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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-40969
____________________________
ENTRADA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
____________________________
Delaware81-3983399
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
6 Tide Street
Boston, MA
02210
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (857) 520-9158
____________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareTRDA
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyxEmerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2022, the registrant had 31,406,165 shares of common stock, $0.0001 par value per share, outstanding.
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We own various U.S. federal trademark applications and unregistered trademarks, including our company name and logo, that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q (Quarterly Report) may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Quarterly Report is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this Quarterly Report may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner of these trademarks, service marks and trade names will not assert, to the fullest extent under applicable law, its rights.
From time to time, we may use our website to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors Relations section of our website, available at www.entradatx.com. Investors are encouraged to review the Investors Relations section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website is not incorporated into, and does not form a part of, this Quarterly Report.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (Quarterly Report) contains express or implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that are based on our management’s belief and assumptions and on information currently available to our management. These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
the initiation, timing, progress, results and costs of conducting our research and development programs and our current and future preclinical studies and anticipated clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our current and future programs;
the ability of our preclinical studies and clinical trials to demonstrate safety and efficacy of our therapeutic candidates, and other positive results;
the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our therapeutic candidates;
the timing, scope and likelihood of regulatory filings and approvals, including timing of Investigational New Drug applications (INDs) and final U.S. Food and Drug Administration (FDA) approval of our current therapeutic candidates or any future therapeutic candidates;
the timing, scope or likelihood of foreign regulatory filings and approvals;
the ability to leverage our proprietary EEV Platform to efficiently develop additional therapeutic candidates, including by applying learnings from one program to other programs and from one indication to our other indications;
our estimates of the number of patients that we will enroll and our ability to initiate, recruit and enroll patients in and conduct and successfully complete clinical trials at the pace that we project;
the costs of manufacturing and our ability to scale-up our manufacturing and processing approaches to appropriately address our anticipated commercial needs, which will require significant resources;
our ability to establish or maintain collaborations or strategic relationships and the ability and willingness of our third-party strategic collaborators to undertake research and development activities relating to our current or future therapeutic candidates and discovery programs;
our ability to obtain funding for our operations necessary to complete further development and commercialization of our therapeutic candidates;
our ability to take advantage of expedited regulatory pathways for our therapeutic candidates;
our ability to obtain and maintain regulatory approval of our therapeutic candidates;
the implementation of our business model, and strategic plans for our business, therapeutic candidates, and technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates and other therapeutic candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property;
rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;
our financial performance and estimates of our future expenses, revenues, capital requirements, use of our cash reserves, and our needs for additional financing;
future agreements with third parties in connection with the development and commercialization of our therapeutic candidates and any other approved product;
the rate and degree of market acceptance and the size and growth potential of the markets for our therapeutic candidates, and our ability to serve those markets;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
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our ability to produce our therapeutic candidates with advantages in turnaround times or manufacturing cost;
our competitive position and the success of competing therapies that are or may become available;
our need for and ability to attract and retain key scientific, management and other personnel and to identify, hire and retain additional qualified professionals;
our expectations regarding the period during which we will remain an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act);
our anticipated use of our existing resources;
the effect of the ongoing coronavirus, or COVID-19, pandemic, or any other health epidemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies, our future clinical trials, healthcare systems and the global economy as a whole;
the impact of global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflict in Ukraine, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our common stock and our ability to access capital markets; and
other risks and uncertainties, including those listed under the caption “Risk Factors.”
In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “expect,” “estimate,” “seek,” “predict,” “future,” “project,” “potential,” “continue,” “target,” "contemplate," "possible," "can" or the negative of these terms or other comparable terminology, and similar expressions, although not all forward-looking statements contain these identifying words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Quarterly Report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the Securities and Exchange Commission (the SEC) thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this Quarterly Report represent our views as of the date of this Quarterly Report. We do not undertake any obligation to publicly update any forward-looking statement except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.
This Quarterly Report also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. All of the market data used in this Quarterly Report involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.
This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed as exhibits to this Quarterly Report. Unless the context otherwise requires, reference in this Quarterly Report to the terms “Entrada,” “Entrada Therapeutics,” “the Company,” “we,” “us,” “our,” and similar designations refer to Entrada Therapeutics, Inc. and, where appropriate, our wholly-owned subsidiary.

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SUMMARY OF MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties and are subject to change based on various factors, including those highlighted in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report). These risks include, but are not limited to, the following:
We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.
We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development programs, commercialization efforts or other operations.
We are early in our development efforts. We have not initiated clinical studies, and as a result it will be years before we commercialize a therapeutic candidate, if ever. If we are unable to identify and advance therapeutic candidates through preclinical studies and clinical trials, obtain marketing approval and ultimately commercialize them, or experience significant delays in doing so, our business will be materially harmed.
Our business is highly dependent on the clinical advancement of our programs and modalities and is especially dependent on the success of our lead EEV therapeutic candidates, ENTR-601-44 and ENTR-701. Delay or failure to advance programs or modalities, including ENTR-601-44 and ENTR-701 could adversely impact our business.
Our EEV therapeutic candidates are based on a novel therapeutic approach, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.
Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies are not necessarily predictive of the results of later preclinical studies and any clinical trials of our therapeutic candidates. We have not tested any of our therapeutic candidates in clinical trials and our therapeutic candidates may not have favorable results in clinical trials, if any, or receive regulatory approval on a timely basis, if at all.
Substantial delays in the commencement, enrollment or completion of our planned clinical trials or failure to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities could prevent us from commercializing any therapeutic candidates we determine to develop on a timely basis, if at all.
Our approach to the discovery and development of therapeutic candidates based on our EEV Platform is unproven, and we do not know whether we will be able to develop any products of commercial value, or if competing technological approaches will limit the commercial value of our therapeutic candidates or render our EEV Platform obsolete.
We rely, and expect to continue to rely, on third parties to conduct some or all aspects of our product manufacturing, research and preclinical and clinical testing, and these third parties may not perform satisfactorily or, dedicate adequate resources to meet our needs, or may be unable to acquire the necessary supplies to perform successfully.
We face significant competition, and if our competitors develop technologies or therapeutic candidates more rapidly than we do or their technologies are more effective, our business and our ability to develop and successfully commercialize products may be adversely affected.
We expect to expand our development and regulatory capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
While we will attempt to diversify our risks by developing one or more programs in each modality, there are risks that are unique to each modality and risks that are applicable across modalities. These risks may impair our ability to advance one or more of our programs in clinical development, obtain regulatory approval, or ultimately commercialize our programs, or cause us to experience significant delays in doing so, any of which may materially harm our business.
If we are unable to obtain and maintain patent protection for our EEV Platform, therapeutic development programs and other proprietary technologies we develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our therapeutic programs and other proprietary technologies we may develop may be adversely affected.
Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel.
The market price of our common stock may be volatile, and investors could lose all or part of their investment.
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Volatility in capital markets may affect our ability to access new capital, which may harm our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets.
Unstable market and economic conditions may have adverse consequences for our business, financial condition and stock price.
The material and other risks summarized above should be read together with the text of the full risk factors and in the other information set forth in this Quarterly Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission (the SEC). If any such material and other risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.
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PART I —FINANCIAL INFORMATION
Item 1. Financial Statements
ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(unaudited)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$53,311$291,064
Marketable securities162,261
Prepaid expenses and other current assets19,1617,636
Total current assets234,733298,700
Property and equipment, net7,4446,261
Restricted cash3,950
Right-of-use assets, operating leases27,382
Other non-current assets954872
Total assets$274,463$305,833
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$1,341$706
Accrued expenses and other current liabilities11,9516,013
Operating lease obligations, current portion8,259
Total current liabilities21,5516,719
Operating lease obligations, non-current19,692
Deferred rent, net of current portion396
Total liabilities41,2437,115
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, par value $0.0001; 150,000,000 shares authorized; 31,393,110 shares issued and 31,325,373 shares outstanding as of September 30, 2022 and 31,336,092 shares issued and 31,224,336 shares outstanding as of December 31, 2021
33
Additional paid‑in capital399,620392,384
Accumulated other comprehensive loss(2,747) 
Accumulated deficit(163,656)(93,669)
Total stockholders’ equity233,220298,718
Total liabilities and stockholders’ equity$274,463$305,833
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Operating expenses:
Research and development$18,958$10,513$50,924$23,564
General and administrative6,9783,85120,7459,103
Total operating expenses25,93614,36471,66932,667
Loss from operations(25,936)(14,364)(71,669)(32,667)
Other income (expense):
Interest and other income (expense), net799(66)1,682(44)
Total other income (expense), net799(66)1,682(44)
Net loss$(25,137)$(14,430)$(69,987)$(32,711)
Net loss per share attributable to common stockholders, basic and diluted$(0.80)$(9.78)$(2.24)$(24.18)
Weighted‑average common shares outstanding, basic and diluted31,298,0521,475,17031,273,6121,352,721
Other comprehensive loss:
Unrealized loss on marketable securities(482) (2,747) 
Total other comprehensive loss(482) (2,747) 
Total comprehensive loss$(25,619)$(14,430)$(72,734)$(32,711)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY
(In thousands, except share amounts)
(unaudited)
Redeemable Convertible
Preferred Stock
Common StockAdditional
Paid‑in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
(Deficit) Equity
SharesAmountSharesAmount
Balances at December 31, 2020
85,299,885 $81,658 1,244,139 $ $1,021 $ $(42,511)$(41,490)
Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $420
53,522,099 115,831 — — — — — — 
Issuance of common stock upon exercise of stock options— — 16,453 — 29 — — 29 
Vesting of restricted common stock— — 4,326 — — — — — 
Vesting of early exercised options— — 6,529 — 8 — — 8 
Stock‑based compensation— — — — 164 — — 164 
Net loss— — — — — — (8,380)(8,380)
Balances at March 31, 2021
138,821,984 $197,489 1,271,447 $ $1,222 $ $(50,891)$(49,669)
Issuance of common stock upon exercise of stock options— — 119,359 — 212 — — 212 
Vesting of restricted common stock— — 4,327 — — — — — 
Vesting of early exercised options— — 10,592 — 18 — — 18 
Stock‑based compensation— — — — 326 — — 326 
Net loss— — — — — — (9,901)(9,901)
Balances at June 30, 2021
138,821,984 $197,489 1,405,725 $ $1,778 $ $(60,792)$(59,014)
Issuance of common stock upon exercise of stock options— — 57,661 — 106 — — 106 
Vesting of restricted common stock— — 2,884 — — — — — 
Vesting of early exercised options— — 81,504 — 170 — — 170 
Stock‑based compensation— — — — 577 — — 577 
Net loss— — — — — — (14,430)(14,430)
Balances at September 30, 2021
138,821,984 $197,489 1,547,774 $ $2,631 $ $(75,222)$(72,591)

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










ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY - CONTINUED
(In thousands, except share amounts)
(unaudited)
Redeemable Convertible
Preferred Stock
Common StockAdditional
Paid‑in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
(Deficit) Equity
SharesAmountSharesAmount
Balances at December 31, 2021
 $ 31,224,336 $3 $392,384 $ $(93,669)$298,718 
Issuance of common stock upon exercise of stock options— — 24,891 — 50 — — 50 
Vesting of early exercised options— — 15,224 — 35 — — 35 
Stock‑based compensation— — — — 1,794 — — 1,794 
Other comprehensive loss— — — — — (1,535)— (1,535)
Net loss— — — — — (21,671)(21,671)
Balances at March 31, 2022
 $ 31,264,451 $3 $394,263 $(1,535)$(115,340)$277,391 
Issuance of common stock upon exercise of stock options— — 5,259 — 11 $— — 11 
Vesting of early exercised options— — 14,738 — 34 — — 34 
Stock‑based compensation— — — — 2,512 — — 2,512 
Other comprehensive loss— — — — — (730)— (730)
Net loss— — — — — — (23,179)(23,179)
Balances at June 30, 2022
 $ 31,284,448 $3 $396,820 $(2,265)$(138,519)$256,039 
Issuance of common stock upon exercise of stock options— — 26,868 — 60 — — 60 
Vesting of early exercised options— — 14,057 — 33 — — 33 
Stock‑based compensation— — — — 2,707 — — 2,707 
Other comprehensive loss— — — — — (482)— (482)
Net loss— — — — — — (25,137)(25,137)
Balances at September 30, 2022
 $ 31,325,373 $3 $399,620 $(2,747)$(163,656)$233,220 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENTRADA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net loss$(69,987)$(32,711)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense1,370753
Stock‑based compensation expense7,0131,068
Amortization of premiums and discounts on marketable securities, net255 
(Gain) loss on disposal of property and equipment(1)153 
Changes in operating assets and liabilities:
Prepaid expenses and other current assets(12,020)(449)
Right-of-use assets, operating leases5,609— 
Other non-current assets(82)(1,923)
Accounts payable694311
Accrued expenses and other current liabilities6,1042,138
Operating lease liabilities(5,437)— 
Deferred rent339
Net cash used in operating activities(66,482)(30,321)
Cash flows from investing activities:
Purchases of property and equipment(2,179)(3,258)
Purchases of marketable securities(221,977)
Maturities of marketable securities56,714  
Net cash used in investing activities(167,442)(3,258)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs115,831
Proceeds from exercise of stock options121347
Proceeds from the early exercise of stock options528
Net cash provided by financing activities121116,706
Net increase (decrease) in cash, cash equivalents, and restricted cash(233,803)83,127
Cash, cash equivalents, and restricted cash at beginning of period291,06439,045
Cash, cash equivalents, and restricted cash at end of period$57,261$122,172
Supplemental cash flow disclosures:
Deferred financing costs in accounts payable and accrued expenses$$505
Purchases of property and equipment included in accounts payable and accrued expenses$32$832
Right-of-use assets obtained in exchange for operating lease liabilities$32,991$
Transfer of deposits for equipment from operating to investing cash flows$495$
Vesting of options early exercised subject to repurchase$102$195
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENTRADA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of the Business
Organization
Entrada Therapeutics, Inc. (Entrada or the Company) aims to transform the lives of patients by establishing Endosomal Escape Vehicle (EEVTM) therapeutics as a new class of medicines and to become the world’s foremost intracellular therapeutics company. The Company was incorporated in Delaware on September 22, 2016 and its principal offices are located in Boston, Massachusetts.
Liquidity and Capital Resources
Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its proprietary, highly versatile and modular EEV platform (EEV Platform), advancing development of its portfolio of programs and general and administrative support for these operations, including raising capital. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, technical risks associated with the successful research, development and manufacturing of therapeutic candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and the ability to secure additional capital to fund operations. Therapeutic candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.
In accordance with Accounting Standards Codification (ASC) 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The Company has incurred losses since its inception, including losses of $70.0 million and $32.7 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the Company had an accumulated deficit of $163.7 million. To date, the Company has funded its operations primarily through the sale of equity securities. The Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future.
The Company expects that its cash, cash equivalents and marketable securities of $215.6 million as of September 30, 2022 will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its business strategy and may pursue additional cash resources through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing, or other arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed or on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.
2. Summary of Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (Annual Report), except as noted immediately below.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). The condensed
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consolidated financial statements have been prepared on the same basis as the audited annual financial statements, except for the adoption of ASU No. 2016-02 Leases (Topic 842), as discussed further in Recently Adopted Accounting Pronouncements and Note 11 Leases. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted, as is permitted by GAAP. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of September 30, 2022, and results of operations for the interim periods ended September 30, 2022 and 2021.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the years ended December 31, 2021 and 2020, and the notes thereto, included in the Company’s Annual Report.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. At September 30, 2022 and December 31, 2021, cash and cash equivalents include standard checking accounts and money market account funds that invest primarily in U.S. government-backed securities and treasuries. At September 30, 2022, cash equivalents also includes debt securities classified as cash equivalents.
As of September 30, 2022, restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities located at One Design Center Place, Boston, Massachusetts. As of December 31, 2021, the Company had no restricted cash. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the statement of cash flows is as follows (in thousands):
September 30,
2022
December 31,
2021
Cash and cash equivalents$53,311 $291,064 
Restricted cash3,950  
Total cash, cash equivalents and restricted cash$57,261 $291,064 
Marketable Securities
Investments in marketable securities are classified as available-for-sale. Available-for-sale securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders’ equity. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment. All of the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date. Realized gains and losses are determined using the specific identification method and are included in other income.
The Company reviews investments in marketable securities for other-than-temporary impairment whenever the fair value of the investment is less than the cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has an intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s cost basis. Evidence considered in this assessment includes reasons for the impairment, the severity and duration of the impairment and changes in value subsequent to the end of the period. To date, the Company has not recorded any credit losses on its available-for-sale securities.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive income (loss). For the three and nine months ended September 30, 2022, comprehensive loss consists of net loss and changes in unrealized gains and losses on marketable securities. Comprehensive loss was equal to net loss for the three and nine months ended September 30, 2021.
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Recently Adopted Accounting Pronouncements
ASU No. 2016-02, Leases (Topic 842)
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes all existing lease guidance. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. The new standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Lessees are required to classify leases as either finance or operating leases. If the lease is effectively a financed-purchase by the lessee, the lease is classified as a financing lease; otherwise the lease is classified as an operating lease. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. Topic 842 provides accounting guidance for transactions that meet specific criteria for a leaseback transaction. If the criteria are not met, the transaction is considered a “failed sale” and the transaction must be accounted for as a financing arrangement. For EGCs, such as the Company, ASU 2016-02, as amended, is effective for annual reporting periods beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted.
Prior to January 1, 2022, the Company accounted for leases pursuant to ASC 840, Leases. At lease inception, the Company determined if an arrangement was an operating or capital lease. For operating leases, the Company recognized rent expense, inclusive of rent escalations, holidays and lease incentives, on a straight-line basis over the lease term. The difference between rent expense recorded and the amount paid was recorded as deferred rent. The Company classified deferred rent as current and non-current liabilities based on the portion of the deferred rent that was scheduled to mature within the next twelve months.
Effective January 1, 2022, the Company adopted ASC 842 using the modified retrospective approach and utilizing the effective date as its date of initial application.
At contract inception, the Company determines whether an arrangement contains a lease based on the unique facts and circumstances present in the arrangement. The lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease. The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases. The Company has elected to take advantage of the short-term lease exemption, which allows for only leases with a term greater than one year to be recognized on the condensed consolidated balance sheets as right-of-use assets, classified as non-current assets, and operating lease liabilities, classified as current and non-current liabilities. Operating lease expense is recognized on a straight-line basis over the lease term.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating. In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates. Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.
Components of a lease are split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) are allocated based on the respective relative fair values to the lease components and non-lease components. The Company has elected to account for lease and associated non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.
Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the
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lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease. The Company assesses its right-of-use assets for impairment in a manner consistent with its assessment for long-lived assets held and used in operations.
As a result of the adoption of ASC 842, the Company recorded (i) an operating lease liability of $33.4 million determined using an incremental borrowing rate as of the effective adoption date and (ii) an operating lease right-of-use asset of $33.0 million, net of the unamortized balance of prepaid/accrued rent as of the transition date. There was no impact to the Company’s results of operations and cash flows from operations other than changes to include the presentation of changes in the right-of-use asset and lease liability in the statement of cash flows.
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends certain aspects of the existing guidance to improve consistent application. For EGCs, such as the Company, ASU 2019-12 is effective beginning January 1, 2022, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2022. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations upon adoption.
3. Marketable Securities
The following is a summary of the Company's marketable securities at September 30, 2022 (in thousands). The Company did not have any marketable securities as of December 31, 2021.
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. government agency securities and treasuries$103,011 $ $1,264 $101,747 
Corporate debt securities34,956  622 34,334 
Total securities with a maturity of one year or less$137,967 $ $1,886 $136,081 
U.S. government agency securities and treasuries11,790  263 11,527 
Corporate debt securities15,251  598 14,653 
Total securities with a maturity of one to two years$27,041 $ $861 $26,180 
Total available-for-sale securities$165,008 $ $2,747 $162,261 

As of September 30, 2022, the Company had 36 marketable securities with a total fair market value of $162.3 million in an unrealized loss position, of which none were in a continuous unrealized loss position for more than twelve months. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and primarily related to the change in market interest rates since purchase and believes that it is more likely than not that it will be able to hold its debt securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity.
Securities are evaluated for impairment at the end of each reporting period. The Company did not record any impairment related to its available-for-sale securities during the three and nine months ended September 30, 2022.
The summary above excludes $9.0 million of debt securities classified as cash equivalents. For all debt securities classified as cash equivalents, amortized cost approximated fair value.
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4. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):
Fair Value Measurements at
September 30, 2022
Level 1Level 2Level 3Total
Cash equivalents: (1)
Money market funds$44,074$$$44,074
U.S. government agency securities and treasuries8,9878,987
Marketable securities:
U.S. government agency securities and treasuries 113,274113,274
Corporate bonds48,98748,987
Total$44,074$171,248$$215,322
Fair Value Measurements at
December 31, 2021
Level 1Level 2Level 3Total
Cash equivalents: (1)
Money market funds$290,814$$$290,814
Total$290,814$$$290,814
(1)The cash equivalent amounts above do not include $0.3 million of cash related to checking accounts included in cash and cash equivalents as of September 30, 2022 and December 31, 2021. These amounts are excluded as no valuation is needed for cash in checking accounts.
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The Company measures its debt securities at fair value on a recurring basis using inputs that are observable or can be corroborated by observable market data and classifies those instruments within Level 2 of the fair value hierarchy.
5. Property and Equipment, Net
Property and equipment, net consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022
December 31,
2021
Laboratory equipment$7,939 $5,988 
Furniture and fixtures161 96 
Computer equipment43 37 
Leasehold improvements2,026 1,556 
Construction in progress51  
Total property and equipment10,220 7,677 
Less: Accumulated depreciation(2,776)(1,416)
Property and equipment, net$7,444$6,261
Depreciation expense for the three months ended September 30, 2022 and 2021 was $0.5 million and $0.3 million, respectively. Depreciation expense for the nine months ended September 30, 2022 and 2021 was $1.4 million and $0.8 million, respectively.
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6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022
December 31,
2021
Employee compensation and benefits$4,033 $4,077 
External research and development expenses2,620 1,032 
General and administrative professional service expenses563 419 
Tenant Improvement Costs4,494  
Other241 485 
Total accrued expenses and other current liabilities$11,951$6,013
The accrued tenant improvement costs in the table above relate to the lease agreement between the Company and IDB 17-19 Drydock Limited Partnership as further discussed in Note 11 Leases.
7. Common Stock and Preferred Stock
Common Stock
As of September 30, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 150,000,000 shares of common stock, par value $0.0001 per share.
Shares Reserved for Future Issuance
The Company has reserved the following shares of common stock for future issuance as of:
September 30,
2022
December 31,
2021
Exercise of outstanding stock options5,002,730 3,461,870 
Vesting of outstanding restricted stock445,445  
Future awards under the 2021 Stock Option and Incentive Plan2,048,905 2,843,255 
Future awards under the 2021 Employee Stock Purchase Plan591,055 278,762 
Total shares of authorized common stock reserved for future issuance8,088,135 6,583,887 
Preferred Stock
As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, par value $0.0001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof. As of September 30, 2022 and December 31, 2021, there were no shares of undesignated preferred stock issued or outstanding.
8. Stock-Based Compensation
2021 Plan
The total shares of common stock authorized for issuance under the 2021 Stock Option and Incentive Plan (2021 Plan) increased from 3,986,270 as of December 31, 2021 to 5,255,443 as of September 30, 2022 primarily due to the automatic annual increase provision.
2021 Employee Stock Purchase Plan
The total shares of common stock authorized for issuance under the 2021 Employee Stock Purchase Plan (2021 ESPP) increased from 278,762 as of December 31, 2021 to 591,055 as of September 30, 2022 due to the automatic annual
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increase provision within the 2021 ESPP. The first offering period commenced on July 1, 2022 and will end on December 15, 2022.
2016 Plan
The total shares of common stock authorized for issuance under the 2016 Plan as of September 30, 2022 and December 31, 2021 were 2,241,637 shares and 2,318,855 shares, respectively.
Stock-Based Compensation
Stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Research and development expenses$1,158$182$2,836$344
General and administrative expenses1,5493964,177724
Total$2,707$578$7,013$1,068
Stock Option Valuation
The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted during the nine months ended September 30, 2022 and 2021:
September 30,
2022
September 30,
2021
Risk‑free interest rate2.11 %0.99 %
Expected volatility71 %74 %
Expected dividend yield  
Expected term (in years)6.046.02
Early Exercise of Unvested Stock Options
Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in current liabilities on the balance sheet. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. Vesting can occur in the year of exercise and thereafter. There were 67,737 and 111,756 unvested shares related to early exercises of stock options as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the liability associated with the unvested early exercise of stock options was $0.2 million and $0.3 million, respectively.
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Stock Options
The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2022:
Number of
Shares
Weighted‑
Average
Exercise
Price
Outstanding as of December 31, 2021
3,461,870$10.38
Granted1,660,98711.34
Exercised(57,018)2.12
Forfeited(63,109)11.83
Outstanding as of September 30, 2022
5,002,730$10.77
Exercisable as of September 30, 2022 (1)
2,506,844$7.16
(1)This represents the number of vested and unvested options exercisable as of September 30, 2022.
The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2022 and 2021 was $7.26 per share and $6.02 per share, respectively. As of September 30, 2022, there was $26.2 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.02 years.
Restricted Stock Units
During the nine months ended September 30, 2022, restricted stock units (RSUs) were granted to employees with vesting conditions based on continued service over time. Accordingly, stock-based compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company's common stock on the date of grant.
A summary of restricted stock activity during the nine months ended September 30, 2022 is as follows:
SharesWeighted‑
Average
Grant‑Date
Fair Value
Unvested as of December 31, 2021
$
Issued456,84512.05
Forfeited(11,400)11.62
Unvested as of September 30, 2022
445,445$12.06
As of September 30, 2022, there was $4.7 million of unrecognized stock-based compensation expense related to restricted stock that is expected to vest. These costs are expected to be recognized over a weighted-average remaining vesting period of 3.49 years.
9. Income Taxes
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets.
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10. Commitments and Contingencies
The Company's commitments, including significant license agreements, are disclosed in Note 9 Commitments and Contingencies in the audited financial statements for the year ended December 31, 2021, and notes thereto, included in the Company’s Annual Report. Since the date of those financial statements, there have been no material changes to its commitments except those discussed in Note 11 Leases.
11. Leases
The Company’s operating lease activity is comprised of non-cancelable facility leases for office and laboratory space in Boston, Massachusetts. The Company entered into an operating lease for office and laboratory space in Boston, Massachusetts in February 2020, and entered into subsequent amendments in 2021. The amendments run co-terminus with the existing lease. The Company has a total of 42,046 square feet licensed at this facility. The Company has the option to terminate the lease and amendments after November 30, 2023 without penalty. At the adoption of ASC 842, the Company concluded that it is not reasonably certain that it will exercise this option to terminate the lease early. Therefore, lease payments through November 2025 are included in the right-of-use asset and lease liabilities in the condensed consolidated balance sheets. The Company paid a security deposit of $0.8 million, which is recorded as a component of other non-current assets in the accompanying condensed consolidated balance sheets.
The components of operating lease cost were as follows (in thousands):
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Operating lease cost$2,294$6,479
Variable lease cost  
Total lease cost$2,294$6,479
Supplemental information related to operating leases was as follows:
Other informationNine Months Ended September 30, 2022
Operating cash flows used for operating leases (in thousands)$6,306
Weighted average remaining lease term3.2 years
Weighted average discount rate3.81%
Future payments due under operating leases as of September 30, 2022 were as follows (in thousands):
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Maturity of Lease Liability
As of September 30, 2022
2022 (excluding the nine-months ended September 30, 2022)$2,268
20239,219
20249,494
20258,650
Thereafter
Total lease payments$29,631
Less: imputed interest(1,680)
Present value of operating lease liabilities$27,951
On March 16, 2022, the Company and IDB 17-19 Drydock Limited Partnership, as landlord (Landlord), entered into a lease agreement (IDB Lease) with respect to approximately 81,442 square feet of office and laboratory space (Premises) in Boston, Massachusetts, which, when available for occupancy, will become the Company’s new consolidated headquarters location and supplement its existing space in Massachusetts.
The term of the IDB Lease commences the date upon which the Landlord tenders possession of the Premises to the Company following the Landlord’s substantial completion of the initial build-out of the Premises (Commencement Date) and shall continue for a period of approximately 10 years, unless earlier terminated in accordance with the terms of the IDB Lease. The Company has (i) the option to extend the IDB Lease for an additional period of five (5) years, and (ii) a right of first offer on adjacent space to the Premises, subject to the terms and conditions of the IDB Lease. As these options are not reasonably certain of occurring, they will not be included in the initial calculation of the Company's right-of-use asset upon lease commencement.

    The initial fixed rental rate is $0.5 million per month, which is for a 12 month period during which the base rent is payable for 65,000 square feet, and will increase 3% per annum thereafter for the entire 81,442 square feet leased. Base rent becomes due upon the earlier of (i) the Company’s occupancy of the Premises for use in its regular operations, or (ii) 10 months following the Commencement Date, provided that in the event the Landlord’s build-out of the Premises is not complete on such date, base rent becomes due upon substantial completion of such build-out. Under the terms of the IDB Lease, the Landlord will provide an allowance in an amount not to exceed $19.5 million (calculated at a rate of $240.00 per rentable square foot of the Premises) toward the cost of completing tenant improvements for the Premises. In addition, the Company has the right to require the Landlord to provide an additional contribution in an amount not to exceed $1.6 million (calculated at a rate of $20.00 per rentable square foot of the Premises) toward the cost of tenant improvements to the Premises, which amount shall be repaid by the Company in an amount of equal monthly payments of principal and interest as would be necessary to repay a loan in the full amount of the additional contribution used by the Company, subject to an 8% annual interest charge, on a level direct reduction basis over a 120 month period. The Company will be required to pay its share of operating expenses, taxes and any other expenses payable under the IDB Lease. In connection with the execution of the IDB Lease, the Company executed a cash-collateralized letter of credit, which may be reduced in the future subject to reduction requirements specified in the IDB Lease therein. The cash collateralizing the letter of credit is classified as restricted cash on the Company's condensed consolidated balance sheets.
The Company concluded that the improvements resulting from both the Landlord's build-out and the tenant improvements are the Landlord's assets for accounting purposes. Costs incurred by the Company related to the tenant improvements up to the Landlord's allowance are pass-through costs and will be reimbursed. Costs incurred by the Company related to the tenant improvements in excess of the Landlord's allowance will be treated as prepaid rent and will increase the right-of-use asset once the accounting commencement date occurs. As of September 30, 2022, the Company has incurred $13.7 million related to the build out of the lease space prior to the commencement date. The amount is included in other current assets as the Company expects to receive reimbursement for such costs in the next 12 months. The accounting commencement date, which has not occurred as of September 30, 2022, will occur when both the Landlord's build-out and the tenant improvements are substantially complete. The Company will assess the classification of the IDB Lease at the accounting commencement date and measure the right-of-use asset and lease liability. As the accounting commencement date had not occurred as of September 30, 2022, the IDB Lease is excluded from the table above.
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12. Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Numerator:
Net loss attributable to common stockholders$(25,137)$(14,430)$(69,987)$(32,711)
Denominator:
Weighted‑average common shares outstanding, basic and diluted31,298,0521,475,17031,273,6121,352,721
Net loss per share attributable to common stockholders, basic and diluted$(0.80)$(9.78)$(2.24)$(24.18)
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Nine Months Ended September 30,
20222021
Redeemable convertible preferred stock (as converted to common stock)19,185,183
Unvested restricted common stock445,445
Unvested shares from early exercises67,737136,520
Stock options to purchase common stock5,002,7302,369,563
5,515,91221,691,266
13. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the condensed consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has concluded that no subsequent events have occurred that require disclosure.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (SEC) on March 15, 2022 (Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. You should carefully read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements contained in the following discussion and analysis.
Overview
We are a biotechnology company that aims to transform the lives of patients by establishing EEV therapeutics as a new class of medicines and become the world’s foremost intracellular therapeutics company. Through our proprietary, highly versatile and modular EEV platform (EEV Platform), we are building a robust development portfolio of EEV therapeutic candidates designed to enable the efficient intracellular delivery of therapeutics in various organs and tissues with an improved therapeutic index. We are initially focused on the development of EEV therapeutics for rare neuromuscular diseases, including Duchenne muscular dystrophy (DMD) and myotonic dystrophy type 1 (DM1). In our neuromuscular disease programs, we link EEVs to small strands of nucleic acids called oligonucleotides, including phosphorodiamidate morpholino oligomers (PMOs).
Entrada expects to file its first IND for ENTR-601-44 for patients with DMD who are amenable to exon 44 skipping in the fourth quarter of 2022. Following regulatory feedback and potential IND clearance, Entrada plans to initiate a single ascending dose study in healthy volunteers with initial clinical data anticipated in the second half of 2023. A second IND for ENTR-701 for the potential treatment of DM1 is planned for the second half of 2023. The Company is also on track to nominate a clinical candidate for its second DMD program, for patients who are amenable to exon 45 skipping, in the fourth quarter of 2022 and has initiated discovery efforts on additional exon skipping programs. There are currently no treatments for patients with DMD who are exon 44 skipping amenable or for patients with DM1.
Since our inception, we have devoted substantially all our resources to research and development efforts relating to our EEV Platform, advancing development of our portfolio of programs and general and administrative support for these operations, including raising capital. Since our inception, we have raised over $400.0 million in private and public capital from leading biotechnology investors, most recently, with net proceeds of $190.7 million from the sale of common stock in our initial public offering (IPO) in November 2021.
We have incurred losses since our inception. Our net losses were $70.0 million and $32.7 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $163.7 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future as we advance our platform and EEV therapeutic candidates into later stages of preclinical development and, if successful, clinical development. We will not generate any revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more therapeutic candidates, if ever. If we obtain regulatory approval for any therapeutic candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.
Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy, as we advance therapeutic candidates through preclinical and, if successful, into clinical development, seek regulatory approval, prepare for and, if any therapeutic candidates are approved, proceed to commercialization and operate as a public company. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.
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If we are unable to obtain funding, we will be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion and ultimate commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations. Although we continue to pursue these plans, we may not be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we can generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of September 30, 2022, we had cash, cash equivalents and marketable securities of $215.6 million. We believe that our cash, cash equivalents and marketable securities as of September 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.
Impact of the Ongoing COVID-19 Pandemic on Our Business
The duration of the ongoing COVID‑19 pandemic and the extent to which it may directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and difficult to predict, including the duration of the pandemic, new information that may emerge concerning the severity of COVID-19, such as new strains of the virus, including any future variants that may emerge, which may impact rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines and the extent and effectiveness of actions to contain COVID-19 or treat its impact, including vaccination campaigns and lockdown measures, among others. At times during the pandemic, we, our contract manufacturing organizations (CMOs), and our contract research organizations (CROs), experienced temporary reductions in certain operations that have since normalized. We, together with our CMOs and CROs, are closely monitoring the impact of the ongoing COVID‑19 pandemic on these operations. Additionally, to provide a safe work environment for our employees, we have implemented various measures including embracing a hybrid work environment where permissible and appropriate, providing for social distancing, increased sanitization of our facilities and providing personal protective equipment for our employees. We are continuing to monitor the impact and effects of the ongoing COVID‑19 pandemic and our response to it, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.
We have not incurred any significant impairment losses in the carrying values of our assets as a result of the pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our condensed consolidated financial statements included elsewhere in this Quarterly Report. Our estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue. We do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for our therapeutic candidates are successful and result in regulatory approval or we successfully enter into collaboration or license arrangements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license arrangements that we may enter into with third parties, or any combination thereof.
Operating Expenses
Research and Development Expenses
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Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:
personnel-related expenses, including salaries, related benefits, and stock-based compensation expense for individuals engaged in research and development functions;
expenses incurred in connection with the discovery and preclinical development of our therapeutic candidates and research programs, including under agreements with third parties, such as consultants, contractors, and CROs;
the cost of developing and validating our manufacturing process for use in our preclinical studies and potential future clinical trials, including the cost of raw materials used in our research and development activities, and engaging with third party CMOs;
the cost of laboratory supplies and research materials;
the costs of payments made under third-party licensing agreements and related future payments should certain development and regulatory milestones be achieved; and
facilities, depreciation and other direct and allocated expenses, including rent and other operating costs, incurred as a result of our research and development activities.
We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
As a preclinical-stage company in the early phases of development, our research and development costs are primarily devoted to proof-of-concept studies and our overall EEV Platform that underpins our therapeutic candidates. Our direct, external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We expect to track these external research and development costs on a program-by-program basis as we identify specific programs and product candidates to advance into clinical development.
We do not allocate employee costs, costs associated with our development efforts and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources and third-party consultants primarily to conduct our research and development activities as well as for managing our process development, manufacturing and clinical development activities.
Therapeutic candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our platform development efforts and planned preclinical and clinical development activities in the near term and in the future. We expect that the research and development expenses of our programs will increase in the near term as we initiate investigational new drug (IND)-enabling activities for our therapeutic candidates and prepare to initiate our first clinical trial. Therefore, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our therapeutic candidates. The successful development of our therapeutic candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:
the scope, timing, rate of progress and expenses of our ongoing and potential future research activities, including preclinical and IND-enabling studies, clinical trials and other research and development activities we decide to pursue;
the successful initiation, enrollment, and completion of clinical trials under the FDA's Good Clinical Practices (GCPs);
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the timing of filing and acceptance of INDs or comparable foreign applications that allow commencement of future clinical trials for our therapeutic candidates;
whether our therapeutic candidates show safety and efficacy in our clinical trials and an acceptable risk-benefit profile in the intended populations;
our ability to hire and retain key research and development personnel;
our ability to successfully develop, obtain regulatory and marketing approvals of our therapeutic candidates for the expected indications and patient populations;
our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our therapeutic candidates are approved;
commercializing therapeutic candidates, if and when approved, whether alone or in collaboration with others;
our ability to maintain a continued acceptable safety, tolerability, and efficacy profile of our therapeutic candidates following approval;
our ability to establish new licensing or collaboration arrangements to support our potential therapeutic candidates on favorable business terms;
any decisions we make to discontinue, delay or modify our programs to focus on others;
obtaining, maintaining, protecting and enforcing patent and trade secret protection and regulatory exclusivity for our therapeutic candidates;
obtaining and maintaining adequate coverage and reimbursement from third party payors; and
the effects of the ongoing COVID-19 pandemic.
A change in the outcome of any of these variables with respect to the development of any of our therapeutic candidates could significantly change the costs and timing associated with the development of that therapeutic candidate. We may never succeed in obtaining regulatory approval for any of our therapeutic candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, corporate and business development, human resources, and other administrative functions. General and administrative expenses also include: legal fees relating to intellectual property and corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our programs and EEV Platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.
Interest and Other Income (Expense), net
Interest and other income (expense), net consists primarily of interest earned on our invested cash equivalents and marketable securities, gains and losses on disposal of fixed assets and gains and losses on foreign currency transactions.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year and interim period as we believe, based upon the weight of available evidence, that it is more likely than not that all our net operating loss carryforwards and tax credit carryforwards will not be realized.

As part of the Tax Cuts and Jobs Act of 2017 (TCJA), beginning with the 2022 tax year, we are required to capitalize research and development expenses, as defined under Internal Revenue Code section 174. For expenses that are incurred for research and development in the U.S., the amounts will be amortized over 5 years, and expenses that are
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incurred for research and experimentation outside the U.S. will be amortized over 15 years. We expect that this provision will result in a significant decrease to our 2022 tax loss but will not result in an actual tax liability for 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates from those reported in our Annual Report, except as described further in Note 2 Summary of Significant Accounting Policies in the condensed consolidated financial statements elsewhere in this Quarterly Report, which discusses new policies regarding restricted cash, marketable securities, other comprehensive loss and our adoption of ASC 842 Leases.
Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
Three Months Ended September 30,
(in thousands)20222021Change
Operating expenses:
Research and development$18,958 $10,513 $8,445 
General and administrative6,978 3,851 3,127 
Total operating expenses25,936 14,364 11,572 
Loss from operations(25,936)(14,364)(11,572)
Other income (expense):
Interest and other income (expense), net799 (66)865 
Total other income (expense), net799 (66)