The following discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our consolidated financialstatements and related notes appearing at the end of this Annual Report on Form10-K. Some of the information contained in this discussion and analysis or setforth elsewhere in this Annual Report on Form 10-K, including information withrespect to our plans and strategy for our business, includes forward-lookingstatements that involve risks and uncertainties. As a result of many factors,including those factors set forth in the "Risk Factors" section of this AnnualReport on Form 10-K, our actual results could differ materially from the resultsdescribed in, or implied by, the forward-looking statements contained in thefollowing discussion and analysis.

Overview

Magenta Therapeutics, Inc. is a biotechnology company focused on improving stemcell transplantation.

In February 2023, after a review of Magenta's programs, resources andcapabilities, including anticipated costs and timelines, we announced thedecision to halt further development of our programs. Specifically, wediscontinued the MGTA-117 Phase 1/2 clinical trial in patients withrelapsed/refractory acute myeloid leukemia, or R/R AML, and myelodysplasticsyndromes, or MDS. We discontinued the MGTA-145 Phase 2 stem cell mobilizationclinical trial in patients with sickle cell disease, or SCD. Lastly, we stoppedincurring certain costs relating to MGTA-45, including manufacturing and costsrelating to certain other activities that were intended to support aninvestigative new drug application, or IND, for MGTA-45 (previously namedCD45-ADC). As a result of these decisions, we conducted a corporaterestructuring that resulted in a reduction in our workforce by 84%.

Coinciding with the decisions related to the programs and across the portfolio,we announced that we intended to conduct a comprehensive review of strategicalternatives for the company and its assets. As part of our strategic reviewprocess, we are exploring potential strategic alternatives that include, withoutlimitation, an acquisition, merger, business combination or other transaction.We are also exploring strategic transactions regarding our product candidatesand related assets, including, without limitation, licensing transactions andasset sales. There can be no assurance that the strategic review process or anytransaction relating to a specific asset, will result in Magenta pursuing such atransaction(s), or that any transaction(s), if pursued, will be completed onterms favorable to Magenta and its stockholders in the existing Magenta entityor any possible entity that results from a combination of entities. If thestrategic review process is unsuccessful, our board of directors may decide topursue a dissolution and liquidation of Magenta.

Our product candidates have been designed to improve the patient experience whenpreparing for stem cell transplant or gene therapy. Our MGTA-117 productcandidate was designed as an antibody drug conjugate, or ADC, designed todeplete CD117-expressing stem cells in the bone marrow in order to make room forsubsequently transplanted stem cells or ex vivo gene therapy products. Theprocess of making room in the bone marrow is known as conditioning, and thecurrent standard of care for conditioning utilizes chemotoxic agents. Our secondtargeted conditioning product candidate, MGTA-45, is an ADC designed toselectively target and deplete both stem cells and immune cells, and it isintended to replace the use of chemotherapy-based conditioning prior to stemcell transplant in patients with blood cancers and autoimmune diseases. Lastly,our MGTA-145 product candidate, in combination with plerixafor, is designed toimprove the stem cell mobilization process by which stem cells are mobilized outof the bone marrow and into the bloodstream to facilitate their collection forsubsequent transplant back into the body for the purpose of resetting the immunesystem.

In January 2023, we voluntarily paused dosing in our MGTA-117 Phase 1/2 clinicaltrial for MGTA-117 in patients with R/R AML and MDS after the last participantdosed in Cohort 3 in the clinical trial experienced a Grade 5 serious adverseevent, or SAE (respiratory failure and cardiac arrest resulting in death) deemedto be possibly related to MGTA-117. This safety event was reported to the FDA asthe study's third safety event which is of a type referred to as a "Suspected,Unexpected, Serious Adverse Reaction," or SUSAR. The FDA subsequently placed thestudy on partial clinical hold in February 2023.

In April 2022, we announced a plan to more narrowly focus our capital allocationon the MGTA-117 targeted conditioning program, the MGTA-45 IND-enablingactivities and the MGTA-145 stem cell mobilization efforts in sickle celldisease while also de-prioritizing other portfolio investments. We made certainreductions in our planned spending related to research platform-relatedinvestments in new disease targets, paused certain MGTA-145 investments,including the program's planned MGTA-145 dosing and administration optimizationclinical trial in healthy subjects and reduced planned general andadministrative expenses. In connection with these reductions to our plannedspending, we also reduced our workforce by 14%.

Since our inception in 2015, we have focused substantially all of our effortsand financial resources on organizing and staffing our company, businessplanning, raising capital, acquiring and developing our technology, identifyingpotential product candidates

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and undertaking preclinical studies and clinical trials, including MGTA-117,MGTA-45 and MGTA-145. We do not have any products approved for sale and have notgenerated any revenue from product sales.

Since our inception, we have incurred significant operating losses. Net losseswere $76.5 million and $71.1 million for the years ended December 31, 2022 and2021, respectively. As of December 31, 2022, we had an accumulated deficit of$402.0 million.

We expect to continue to incur costs and expenditures in connection with theprocess of evaluating our strategic alternatives. There can be no assurance,however, that we will be able to successfully consummate any particularstrategic transaction. The process of continuing to evaluate these strategicoptions may be very costly, time-consuming and complex and we have incurred, andmay in the future incur, significant costs related to this continued evaluation,such as legal, accounting and advisory fees and expenses and other relatedcharges. A considerable portion of these costs will be incurred regardless ofwhether any such course of action is implemented or transaction is completed.Any such expenses will decrease the remaining cash available for use in ourbusiness. In addition, any strategic business combination or other transactionsthat we may consummate in the future could have a variety of negativeconsequences and we may implement a course of action or consummate a transactionthat yields unexpected results that adversely affects our business and decreasesthe remaining cash available for use in our business or the execution of ourstrategic 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 theanticipated results. Any failure of such potential transaction to achieve theanticipated results could significantly impair our ability to enter into anyfuture strategic transactions and may significantly diminish or delay any futuredistributions to our stockholders.

Should we resume development of our product candidates, our ability to generateproduct revenue sufficient to achieve profitability will depend heavily on thesuccessful development and eventual commercialization of one or more of ourproduct candidates. In addition, we will incur substantial research anddevelopments costs and other expenditures to develop such product candidatesparticularly as we:

enroll and conduct clinical trials for our product candidates;

initiate and conduct preclinical studies and clinical trials of our otherproduct candidates;

develop any other future product candidates we may choose to pursue;

seek marketing approval for any of our product candidates that successfullycomplete clinical development, if any;

maintain compliance with applicable regulatory requirements;

develop and scale up our capabilities to support our ongoing preclinicalactivities and clinical trials for our product candidates and commercializationof any of our product candidates for which we obtain marketing approval, if any;

maintain, expand, protect and enforce our intellectual property portfolio;

develop and expand our sales, marketing and distribution capabilities for ourproduct candidates for which we obtain marketing approval, if any; and

expand our operational, financial and management systems and increase personnel,including to support our clinical development and commercialization efforts andour operations as a public company.

If we resume development of our product candidates, we will not generate revenuefrom product sales unless and until we successfully complete clinicaldevelopment and obtain regulatory approval for our product candidates. If weobtain regulatory approval for any of our product candidates, we expect to incursignificant expenses related to developing our commercialization capability tosupport product sales, marketing and distribution. Further, we expect to incuradditional costs associated with operating as a public company.

Should we resume development of our product candidates, we will need substantialadditional funding to support our continuing operations. Until such time as wecan generate significant revenue from product sales, if ever, we expect tofinance our operations through a combination of equity offerings, debtfinancings, collaborations, strategic alliances and marketing and distributionor licensing arrangements. We may be unable to raise additional funds or enterinto such other agreements or arrangements when needed on favorable terms, or atall. Additionally, because of the numerous risks and uncertainties associatedwith pharmaceutical product development, we are unable to accurately predict thetiming or amount of increased expenses or when or if we will be able to achieveor maintain profitability. Even if we are able to generate product sales, we maynot become profitable. Accordingly, if we fail to raise capital or enter intonecessary strategic agreements, or fail to ever become profitable, we may haveto significantly delay, scale back or discontinue the development andcommercialization of one or more of our product candidates, and we may also beforced to reduce or terminate our operations.

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As of December 31, 2022, we had cash, cash equivalents and marketable securitiesof $112.0 million. Based on our current operating plan, we believe that ourexisting cash, cash equivalents and marketable securities will enable us to fundour operating expenses and capital expenditure requirements for the next twelvemonths from the issuance date of this Annual Report on Form 10-K. See "Item 2.Management's Discussion and Analysis of Financial Condition and Results ofOperations - Liquidity and Capital Resources."

Impact of the COVID-19 Pandemic

The COVID-19 pandemic, including the emergence of various variants, has causedand could continue to cause significant disruptions to the U.S., regional andglobal economies and has contributed to significant volatility and negativepressure in financial markets.

We have been carefully monitoring the COVID-19 pandemic and its potential impacton our business and have taken important steps to help ensure the safety of ouremployees and their families and to reduce the spread of COVID-19 in theCambridge community. We have established a hybrid work-from-home policy for allemployees, as well as safety measures for those using our offices and laboratoryfacilities that are designed to comply with applicable federal, state and localguidelines instituted in response to the COVID-19 pandemic. We will continue toassess those measures as COVID-19-related guidelines evolve.

The future impact of the COVID-19 pandemic on our industry, the healthcaresystem and our current and future operations and financial condition will dependon future developments, which are uncertain and cannot be predicted withconfidence. These developments may include, without limitation, changes in thescope, severity and duration of the pandemic, the actions taken to contain thepandemic or mitigate its impact, including the adoption, administration andeffectiveness of available vaccines, the effect of any relaxation of currentrestrictions within the Cambridge community or regions in which our partners arelocated and the direct and indirect economic effects of the pandemic andcontainment measures. See "Item 1A. Risk Factors" for a discussion of thepotential adverse impact of COVID-19 on our business, results of operations andfinancial condition.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for ourresearch activities, including our drug discovery efforts, and the developmentof our product candidates, which include:

employee-related expenses, including salaries and related costs, and stock-basedcompensation expense, for employees engaged in research and developmentfunctions;

expenses incurred in connection with the preclinical and clinical development ofour product candidates, including under agreements with contract researchorganizations, or CROs;

the cost of consultants and third-party contract development and manufacturingorganizations, or CDMOs, that manufacture drug products for use in ourpreclinical studies and clinical trials;

facilities, depreciation and other expenses, which include direct and allocatedexpenses for rent and maintenance of facilities, insurance and supplies; and

payments made under third-party licensing agreements.

We expense research and development costs to operations as incurred. Advancepayments for goods or services to be received in the future for use in researchand development activities are recorded as prepaid expenses. The prepaid amountsare expensed as the related goods are delivered or the services are performed.

Our direct research and development expenses are tracked on a program-by-programbasis and consist primarily of external costs, such as fees paid to consultants,central laboratories, contractors, CDMOs and CROs in connection with ourpreclinical and clinical development activities. We do not allocate employeecosts, costs associated with our platform technology or facility expenses,including depreciation or other indirect costs, to specific product developmentprograms because these costs are deployed across multiple product developmentprograms and, as such, are not separately classified.

Should we resume development of our product candidates, the successfuldevelopment and commercialization is highly uncertain. This is due to thenumerous risks and uncertainties, including the following:

successful completion of preclinical studies and clinical trials;

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receipt and related terms of marketing approvals from applicable regulatoryauthorities;

raising additional funds necessary to complete clinical development of andcommercialize our product candidates;

obtaining and maintaining patent, trade secret and other intellectual propertyprotection and regulatory exclusivity for our product candidates;

making arrangements with third-party manufacturers, or establishingmanufacturing capabilities, for both clinical and commercial supplies of ourproduct candidates;

developing and implementing marketing and reimbursement strategies;

establishing sales, marketing and distribution capabilities and launchingcommercial sales of our products, if and when approved, whether alone or incollaboration with others;

acceptance of our products, if and when approved, by patients, the medicalcommunity and third-party payors;

effectively competing with other therapies;

obtaining and maintaining third-party coverage and adequate reimbursement;

protecting and enforcing our rights in our intellectual property portfolio;

maintaining a continued acceptable safety profile of the products followingapproval; and

the continuing impact of the COVID-19 pandemic on our industry, the healthcaresystem, and our current and future operations.

A change in the outcome of any of these variables with respect to thedevelopment of any of our product candidates would significantly change thecosts and timing associated with the development of that product candidate. Wemay never succeed in obtaining regulatory approval for any of our productcandidates.

Research and development activities have historically been central to ourbusiness model. Product candidates in later stages of clinical developmentgenerally have higher development costs than those in earlier stages of clinicaldevelopment, primarily due to the increased size and duration of later-stageclinical trials. We expect our research and development expenses to decrease inthe near future as we halted the development of our product candidates while weexplore strategic alternatives. Should we resume development of our productcandidates, we expect research and development costs to increase significantlyfor the foreseeable future as our product candidate development programsprogress.

Inflation generally affected us by increasing our cost of labor and clinicaltrial costs. While we do not believe that inflation had a material effect on ourfinancial condition and results of operations during the periods presented, itmay result in increased costs in the foreseeable future.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and relatedcosts, and stock-based compensation, for personnel in executive, finance andadministrative functions. General and administrative expenses also includedirect and allocated facility-related costs and insurance costs, as well asprofessional fees for legal, patent, consulting, pre-commercialization,accounting and audit services. We expect our general and administrative expensesto decrease in the near future due to recent workforce reductions. We do expectto incur significant costs, however, related to our exploration of strategicalternatives, including legal, accounting and advisory expenses and otherrelated charges.

Interest and Other Income, Net

Interest and other income, net, consists of interest income and miscellaneousincome and expense unrelated to our core operations.

Income Taxes

Since our inception, we have not recorded any U.S. federal or state income taxbenefits for the net losses we have incurred in each year or for our earnedresearch and orphan drug tax credits, due to our uncertainty of realizing abenefit from those items. As of December 31, 2022, we had net operating losscarryforwards for federal income tax purposes of $272.9 million, of which $17.5million begin to expire in 2035 and $255.4 million can be carried forwardindefinitely. As of December 31, 2022, we had net operating loss carryforwardsfor state income tax purposes of $272.6 million which begin to expire in 2035.As of December 31, 2022,

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we also had available research and orphan drug tax credit carryforwards forfederal and state income tax purposes of $12.9 million and $3.4 million,respectively, which begin to expire in 2035 and 2030, respectively.

Critical Accounting Policies and Significant Judgments and Estimates

Excerpt from:
MAGENTA THERAPEUTICS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K) - Marketscreener.com