Hematology (“ASH”) conference in December 2022. Magenta considered the outcome of this investor engagement to be a proxy for the interest level in the investor community for a possible financing opportunity based on the clinical trial data. After reviewing the data, the investor stated that it would need to review additional clinical data and anticipated re-engaging with Magenta when more clinical data was available.

During the latter half of 2022, Magenta also had preliminary conversations with 11 companies to gauge interest in the MGTA-45 program. However, all of these companies indicated that they were not interested in pursuing a partnership at such time on terms favorable to Magenta due to the early-stage nature of MGTA-45 and a lack of interest in conditioning agents for transplant, as that program was still several years away from a complete clinical data set in a first-in-human clinical trial. Based in part on this feedback, Magenta determined that a transaction for MGTA-45 before it had clinical data was unlikely to generate sufficient value to Magenta.

In December 2022, Magenta presented its emerging clinical trial data for MGTA-117 at the ASH conference. Later that month, Magenta announced that it stopped dosing in Cohort 4 of the MGTA-117 Phase 1/2 clinical trial due to the observance of dose limiting toxicities (“DLTs”) involving pulmonary distress in two of the three participants dosed in Cohort 4. As a result of these observations, and due to the unexpected nature of the pulmonary involvement, two Suspected Unexpected Serious Adverse Reactions (“SUSARs”) were reported to the FDA. In accordance with the clinical trial protocol and, following the recommendation of the trial’s Safety Cohort Review Committee, Magenta resumed dosing at a lower dose level in Cohort 3.

Following the second SUSAR in December 2022, in connection with Magenta’s ongoing efforts to consider alternatives regarding the possible future development of its programs, Magenta contacted over 35 companies and four venture firms to assess third party interest in its programs. During this time, Magenta had meetings with over 20 of such parties. Following such discussions, conversations advanced with three parties under customary confidentiality agreements (without a standstill provision).

On January 25, 2023, Magenta announced that one of the additional participants dosed in Cohort 3 in the clinical trial experienced a Grade 5 serious adverse event (respiratory failure and cardiac arrest resulting in death) deemed to be possibly related to MGTA-117, which was reported to the FDA as the third SUSAR of the MGTA-117 clinical trial. After consultation with the trial’s Safety Cohort Review Committee, and with the highest regard for patient safety, Magenta voluntarily paused all dosing in the clinical trial. The FDA subsequently placed the trial on partial clinical hold in February 2023, which would have required Magenta to reestablish safety beginning at the Cohort 2 dose level.

On January 26, 2023, the Magenta board of directors held a meeting by videoconference, at which members of management and representatives of Goodwin were present, to review the future of the MGTA-117 program following the third SUSAR in the MGTA-117 Phase 1/2 clinical trial, as well as Magenta’s broader portfolio of programs to determine if one or more of the programs could have meaningful value as stand-alone programs or

 

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together as a whole. At the start of the meeting, representatives of Goodwin provided an overview of legal considerations in connection with a potential transaction, including the directors’ fiduciary duties under Delaware law in the context of a strategic transaction (including mergers, acquisitions, dissolution and insolvency), the management of any actual or potential conflicts, and the transaction process. During this meeting, management reviewed its business development efforts to license, sell or otherwise partner the MGTA-117, MGTA-145 and MGTA-45 assets. The Magenta board of directors then reviewed each of its programs in various scenarios, including scenarios where Magenta would wind down the development of its other programs and allocate all of its capital in continuing to pursue only MGTA-117 or MGTA-45 alone, as well as the status and value in its MGTA-145 program, and the Magenta board analyzed the ability and likelihood of Magenta to capture value in each scenario. The Magenta board of directors first discussed MGTA-117, including the safety events in the MGTA-117 Phase 1/2 trial, the lack of third-party interest to date, investor interest and value perception for possible revised clinical studies for MGTA-117, feedback from regulatory agencies to date, the possible development pathway and probability of success in relation to the requisite time and costs required and concluded that the probability of success of MGTA-117 was low. The Magenta board of directors next discussed MGTA-45, including the preclinical status of the program, the lack of third-party interest to date, potential alternative regulatory paths in Europe, development timelines and costs required. The Magenta board of directors concluded that any value inflection point for the development of MGTA-45 would likely coincide with the exhaustion of Magenta’s capital resources. Next, the Magenta board of directors reviewed MGTA-145 in light of the lack of third-party interest to-date, the lack of progress in enrollment in the MGTA-145 Phase 2 clinical trial in sickle cell disease, the need to better optimize the product candidate’s dosing regimen, investor perception and overall potential return of value on the program. The Magenta board of directors then determined that MGTA-145 would not have sufficient value to be the only asset of Magenta and may draw resources away from either MGTA-117 or MGTA-45, which were Magenta’s primary programs.

The Magenta board of directors also considered various financing alternatives, as well as the potential value of Magenta discontinuing all of its programs and focusing on cost preservation activities. Magenta’s board and management weighed the potential value that Magenta could deliver to stockholders in the event of a possible reverse merger or liquidation scenario, compared to the continued development of its programs. Following such discussion, the Magenta board of directors determined that none of MGTA-117, MGTA-145 and MGTA-45 merited further development by Magenta, and, as such, that Magenta should discontinue its programs and other discovery and development activities, and focus its efforts on pursuing an acquisition, merger, business combination or other strategic transaction. The participants also determined that a significant reduction in force would be required as a result of this strategic direction. The participants then discussed various considerations for the process of identifying counterparties for a possible strategic transaction, as well as a process for selling Magenta’s remaining assets and restructuring the organization.

On February 2, 2023, Magenta announced its decision to halt further development of Magenta’s programs, including the MGTA-117 Phase 1/2 clinical trial, and to conduct a comprehensive review of strategic alternatives for the programs and Magenta. In connection with such announcement, Magenta’s management, with the Magenta board of directors’ permission, initiated a process to select a financial advisor to assist management in its review of strategic alternatives, including identifying counterparties for a possible strategic transaction.

On February 4, 2023, the Magenta board of directors approved, among other things, (i) a second restructuring plan to further reduce the company’s operations to preserve financial resources, resulting in a reduction of the company’s workforce by approximately 84%, and (ii) in connection with the board’s decision to halt further development of the company’s programs and decision to evaluate potential strategic reactions, the formation of a transaction committee of the Magenta board of directors (the “Transaction Committee”) to review strategic alternatives, for the purpose of evaluating an acquisition, merger, business combination or other transaction of Magenta and, if it chooses, recommend such transaction(s) to the Magenta board of directors. The Magenta board of directors appointed Mr. Albers, Dr. Booth, Mr. Daniel and Ms. Lawton as members of the Transaction Committee based on its determination that these directors were each disinterested with respect to a potential transaction and free of any relationship that, in the opinion of the Magenta board of directors, would

 

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interfere with their exercise of independent judgment in carrying out his or her responsibility in considering and evaluating a potential strategic transaction.

On February 6, 2023, the Magenta board of directors held a meeting by videoconference at which members of Magenta management and representatives of Wedbush and Goodwin were present. In connection with Magenta’s pursuit of strategic alternatives, Wedbush provided an overview of its financial advisory expertise, as well as potential business combination timelines, related activities, potential transaction structures and relevant precedents. The discussion covered a variety of topics, including the potential relevance of Magenta’s net cash position, the impact of its existing sublease obligations, the potential criteria to be considered in selecting a potential business combination partner, certain considerations regarding asset sales in connection with or in advance of such transactions, and the role of the Transaction Committee in such process. The representatives of Wedbush then departed the meeting. Magenta’s management then discussed the formal engagement of Wedbush, including the terms of a proposed engagement letter between Magenta and Wedbush, and noted Wedbush’s relationship and familiarity with Magenta (including as lead manager in Magenta’s initial public offering in 2018), and its qualifications, professional reputation, experience and expertise as a transaction advisor for reverse mergers in the biopharmaceutical industry. Based on these factors, the Magenta board of directors authorized the engagement of Wedbush to serve as Magenta’s financial advisor in connection with a potential strategic transaction and Magenta’s entry into an engagement letter, dated February 6, 2023, between Magenta and Wedbush.

On February 14, 2023, the Transaction Committee held a meeting by videoconference at which members of Magenta management and representatives of Wedbush were present. At the meeting, representatives of Wedbush reviewed counterparty outreach to date, potential strategic alternatives and discussed the process by which Wedbush, together with Magenta management, were identifying companies that Magenta could evaluate as potential counterparties in a reverse merger process. Representatives of Wedbush then reviewed the current market conditions, various criteria to consider and overall transaction process, as well as other items that the Transaction Committee and Magenta might consider when embarking on a strategic review process, including expectations for timelines and schedules.

On February 21, 2023, the Transaction Committee held a meeting by videoconference, at which members of Magenta management and representatives of Wedbush were present. Representatives of Wedbush reviewed the status of Magenta’s process for identifying potential counterparties and outlined key considerations for the Magenta board of directors, management and the Transaction Committee’s review of such counterparties. Next, Magenta management provided an update on the status of Magenta management, the Magenta board of directors and the Transaction Committee’s review and ranking of such companies based on any potential indications of interest received through Wedbush. The Transaction Committee and the members of management, together with input from Wedbush, discussed and agreed upon the proposed criteria that would be used to evaluate any potential indications of interest, consisting of the following factors: the stage of development of the counterparty’s product candidates, including whether they were in human clinical trials and how much progress they had made through those trials, or whether they were only in pre-clinical studies; the attractiveness of the counterparty’s technology, including its innovation and/or whether there is a strong biologic rationale for disease modification; the depth of its product candidate development pipeline, including the number of product candidates that are in its pipeline; the quality of any clinical data generated to date and their implications for potential success for future studies and/or potential regulatory approval; regulatory path and interactions, including whether the development pathway for any product candidates is well-understood or whether there exists positive or negative feedback from the regulatory agencies; the quality of management, board and investor base; potential value inflection milestones in the relative near term, including within the anticipated cash runway period following the closing of a transaction; readiness to be a U.S. publicly traded company, including the availability of audited financial statements; the complexity of the manufacturing process and impact on cost of goods; anticipated time to commercialization; commercial opportunity, including competitive differentiation, pricing, reimbursement and potential market share; the strength of its intellectual property position and length of exclusivity; insider and potential new investor support for capitalizing the counterparty in a concurrent financing;

 

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the counterparty’s ability to fund operations following the completion of a transaction with Magenta and timing to next data event and potential value inflection point; and the proposed relative valuations and pro forma ownership splits of the combined company’s equity (collectively, the “Criteria”). Magenta applied the Criteria to potential counterparties on a holistic basis in considering their relative potential strengths and weaknesses and did not change (nor reprioritize) the Criteria over time.

Over the course of February 2023 and March 2023, representatives of Wedbush and Magenta contacted, or were contacted by, 221 potential counterparties regarding their interest in a potential strategic transaction with Magenta. Counterparties were primarily privately-held companies that were identified, or identified themselves, based on their need to obtain financing and their interest in becoming a public company with access to the public capital markets. Representatives of Wedbush distributed 121 process letters requesting that such potential counterparties submit non-binding indications of interest with respect to a strategic transaction with Magenta. At the direction of the Magenta board of directors and the Transaction Committee, Magenta management and its financial and legal advisors (including Wedbush and Goodwin), conducted due diligence on multiple potential counterparties, focusing their diligence on strategic, scientific and clinical diligence, as well as competition and other business factors. These advisors included several employees of Atlas Venture, who assisted with Magenta’s due diligence. Of the 121 process letters sent by Wedbush to potential counterparties, 51 counterparties submitted non-binding indications of interest, and 24 of these counterparties executed customary confidentiality agreements with Magenta (none of which included standstill provisions).

On February 27, 2023, the Transaction Committee held a meeting by videoconference, at which members of Magenta management and representatives of Wedbush were present. Representatives of Wedbush reviewed the status of outreach to potential counterparties and indications of interest received thus far. The participants discussed the status of their review of the indications of interest compared to the Criteria and additional information learned about the counterparties. After reviewing all of the submitted indications of interest, the participants selected 12 indications of interest to prioritize and invite to make management and due diligence presentations. After hearing from each counterparty, the Magenta management team, together with the Transaction Committee, deprioritized seven potential counterparties primarily due to some or several of the following factors: such counterparties had only generated preclinical data to date; they were deemed as having a lower likelihood of success because their technology was based on unvalidated targets or had known safety concerns; there was a perceived lack of a compelling commercial market opportunity; they had a low cash balance and there were concerns about their ability to raise sufficient additional funds; and/or their readiness for public markets was uncertain. Accordingly, five indications of interested were selected for further evaluation, including:

 

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The indication of interest from Dianthus, which was received on February 23, 2023, and which proposed a traditional stock-for-stock merger transaction with an ascribed value of Magenta of $60 million (assuming closing net cash of $50 million) and an ascribed value of Dianthus of $225 million (which represented a 1.2x step-up to Dianthus’ prior post-money valuation of $196 million from its financing in April 2022), with an implied ownership interest in the combined company of approximately 21% for existing Magenta equityholders, prior to any concurrent financing. Dianthus’ proposal also contemplated a concurrent financing of $75 million, with meaningful participation from existing Dianthus investors.

 

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The indication of interest from Party A, a privately held biotech company developing tissue-targeting molecules to treat autoimmune and inflammatory diseases, which was received on February 23, 2023, and which proposed a traditional stock-for-stock merger transaction with an ascribed value of Magenta of $65 million (assuming closing net cash of $55 million) and an ascribed value of Party A ranging from $225 million to $325 million, with an implied ownership interest in the combined company of a range of 17% to 22% for existing Magenta equityholders, prior to any concurrent financing. Party A’s proposal also contemplated a concurrent financing of $30 million, with meaningful participation from existing Party A investors.

 

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The indication of interest from Party B, a privately held biotech company developing therapies to treat diseases of the central nervous system, which was received on February 23, 2023, and which proposed a traditional stock-for-stock merger transaction with an ascribed value of Magenta ranging from $55 million to $67 million (assuming closing net cash range of $50 million to $60 million, respectively) and an ascribed value of Party B ranging from $360 million to $410 million, respectively, with an implied ownership interest in the combined company of a range of 13% to 14% for existing Magenta equityholders, prior to any concurrent financing. Party B’s proposal also contemplated a concurrent financing in the range of $50 to $75 million, with meaningful participation from existing Party B investors.

 

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The indication of interest from Party C, a privately held biotech company developing therapies to treat oncology indications, which was received on February 23, 2023, and which proposed a traditional stock-for-stock merger transaction with an ascribed value of Magenta of $70 million (assuming closing net cash of $60 million) and an ascribed value of Party C of $202 million, with an implied ownership interest in the combined company of approximately 25.7% for existing Magenta equityholders, prior to any concurrent financing. Party C’s proposal also contemplated a concurrent financing of $75 million, with meaningful participation from existing Party C investors.

 

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The indication of interest from Party D, a privately held biotech company developing therapies to treat rare diseases, which was received on February 23, 2023, and which proposed a traditional stock-for-stock merger transaction with an ascribed value of Magenta of $75 million (assuming closing net cash of $60 million) and an ascribed value of Party D of $150 million, with an implied ownership interest in the combined company of approximately 33.3% for existing Magenta equityholders, prior to any concurrent financing. Party D’s proposal also contemplated a concurrent financing of $55 million.

During the meeting, Magenta’s management and the Transaction Committee also reviewed potential conflicts between certain members of Magenta’s board of directors, including Mr. Albers and Dr. Booth, and certain potential counterparties to a potential strategic transaction and determined that only Dr. Booth, as a general partner with Atlas Venture, would be recused from deliberations and any related votes relating to Party A and any other Atlas Venture-affiliated companies. Beginning at this meeting, representatives of Wedbush provided the Transaction Committee and Magenta management with customary disclosures regarding any material relationships that Wedbush had with the proposed counterparties. In particular, the participants noted Dr. Booth’s role as a general partner with Atlas Venture and that Atlas Venture was an investor in certain of the other potential counterparties, including Party A. Further, it was noted that Goodwin was outside legal counsel to one of the potential counterparties, and that an affiliate of Wedbush, Wedbush Healthcare Partners, was an investor in two of the potential counterparties, including Dianthus. Magenta’s Chief Legal Officer then reviewed the fiduciary duties under Delaware law of the members of the Transaction Committee and the process by which any conflicted board members or advisors would be recused from certain discussions and decisions to approve a final strategic transaction counterparty in the event that a conflict was determined to exist.

Beginning on February 27, 2023, Magenta requested each of the 12 counterparties identified during the February 27, 2023 Transaction Committee meeting to make presentations to the Transaction Committee members and management, and to otherwise be available for due diligence sessions with Wedbush, the Transaction Committee and Magenta’s board of directors, management, and financial and legal advisors. Additionally, Dianthus and Party A subsequently entered into joinders to their respective confidentiality agreements to include customary standstill provisions.

Between March 1, 2023 and March 28, 2023, a stockholder of Magenta (the “Investor”) made several unsolicited inquiries to Stephen Mahoney, the President, Chief Financial and Operating Officer of Magenta, to inquire whether Magenta would have an interest in the Investor proposing a cash tender offer for Magenta at a discount to its current cash position. No specific proposal, terms or valuation were discussed during this conversation, or any subsequent conversation between the Investor and representatives of Magenta. In addition, the Investor inquired as to the status of Magenta’s sublease liabilities due to its potentially significant impact on Magenta’s final net cash position, in response to which Mr. Mahoney provided the Investor with the publicly available information regarding the sublease.

 

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On March 2, 2023, the Transaction Committee held a meeting by videoconference, at which members of Magenta’s management were present, to discuss the Investor’s inquiry regarding Magenta’s potential interest in a tender offer. The participants discussed the possible advantages and disadvantages to Magenta’s stockholders of a potential cash tender offer at a discount to its net cash value in light of Magenta’s efforts to identify counterparties for a potential strategic transaction that could deliver value to Magenta shareholders in excess of its cash. The meeting participants discussed the Investor’s interest and considered whether to offer the Investor the opportunity to enter into a customary confidentiality agreement with Magenta to consider strategic alternatives. In addition, the Transaction Committee briefly discussed a suggestion by Goodwin for the Magenta board of directors to consider adopting a stockholder rights agreement to help Magenta’s board of directors maintain control of the process of evaluating strategic alternatives. The Transaction Committee concluded that the proposed responses to the Investor should be presented to the full Magenta board of directors for review, along with the suggestion to adopt a stockholder rights agreement.

Between March 2, 2023 and March 6, 2023, each of the 12 counterparties (including Dianthus, Party A, Party B, Party C and Party D) met with and presented their corporate presentation to the Transaction Committee, members of Magenta management and representatives of Wedbush. During this period, representatives of Dianthus were independently engaged in exploratory discussions with potential investors regarding such investors potential interest and preference in pursuing a reverse merger transaction, private financing or another transaction to support the clinical development of Dianthus’ pipeline (including Dianthus’ current and planned preclinical and clinical trials).

On March 6, 2023, the Magenta board of directors held a meeting by videoconference, at which members of Magenta management and representatives of Goodwin were present. Management and members of the Transaction Committee reported on the Investor’s proposal to initiate a tender offer. The participants discussed the possible advantages and disadvantages to Magenta’s stockholders of a potential cash tender offer at a discount to its net cash value. Magenta’s board of directors indicated its support for continuing its current process of evaluating strategic alternatives on its current timeline, and that it would perform the appropriate analyses to determine which path forward would be in the best interests of Magenta and its stockholders. Magenta’s board of directors determined that Magenta’s management should offer to enter into a customary confidentiality agreement with a standstill provision with the Investor to discuss strategic alternatives. During this meeting, representatives of Goodwin also reviewed the process for putting in place a stockholder rights agreement to help Magenta’s board of directors maintain control of the process of evaluating strategic alternatives, in order to appropriately consider all of Magenta’s strategic alternatives. Magenta’s board of directors agreed that Goodwin should start preparing such a stockholder rights agreement, in the event that the Magenta board of directors determined that it was in the best interests of Magenta to adopt such a plan.

On March 7, 2023, the Transaction Committee held a meeting by videoconference, at which members of Magenta management and representatives of Wedbush were present. Representatives of Wedbush reviewed the status of discussions with each of the 12 potential counterparties that Magenta’s management and the Transaction Committee had identified as a priority based on the Criteria, including Dianthus, Party A, Party B, Party C and Party D. The participants focused on potential counterparties’ strengths and weaknesses with respect to fundraising ability, valuations, product candidate viability, potential data readouts, competition and other Criteria. In the course of the discussion, the meeting participants eliminated many of the indications of interest received as not viable, based on the Criteria. In particular, the Transaction Committee decided to terminate discussions with a number of these counterparties because, following extensive management presentations and due diligence, the Transaction Committee determined that such counterparties were unlikely to meet a sufficient number of the Criteria, including that such counterparties had only generated preclinical data to date; they were deemed as having a lower likelihood of success because their technology was based on unvalidated targets or had known safety concerns; there was a perceived lack of a compelling commercial market opportunity; they had a low cash balance and there were concerns about their ability to raise sufficient additional funds; and/or their readiness for public markets was uncertain. The meeting participants also discussed other potential strategic alternatives, including a liquidation or dissolution of Magenta. Following such discussions, the Transaction

 

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Committee indicated its support for Magenta management and representatives of Wedbush to prioritize engaging in additional due diligence with each of Dianthus and Party A, while continuing to engage with Party B, Party C and Party D.

Beginning on March 7, 2023, the Transaction Committee and representatives of Wedbush conducted additional due diligence on the five counterparties (Dianthus, Party A, Party B, Party C and Party D). This additional due diligence included holding videoconferences with counterparty management, evaluating answers to submitted questions or reviewing the contents of counterparty virtual data rooms.

On March 15, 2023, Magenta’s management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) provided an update to members of the Transaction Committee and discussed their evaluation of the counterparties based upon the counterparties’ presentations and additional Magenta management due diligence. Upon their review, the Transaction Committee and Magenta’s management determined that Dianthus and Party A were the two lead candidates for a potential strategic transaction based upon the evaluation guidelines outlined in the Criteria due to the relative attractiveness of their technology and development pipeline, the likelihood and timing of approval of their respective product candidates based on clinical development plans, as well as their commercial potential, valuation, and the relative financing risk of each candidate, in addition to satisfying most of the other Criteria, and instructed Wedbush to deliver draft term sheets to Dianthus and Party A. Subsequently, the chief executive officers of both Dianthus and Party A contacted Mr. Mahoney to express their interest in pursuing the proposed transaction.

On March 17, 2023, Wedbush sent draft term sheets that were reviewed and approved by the Transaction Committee and Magenta’s management to Dianthus and Party A, which proposed a transaction structure that would allow for an accelerated closing as well as other terms and conditions related to valuation, timelines and the concurrent financing. Due to a possible conflict of interest for Goodwin with respect to Party A, Magenta engaged another law firm to direct the term sheet negotiations.

On March 19, 2023, Dianthus sent a revised term sheet to Magenta, which proposed a traditional reverse merger transaction with an ascribed value of Dianthus of $225 million, with an implied ownership interest in the combined company of approximately 75% for Dianthus equityholders and an ascribed value of Magenta of $75 million (assuming closing net cash of $60 million) with an implied ownership interest in the combined company of approximately 25% for existing Magenta equityholders, in each case, prior to any concurrent financing. Dianthus’ proposal also contemplated a concurrent financing of $75 million, with meaningful participation from existing Dianthus investors.

Between March 20, 2023 and March 21, 2023, Ms. Lawton (the Chair of Magenta’s board of directors) had brief, introductory conversations with representatives of Party A and Dianthus (including Marino Garcia, President and Chief Executive Officer), respectively, during which such representatives expressed their interest in a potential strategic transaction with Magenta. No terms were discussed during these conversations.

On March 20, 2023, Party A sent a revised term sheet to Wedbush, which proposed a sign and close stock-for-stock merger transaction with an ascribed value of Party A of $235 million, and an ascribed value of Magenta of $75 million with an implied ownership interest in the combined company of approximately 24% for existing Magenta equityholders, prior to any concurrent financing. Party A’s proposal also contemplated a concurrent financing of $50 million, with meaningful participation from existing Party A investors.

On March 21, 2023, the Transaction Committee held a meeting by videoconference, at which members of Magenta management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush and Goodwin were present. During this meeting, representatives of Wedbush reviewed the five candidates (Dianthus, Party A, Party B, Party C, and Party D) that the Transaction Committee and Magenta’s board of directors and management had identified as high-priority in the course of the strategic transaction review process based on the Criteria. Following this review, the meeting participants discussed the two leading candidates, Dianthus and Party A. Representatives of Wedbush reviewed the status of negotiations and the proposed terms of

 

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a transaction with each of Party A and Dianthus, including the proposed size of concurrent financing and the proposed structure of the transaction as reflected by the revised term sheets, as well as potential negotiation strategies for each candidate. The participants also further analyzed Dianthus and Party A against the Criteria, focusing on each candidate’s scientific and commercial opportunity, potential for success, valuation, and the relative financing risk of each candidate. In order to avoid a conflict of interest vis-à-vis Dianthus and Party A, respectively, Dr. Booth and the representatives of Wedbush then departed the meeting to allow the remaining participants to continue the discussion in their absence. Following additional discussions, the Transaction Committee directed Magenta management and Wedbush to prioritize engaging with Dianthus and Party A (including conducting further diligence on both parties), and recommended that both Dianthus and Party A be presented to the Magenta board of directors for further review and consideration. The Transaction Committee also indicated that the Magenta board of directors should, upon selecting a candidate, direct Magenta to enter into an exclusive negotiation period with such candidate.

Also on March 21, 2023, representatives of Wedbush communicated to representatives of Dianthus that Magenta would be willing to agree to a traditional reverse merger in exchange for an increase from $75 million to $80 million of the valuation attributed to Magenta. Representatives of Dianthus agreed to the proposed increase on March 23, 2023.

Also on March 21, 2023 and March 22, 2023, Party A’s financial advisors communicated with Wedbush that after review, Party A would prefer a traditional reverse merger structure rather than a sign and close structure. In response, Wedbush indicated to Party A’s financial advisors that Magenta would be willing to agree to a traditional reverse merger process in exchange for an increase from $75 million to $80 million of the valuation attributed to Magenta. Representatives of Wedbush also communicated that Magenta requested Party A decrease their valuation and increase the size of its proposed concurrent financing. Representatives of Party A responded to Wedbush stating that it would be willing to decrease its valuation from $235 million to $225 million and increase the size of its proposed concurrent financing to $75 million, but without confirmation of additional participation from existing Party A investors. Party A was also not willing to increase its ascribed valuation of Magenta.

On March 22, 2023, Magenta’s board of directors, other than Dr. Booth, held a meeting by videoconference, at which Magenta’s management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush and Goodwin were present. Representatives of Wedbush reviewed the process that Magenta and the Transaction Committee undertook to arrive at the list of strategic transaction candidates, including the Criteria used and the status of the leading two candidates, Dianthus and Party A. The participants evaluated Party A and Dianthus against the Criteria, focusing on each candidate’s scientific and commercial opportunity, potential for success, valuation, and the relative financing risk. The participants then reviewed the status of negotiations with each of Dianthus and Party A, including the term sheet interactions with Dianthus and Party A. Representatives of Wedbush noted that they had encouraged both counterparties to increase their relative valuations of Magenta. Representatives of Wedbush also noted that they had informed Party A that Magenta viewed Party A’s proposed increase in its valuation of itself included in its proposal since its last financing as higher than expected, and that, in response, Party A was willing to decrease its valuation of itself in its proposal from $235 million to $225 million and increase the size of its proposed concurrent financing to $75 million, but with no additional participation from existing Party A investors. Party A was also not willing to increase its ascribed valuation of Magenta. The directors and members of Magenta management present, with the assistance of the representatives from Wedbush and Goodwin, continued reviewing the other key elements of the term sheets proposed by Magenta, including the target net cash position of Magenta at closing, the cash collar, and the concept of a contingent value right whereby Magenta stockholders would receive consideration related to the sale of its legacy business.

After the members of the Wedbush team left the meeting, the discussion continued regarding the strengths and weaknesses of Dianthus and Party A in light of the Criteria, including, without limitation, market precedents, management teams, product candidate potential, financing ability and competitive considerations. At the conclusion of the discussion, the Magenta board of directors (excluding Dr. Booth) directed Magenta

 

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management to pursue a final term sheet with Dianthus for a traditional stock-for-stock merger transaction, which would include the core terms presented at the meeting, including an ascribed value of Magenta of $80 million (subject to adjustment if Magenta’s closing net cash is below $59.5 million or above $60.5 million) and an ascribed value of Dianthus of $225 million, with an implied ownership interest in the combined company of approximately 26.2% for existing Magenta equityholders, prior to any concurrent financing. The term sheet also contemplated a concurrent financing of $75 million, subject to potential adjustment depending on the projected closing net cash of Magenta, with meaningful participation from existing Dianthus investors, customary representations, warranties, covenants and closing conditions for a transaction of this nature, and a provision for a 30-day exclusivity period for a reverse merger transaction between Magenta and Dianthus. The term sheet also provided that certain stockholders of each of Dianthus would enter into post-closing lock up agreements and agreements to vote in favor of the transaction, and that Magenta would have the opportunity to sell or license certain legacy assets prior to the closing of the merger transaction, and that the proceeds of such divestiture transactions would be for the benefit of Magenta’s pre-merger stockholders.

On March 22, 2023, following the discussion at the Magenta board of directors meeting, Magenta sent a further revised term sheet to Dianthus that included, among other things, an agreement to pursue a traditional reverse merger process in exchange for an increase from $75 million to $80 million of the valuation of Magenta (assuming closing net cash of $60 million). Dianthus and Magenta subsequently further negotiated the material business items outlined in the term sheet. In addition, beginning March 22, 2023, representatives of Magenta and Dianthus each conducted confirmatory due diligence with respect to the other, including numerous management diligence sessions focusing on each counterparty’s scientific technology, clinical data generated to date, commercial viability and other important business matters.

On March 23, 2023, Dianthus sent a further revised term sheet to Magenta, which reflected, among other things, an agreement to increase the valuation for Magenta from $75 million to $80 million and proposed an equal split of a planned expenditure. Later on March 23, 2023, Magenta agreed to Dianthus’ proposed revised term sheet and each party signed the final version of the term sheet on March 24, 2023 and thereby entered into a 30-day exclusive negotiation period.

On March 28, 2023, representatives of Houlihan Lokey and Mr. Mahoney, Mr. Beetham and Dr. Olson, with the Magenta board of directors’ approval, held preliminary conversations regarding a potential engagement of Houlihan Lokey to provide financial advisory services to the Magenta board of directors in the context of the potential adoption of a stockholder rights agreement.

On March 29, 2023, Goodwin provided an initial draft of the merger agreement to Gibson Dunn & Crutcher LLP (“Gibson Dunn”), Dianthus’ outside legal counsel. The initial draft included the following terms, (i) a traditional reverse merger structure, (ii) a mechanism for contingent payments to Magenta’s stockholders via a CVR Agreement, (iii) a collar for net cash of Dianthus at closing, (iv) typical reciprocal representations and warranties and interim operating covenants with respect to Magenta and Dianthus, and (v) termination fees for Magenta and Dianthus upon termination for certain specific conditions, as well as reciprocal expense reimbursement for termination for specific conditions.

On March 31, 2023, the Magenta board of directors held a meeting by videoconference, at which members of Magenta’s management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush were present. Representatives of Wedbush began by reviewing the terms of the proposed transaction with Dianthus, including diligence, timing considerations and legal documentation. Following such discussion, the representatives of Wedbush departed the meeting. Next, the Magenta board of directors discussed the formal engagement of Houlihan Lokey to provide financial advisory services to the Magenta board of directors in the context of the potential adoption of a stockholder rights agreement, as well as to provide a fairness opinion to the Magenta board of directors in the context of a reverse merger with Dianthus. The Magenta board of directors noted Wedbush’s prior discussions with Magenta’s management, where Wedbush indicated that they were unable to provide a fairness opinion to the Magenta board of directors due to Wedbush Healthcare Partners’

 

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investment in Dianthus. The Magenta board of directors also noted Houlihan Lokey’s qualifications, professional reputation and experience, including that Houlihan Lokey is regularly engaged by other companies to render financial opinions in connection with mergers, acquisitions, divestitures, leveraged buyouts, and for other purposes. Based on these factors, the Magenta board of directors authorized and ratified the engagement of Houlihan Lokey to serve as Magenta’s financial advisor in connection with the adoption of a stockholder rights agreement and to provide a fairness opinion in connection with the reverse merger with Dianthus. Such engagement letters were entered into between Magenta and Houlihan Lokey, effective March 28, 2023 and April 4, 2023, respectively.

Representatives of Goodwin and Houlihan Lokey then joined the meeting. Representatives of Goodwin provided an overview of Magenta management’s recent interactions with the Investor (including, most recently, on March 28, 2023) and, following discussion, Magenta’s board of directors determined there was a reasonable threat to corporate policy or effectiveness, and that it was reasonable to enact a stockholder rights agreement. Magenta’s board of directors therefore adopted the stockholder rights agreement, which was publicly announced on March 31, 2023. Between April 4, 2023 and April 28, 2023, Mr. Mahoney and Ms. Lawton had additional conversations with the Investor where the Investor continued to inquire about the possibility of a tender offer for Magenta. In response, Mr. Mahoney and Ms. Lawton emphasized that a customary confidentiality agreement with a standstill provision would need to be put in place before any conversations about non-public information could take place. Despite this, the Investor did not execute any confidentiality agreement with Magenta, nor did it submit a written proposal to Magenta.

Also on March 31, 2023, Magenta entered into a sublease termination and release agreement to terminate its sublease, which increased Magenta’s projected net cash position by approximately $28 million to a projected amount of approximately $60 million net cash at the closing of the merger.

On April 5, 2023, Gibson Dunn provided a revised draft of the merger agreement. This revised draft included the following terms, (i) agreement with respect to the reverse merger structure, (ii) agreement with respect to the use of a CVR Agreement to provide a mechanism for contingent payments to Magenta’s stockholders, (iii) revised definitions for the calculation of Magenta’s net cash and transaction expenses, (iv) no collar for net cash of Dianthus at closing, (v) typical reciprocal representations and warranties and interim operating covenants with respect to Magenta and Dianthus, and (vi) expanded termination fees for certain intervening events and included a reciprocal expense reimbursement cap for termination for specific conditions.

With respect to the CVR Agreement, representatives of Goodwin and Gibson Dunn exchanged drafts with the key points of negotiation revolving around the right of the post-closing go-forward company to withhold contingent payments due to Magenta’s stockholders for certain indemnity obligations.

Between April 5, 2023 through May 2, 2023, representatives of Goodwin and Gibson Dunn and Mr. Mahoney and Mr. Beetham of Magenta and Mr. Garcia and Mr. Savitz of Dianthus negotiated the remaining terms of the Merger Agreement, including the definition of net cash, the calculation of the exchange ratio based upon the ascribed values in the term sheet, representations and warranties and operating covenants of each party, the amount of the termination fees and the expense reimbursement cap, the terms of the forms of support agreement and lock-up agreement, the subscription agreement for the concurrent financing and the form of contingent value rights agreement. In particular, the parties finalized the calculation of the exchange ratio, including the treatment of “out-of-the-money” Magenta stock options, that the pre-transaction stockholders of each company would equally share the dilution from the concurrent financing, the definition of net cash, including the amount to be deducted in respect of anticipated costs of administering the CVR, the method for determining the future contractual commitments that would reduce net cash and the accounting standards applicable to the calculation of the components of the definition of net cash.

On April 7, 2023, Magenta entered into an asset purchase agreement to sell certain Magenta assets related to MGTA-45 for cash consideration of $0.8 million, reimbursement of up to $0.5 million for certain expenses and a

 

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potential $10.0 million milestone payment contingent upon the achievement of a certain regulatory milestone. During the exclusivity period prior to executing a definitive purchase agreement, the buyer agreed to reimburse Magenta for certain research and development expenses incurred.

On April 14, 2023, Ms. Lawton had a call with Mr. Moulder, Chair of the Dianthus board of directors, during which he suggested that two of Magenta’s current directors join the board of directors of the proposed combined company to supplement the six Dianthus directors currently on the Dianthus board of directors, based on the approximate percentage ownership of Magenta’s and Dianthus’ stockholders in the combined company after closing the merger. Mr. Moulder also indicated that his preference would be for Ms. Lawton and Ms. McGeorge, as Chair of the Audit Committee of the Magenta board of directors, to join the board of the combined company after closing the merger. Ms. Lawton expressed that she would share this with the Magenta board of directors to see what, if any, interest the other directors might have and whether they would be supportive of this proposal.

On April 15, 2023, Ms. McGeorge had a call with Mr. Moulder regarding the board composition of the combined company post-merger. Mr. Moulder suggested that the board of directors of the combined company to consist of the existing six board members of Dianthus plus two additional board members from Magenta. Mr. Moulder proposed that those two new board members be Ms. Lawton and Ms. McGeorge. Mr. Moulder also specified that the board of directors of the combined company would need a member who could serve as chair of its audit committee. Ms. McGeorge reviewed her skills and experience as a public company audit committee chair. Ms. McGeorge said that she would discuss the matter with Ms. Lawton to confirm that the other directors of Magenta were in agreement with the proposal. Mr. Moulder agreed to follow up with Ms. Lawton, and Ms. McGeorge agreed to have a conversation with Mr. Garcia, the Chief Executive Officer of Dianthus.

On April 17, 2023, Ms. Lawton had a videoconference with Mr. Garcia. They reviewed their respective backgrounds, perspectives on company culture and future plans. On the same day, Ms. McGeorge had a videoconference with Mr. Garcia and they discussed the potential board composition of the combined entity, the role of the audit committee chair, the skills and experience of the finance leaders of Dianthus, the audit firm of Dianthus, the requisite skills and experience needed for additional members on an audit committee of the combined company and potential composition of that audit committee. Ms. McGeorge explained that she would discuss the matter with Ms. Lawton to confirm that the other Magenta board members were in agreement with the proposal. Ms. Lawton subsequently spoke with each board member to review the proposal, and all were in agreement.

On April 20, 2023, Magenta entered into an asset purchase agreement to sell certain Magenta assets related to MGTA-145 for cash consideration of $1.0 million and a potential $5.0 million milestone payment contingent upon the achievement of a certain clinical milestone.

On April 21, 2023, Magenta entered into an asset purchase agreement to sell certain Magenta assets related to the CD117 antibodies including the clinical antibody that was used with MGTA-117 for cash consideration of $1.5 million and a potential $5.0 million milestone payment contingent upon the achievement of a certain clinical milestone.

Also on April 21, 2023, the Magenta board of directors held a meeting by videoconference, at which Magenta management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush and Goodwin were present. The participants discussed the status of the merger agreement negotiations, diligence process and the concurrent private financing in Dianthus. The participants also discussed the interactions with the Investor, related communications and the potential for the Investor to participate in the concurrent financing in Dianthus.

On April 27, 2023, the Magenta board of directors held a meeting by videoconference, at which Magenta management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush and

 

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Goodwin were present. The participants discussed the status of the merger agreement negotiations, the due diligence process and the concurrent Dianthus private financing. The participants discussed the timeline for Dianthus to conclude the concurrent financing and the impact of such timeline on the timing of the merger and related matters. Magenta’s board of directors determined to set a deadline of May 3, 2023 for Dianthus to obtain full commitments for its concurrent financing. This deadline was then communicated by Mr. Mahoney to Mr. Garcia.

On May 1, 2023, the Magenta board of directors held a meeting by videoconference, at which members of Magenta management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush, Houlihan Lokey and Goodwin were present. The participants discussed the status of Dianthus’ concurrent financing, noting that the size of the financing was now projected to be $70 million rather than the $75 million as initially predicted due to a fund-related compliance issue regarding one of the investors and the fact that such occurrence had no impact on Dianthus’ expectations regarding its ability to fund its operations into the second quarter of 2026. During the meeting, representatives of Goodwin reviewed the fiduciary duties under Delaware law of the Magenta board of directors in connection with the proposed merger with Dianthus, the terms of the merger agreement and the forms of support agreement, lock-up agreement and contingent value rights agreement. The participants also discussed the extensive due diligence process that Magenta and its representatives undertook to evaluate Dianthus, including its technology, pipeline, commercial prospects, regulatory interactions, clinical plans and data, intellectual property, agreement, legal and compliance matters, financial position and other matters. Representatives of Houlihan Lokey then reviewed and discussed with the Magenta board of directors Houlihan Lokey’s preliminary financial analyses with respect to Magenta, Dianthus and the proposed merger. Following this review, the Magenta board of directors, with the assistance of Magenta management and its advisors, discussed the anticipated operating expenses of the combined company, which the Magenta board of directors believed were reasonable for transactions in the biotechnology industry, including in light of, among other things, the expected timelines to regulatory approval and the anticipated period of patent term exclusivity for the product candidates, if approved. Magenta’s board of directors then discussed various considerations with respect to the proposed merger.

On May 2, 2023, the Magenta board of directors held a meeting by videoconference, at which members of Magenta management (including Mr. Mahoney, Mr. Beetham and Dr. Olson) and representatives of Wedbush, Houlihan Lokey and Goodwin were present. Representatives of Goodwin communicated that the Merger Agreement, the CVR Agreement, the subscription agreements and all other ancillary documents associated with the proposed merger with Dianthus were in final form, with no material changes to any of the previously communicated terms. Representatives of Goodwin then reminded the Magenta board of directors of its fiduciary duties under Delaware law in connection with a merger, which had been discussed with the Magenta board of directors throughout the process. Houlihan Lokey then reviewed its financial analyses with respect to Magenta, Dianthus and the proposed merger. Thereafter, at the request of the Magenta board of directors, Houlihan Lokey orally rendered its opinion to the Magenta board (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion dated May 2, 2023 addressed to the Magenta board of directors), as to, as of such date, the fairness, from a financial point of view, to Magenta of the exchange ratio provided for in the merger pursuant to the Merger Agreement, after giving effect to the Related Transactions. After further discussion, based on the factors cited in “—Reasons for the Merger,” the Magenta board of directors unanimously: (i) determined that the merger and the related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Magenta and its stockholders; (ii) approved and declared advisable the Merger Agreement and the related transactions contemplated by the Merger Agreement, including the issuance of shares of Magenta common stock in connection with the merger; and (iii) recommends that Magenta’s stockholders vote in favor of the Proposals. In addition, the Magenta board of directors approved an amendment to its stockholder rights plan to exempt Dianthus from certain provisions of the stockholder rights plan.

Subsequently, on May 2, 2023, Dianthus and Magenta entered into the Merger Agreement and Dianthus entered into the subscription agreement for the $70 million concurrent financing.

 

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On May 3, 2023, before opening of the Nasdaq Stock Market for trading that day, Dianthus and Magenta issued a joint press release announcing the execution of the Merger Agreement and the subscription agreement for the concurrent financing. Magenta also filed a current report on Form 8-K with the SEC announcing, among other things, the execution of the Merger Agreement and an amendment to its stockholder rights plan.

Magenta’s Reasons for the Merger

The Magenta board of directors, in consultation with financial and legal advisors and management, evaluated the terms of the Merger Agreement and the related transactions contemplated thereby and unanimously: (i) determined that the merger and the related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Magenta and its stockholders; (ii) approved and declared advisable the Merger Agreement and the related transactions contemplated by the Merger Agreement, including the issuance of shares of Magenta common stock in connection with the merger; and (iii) recommends that Magenta’s stockholders vote in favor of the Proposals.

In connection with its review of strategic alternatives, the Magenta board of directors delegated certain powers and authority to the Transaction Committee to, among other things, consider and evaluate potential strategic alternatives, including, without limitation, an acquisition, merger, business combination or other transaction, as well as strategic transactions regarding Magenta’s product candidates and related assets, including licensing transactions and asset sales. The Transaction Committee is comprised of four of the non-management, independent directors of Magenta. The Transaction Committee considered the Merger Agreement and the transactions contemplated thereby in conjunction with the Magenta board of directors.

During the course of its evaluation of the Merger Agreement and the transactions contemplated by the Merger Agreement, the Magenta board of directors (including the members of the Transaction Committee) held numerous meetings, consulted with Magenta’s senior management, including Mr. Mahoney, Dr. Olson and Mr. Beetham, Magenta’s legal counsel and financial advisors, including Goodwin, Wedbush and Houlihan Lokey, and reviewed and assessed a significant amount of information. In reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, the Magenta board of directors took into account the input of the Transaction Committee, as well as other information presented to it during the process, and considered a number of factors and scenarios that it viewed as supporting its decision to approve the Merger Agreement, including:

 

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the financial condition and prospects of Magenta and the risks associated with continuing to operate Magenta on a stand-alone basis, including in light of:

 

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Magenta’s decision, announced in February 2023, to discontinue its clinical and research programs, which resulted in a corporate restructuring and a reduction in Magenta’s workforce by 84% (in addition to a prior reduction in force of 14% in April 2022), was driven in large part by the safety events observed in participants in Magenta’s MGTA-117 Phase 1/2 clinical trial and Magenta’s determination that understanding and addressing the underlying cause of the safety events would require an extensive, costly and time consuming investigative effort, including running additional clinical studies to obtain results demonstrating that the underlying cause of the safety events had been adequately addressed for a sufficient number of study participants;

 

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investor interest and value perception for possible further development of its programs, the product candidates’ efficacy and safety profiles, stage of development, regulatory agencies’ feedback regarding development pathways, and probability of success in relation to the requisite time and costs; and

 

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difficulties encountered in Magenta’s related business development efforts to license, sell or otherwise partner its assets that could result in meaningful new capital or shared future development costs;

 

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