ARROWHEAD PHARMACEUTICALS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report on Form 10-Q except for historical information may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “goal,” “endeavor,” “strive,” “intend,” “plan,” “project,” “could,” “estimate,” “target,” “forecast” or “continue” or the negative of these words or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements include, but are not limited to, statements about the initiation, timing, progress and results of our preclinical studies and clinical trials, including any commercialization efforts, our research and development programs, and our “20 in 25” pipeline goal; our expectations regarding the potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic arrangements and transactions we have entered into or may enter into in the future; our beliefs and expectations regarding the amount and timing of future milestone, royalty or other payments that could be due to or from third parties under existing agreements; and our estimates regarding future revenues, research and development expenses, capital requirements and payments to third parties. The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately, and many of which are beyond our control. As such, our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated or indicated in any forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and cash flows may differ materially. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in “Item 1. Business” and “ Item 1A. Risk Factors” of Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of our most recent Annual Report on Form 10-K. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW The Company develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, the Company’s therapies trigger the RNAi interference mechanism to induce rapid, deep and durable knockdown of target genes. RNAi is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes. The Company has focused its resources on therapeutics that exclusively utilize its high levels of pharmacologic activity in multiple animal models spanning several therapeutic areas. The Company believes that TRiM TM enabled therapeutics offer several potential advantages over prior generation and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung, CNS, muscle and adipose tissue; and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules. The Company’s clinical pipeline includes: • Hypertriglyceridemia - plozasiran (formerly ARO-APOC3); • Dyslipidemia - zodasiran (formerly ARO-ANG3); • Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen); 23 • Muco-obstructive or inflammatory pulmonary conditions - ARO-MUC5AC and ARO-RAGE; • Idiopathic pulmonary fibrosis - ARO-MMP7; • Non-alcoholic steatohepatitis (NASH) - GSK-4532990 (formerly ARO-HSD, out-licensed to GSK); • Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda); • Chronic hepatitis B virus - daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989, out-licensed to GSK); • Complement mediated diseases - ARO-C3; • Non-alcoholic steatohepatitis (NASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1); • Facioscapulohumeral muscular dystrophy - ARO-DUX4; • Dystrophia myotonica protein kinase (DMPK) - ARO-DM1; and • Hepatic expression of complement factor B (CFB) - ARO-CFB. The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California. The Company continues to develop other clinical candidates for future clinical trials. Clinical candidates are tested internally and through Good Laboratory Practice (GLP) toxicology studies at outside laboratories. Drug materials for such studies and clinical trials are either manufactured internally or contracted to third-party manufacturers. The Company engages third-party contract research organizations (CROs) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, including toxicology/efficacy testing and manufacturing costs, as well as the preparation for and administration of clinical trials, are referred to as “candidate costs.” As clinical candidates progress through clinical development, candidate costs will increase. The First Three Quarters of Fiscal 2024 Business Highlights Key recent developments through the first three quarters of fiscal 2024 included the following: • Announced plans to advance investigational plozasiran into a Phase 3 cardiovascular outcomes trial called CAPITAN, which is designed to enroll patients with mixed hyperlipidemia and residual risk of atherosclerotic cardiovascular disease; • Announced successful top-line results from the pivotal Phase 3 PALISADE study of investigational plozasiran in patients with familial chylomicronemia syndrome (FCS). The Company highlighted recent data for its cardiometabolic pipeline at its June 25, 2024, Cardiometabolic event; • Presented preclinical data on ARO-INHBE for the treatment of obesity and metabolic diseases at the American Diabetes Association 84 th Scientific Sessions. INHBE small interfering RNA (siRNA) administration resulted in multiple promising findings including: (1) 95% reduction in INHBE mRNA expression, (2) 19% suppression of body weight compared to saline controls, (3) 26% loss of fat mass, and (4) preservation of lean mass; • Announced results from the Phase 2b double blind, randomized ARCHES-2 study of investigational zodasiran in patients with mixed hyperlipidemia; • Announced that new interim clinical data on ARO-RAGE achieves high level of gene knockdown in patients with asthma; • Completed enrollment in Amgen’s Phase 3 OCEAN(a) - outcome trial of olpasiran, triggering a $50.0 million milestone payment to the Company, which was paid in the third quarter of fiscal 2024; • Presented final data from the double-blind treatment period of the Company’s Phase 2 SHASTA-2 study of investigational plozasiran in patients with severe Hypertriglyceridemia. Results from the SHASTA-2 study showed dramatic, consistent, and sustained reductions in Apolipoprotein C-III (APOC3) and triglycerides and improvement in multiple atherogenic lipoprotein levels; • Announced an Expanded Access Program (“EAP”) to make investigational plozasiran available outside of a clinical trial for qualifying patients with familial chylomicronemia syndrome (FCS); • Initiated a Phase 1/2a clinical trial of ARO-DM1, being developed as a potential treatment for type 1 myotonic dystrophy (DM1), the most common adult-onset muscular dystrophy; • Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-CFB, being developed as a potential treatment for complement mediated renal disease; 24 • Entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at a price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.3 million after deducting advisory fees and offering expenses; and • Entered into an Amended and Restated License Agreement with GSK, pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989). Daplusiran/tomligisiran had previously been licensed to Janssen Pharmaceuticals, Inc. See Note 2 - Collaboration and License Agreements to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.” Net loss attributable to Arrowhead Pharmaceuticals, Inc. was $170.8 million and $102.9 million for the three months ended June 30, 2024 and 2023, respectively. Net loss attributable to Arrowhead Pharmaceuticals, Inc. was $429.0 million and $95.6 million for the nine months ended June 30, 2024 and 2023, respectively. Net loss per share – diluted was $1.38 and $0.96 for the three months ended June 30, 2024 and 2023, respectively. Net loss per share – diluted was $3.63 and $0.90 for the nine months ended June 30, 2024 and 2023, respectively. The changes in net loss attributable to the Company for the three and nine months ended June 30, 2024 were mainly due to a decrease in revenue from the Company’s license and collaboration agreements, in conjunction with increased research and development expenses, which have continued to increase as the Company’s pipeline of candidates has expanded and progressed through clinical trial phases. The Company had $69.4 million of cash, cash equivalents and restricted cash, $367.3 million in available-for-sale securities, and $883.8 million of total assets as of June 30, 2024, as compared to $110.9 million of cash, cash equivalents and restricted cash, $292.7 million in available-for-sale securities and $765.6 million of total assets as of September 30, 2023. Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months from the date of the issuance of these financial statements. Critical Accounting Estimates There have been no significant changes to the Company’s critical accounting estimates disclosed in the most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2023. RESULTS OF OPERATIONS The following data summarizes the Company’s results of operations for the following periods indicated: Three Months Ended June 30, Nine Months Ended June 30, 2024 2023 2024 2023 (in thousands, except per share amounts) Revenue $ — $ 15,825 $ 3,551 $ 224,638 Operating loss $ (176,141) $ (102,703) $ (438,877) $ (96,672) Net loss attributable to Arrowhead Pharmaceuticals, Inc. $ (170,793) $ (102,946) $ (428,957) $ (95,596) Net loss per share-diluted $ (1.38) $ (0.96) $ (3.63) $ (0.90) Revenue Total revenue for the three months ended June 30, 2024 decreased by $15.8 million or 100.0% from the same period of 2023. Total revenue for the nine months ended June 30, 2024 decreased by $221.1 million, or 98.4% from the same period of 2023. The changes were primarily driven by decreased revenue recognition associated with the Company’s license and collaboration agreements during the nine months ended June 30, 2024. The revenue for the nine months ended June 30, 2023 was mainly driven by the revenue recognition associated with Takeda, GSK, and Horizon/Amgen license agreements, as discussed below. The Company has evaluated each agreement in accordance with FASB Topic 808– Collaborative Arrangements and Topic 606- Revenue for Contracts from Customers . See Note 2 — Collaboration and License Agreements to Consolidated Financial Statements of Part I, “Item 1. Financial Statements” for more information on revenue recognized under the collaboration and license agreements. 25 Takeda : In October 2020, Takeda and the Company entered into the Takeda License Agreement. The Company has allocated the total $300.0 million initial transaction price to its one distinct performance obligation for the fazirsiran license and the associated Takeda R&D Services. Revenue was recognized using the input method (based on actual patient visits completed versus total estimated visits completed for the ongoing SEQUOIA and AROAAT2002 clinical studies). The Phase 2 study visits for patients in the SEQUOIA and AROAAT2002 studies concluded by December 31, 2023, and the Company has substantially completed its performance obligation under the Takeda License Agreement. As such, all revenue has been fully recognized as of December 31, 2023. During the nine months ended June 30, 2023, the Company recorded $146.5 million revenue, including a $40.0 million milestone payment by dosing the first patient in the Phase 3 REDWOOD clinical study of fazirsiran. GSK : On December 11, 2023, GSK and the Company entered into the GSK-HBV Agreement. Under the GSK-HBV Agreement, GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989). Daplusiran/tomligisiran had previously been licensed to Janssen in October 2018. Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the GSK-HBV Agreement. During the nine months ended June 30, 2023, the Company recorded a $30.0 million milestone payment by dosing the first patient in a Phase 2b trial under GSK-HSD License Agreement. Horizon/Amgen : During the nine months ended June 30, 2023, the Company recorded $6.7 million revenue of the total $40.0 million upfront payment received in July 2021, which was recognized on a straight-line basis over the timeframe for completing the Horizon R&D Services, concluding in the first quarter of 2023. There was also $1.5 million of reimbursable costs. Horizon enrolled the first subject in December 2022 in a Phase 1 randomized, placebo-controlled trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of HZN-457, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023. Further, Amgen enrolled the first subject in its Phase 3 trial of olpasiran, which triggered a $25.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023. On October 6, 2023, Amgen Inc. completed its acquisition of Horizon and subsequently notified the Company of Amgen’s intent to terminate the HZN-457 license. Horizon exercised its right to terminate the Horizon License Agreement for convenience, which took effect on December 21, 2023. Operating Expenses The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories. For purposes of comparison, the amounts for the three and nine months ended June 30, 2024 and 2023 are shown in the tables below. Research and Development (R&D) Expenses R&D expenses are related to the Company’s research and development discovery efforts and related candidate costs, which are comprised primarily of outsourced costs related to the manufacturing of clinical supplies, toxicity/efficacy studies and clinical trial expenses. Internal costs primarily relate to discovery operations at the Company’s research facilities in California and Wisconsin, including facility costs and laboratory-related expenses. The Company does not separately track R&D expenses by individual research and development project, or by individual drug candidate. The Company operates in a cross-functional manner across projects and does not separately allocate facilities-related costs, candidate costs, discovery costs, compensation expenses, depreciation and amortization expenses, and other expenses related to research and development activities. The following table provides details of research and development expenses for the periods indicated: 26 (in thousands) Three Months Ended June 30, 2024 % of Expense Category Three Months Ended June 30, 2023 % of Expense Category Increase (Decrease) $ % Candidate costs $ 78,367 51 % $ 41,209 44 % $ 37,158 90 % R&D discovery costs 30,890 20 % 20,253 21 % 10,637 53 % Salaries 24,532 16 % 16,632 18 % 7,900 47 % Facilities related 7,132 5 % 4,810 5 % 2,322 48 % Total research and development expense, excluding non-cash expense $ 140,921 92 % $ 82,904 88 % $ 58,017 70 % Stock compensation 7,241 5 % 8,982 9 % (1,741) (19) % Depreciation and amortization 4,269 3 % 2,871 3 % 1,398 49 % Total research and development expense $ 152,431 100 % $ 94,757 100 % $ 57,674 61 % (in thousands) Nine Months Ended June 30, 2024 % of Expense Category Nine Months Ended June 30, 2023 % of Expense Category Increase (Decrease) $ % Candidate costs $ 157,546 43 % $ 110,079 43 % $ 47,467 43 % R&D discovery costs 84,898 23 % 50,377 20 % 34,521 69 % Salaries 72,048 19 % 47,725 19 % 24,323 51 % Facilities related 19,597 5 % 11,601 5 % 7,996 69 % Total research and development expense, excluding non-cash expense $ 334,089 90 % $ 219,782 87 % $ 114,307 52 % Stock compensation 23,735 7 % 26,129 10 % (2,394) (9) % Depreciation/amortization 12,220 3 % 7,422 3 % 4,798 65 % Total research and development expense $ 370,044 100 % $ 253,333 100 % $ 116,711 46 % Candidate costs increased $37.2 million, or 90%, for the three months ended June 30, 2024 and $47.5 million, or 43%, for the nine months ended June 30, 2024 compared to the same period of 2023. This increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher manufacturing, outsourced clinical trial, and toxicity study costs. R&D discovery costs increased $10.6 million, or 53%, for the three months ended June 30, 2024 and $34.5 million, or 69%, for the nine months ended June 30, 2024 compared to the same period of 2023. This increase was primarily driven by the growth of the Company’s discovery efforts and continued advancement into novel therapeutic areas and tissue types, along with rising costs associated with CNS studies and lab supplies. Salaries consist of salary, bonuses, payroll taxes, and related benefits for the Company’s R&D personnel. Salaries expense increased $7.9 million, or 47%, for the three months ended June 30, 2024 and $24.3 million, or 51%, for the nine months ended June 30, 2024 compared to the same period of 2023. The increase was primarily due to an increase in R&D headcount that has occurred as the Company has expanded its pipeline of candidates, in addition to annual salary increases. Facilities-related expense includes lease costs for the Company’s research and development facilities in San Diego, California and Madison, Wisconsin. Facilities-related costs increased $2.3 million, or 48%, for the three months ended June 30, 2024 and $8.0 million, or 69%, for the nine months ended June 30, 2024 compared to the same period of 2023. This increase was mainly due to the ATIAs on the lease in San Diego, California. See Note 8 — Leases of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.” Stock compensation expense, a non-cash expense, was based upon the valuation of stock options and restricted stock units granted to employees. Stock compensation expense decreased $1.7 million, or 19%, for the three months ended June 30, 2024 and $2.4 million, or 9%, for the nine months ended June 30, 2024 compared to the same period of 2023. The decrease was primarily due to the cancelled awards upon the departure of employees. Depreciation and amortization expense, a non-cash expense, increased $1.4 million, or 49% for the three months ended June 30, 2024 and $4.8 million, or 65%, for the nine months ended June 30, 2024 compared to the same period of 2023. The increase was primarily attributed to higher leasehold improvements, due to completion of the development of the San Diego facility. Additionally, as of December 31, 2023, the Company completed the build out of one of its laboratory and office facilities in Verona, Wisconsin, and commenced depreciation. The Company anticipates these R&D expenses to continue to increase as its pipeline of candidates grows and 27 progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market. General & Administrative Expenses The following table provides details of the Company’s general and administrative expenses for the periods indicated: (in thousands) Three Months Ended June 30, 2024 % of Expense Category Three Months Ended June 30, 2023 % of Expense Category Increase (Decrease) $ % Salaries $ 6,740 28 % $ 5,063 21 % $ 1,677 33 % Professional, outside services, and other 5,410 23 % 5,987 25 % (577) (10) % Facilities related 1,238 5 % 1,352 6 % (114) (8) % Total general & administrative expense, excluding non-cash expenses $ 13,388 56 % $ 12,402 52 % $ 986 8 % Stock compensation 9,809 42 % 10,965 46 % (1,156) (11) % Depreciation and amortization 513 2 % 404 2 % 109 27 % Total general & administrative expenses $ 23,710 100 % $ 23,771 100 % $ (61) — % (in thousands) Nine Months Ended June 30, 2024 % of Expense Category Nine Months Ended June 30, 2023 % of Expense Category Increase (Decrease) $ % Salaries $ 20,087 28 % $ 14,275 21 % $ 5,812 41 % Professional, outside services, and other 16,910 23 % 15,293 22 % 1,617 11 % Facilities related 3,278 5 % 3,377 5 % (99) (3) % Total general & administrative expense, excluding non-cash expenses $ 40,275 56 % $ 32,945 48 % $ 7,330 22 % Stock compensation 30,759 42 % 33,820 50 % (3,061) (9) % Depreciation and amortization 1,350 2 % 1,212 2 % 138 11 % Total general & administrative expenses $ 72,384 100 % $ 67,977 100 % $ 4,407 6 % Salaries expense increased $1.7 million, or 33%, for the three months ended June 30, 2024 and $5.8 million, or 41%, for the nine months ended June 30, 2024 compared to the same period of 2023. The increase was driven by the combination of annual salary increases and increased headcount required to support the Company’s growth. Professional, outside services, and other expense includes legal, consulting, patent expenses, business insurance expenses, other outside services, travel, and communication and technology expenses. This expense decreased $0.6 million, or 10%, for the three months ended June 30, 2024 and increased $1.6 million, or 11%, for the nine months ended June 30, 2024 compared to the same period of 2023. The increase for the nine months ended June 30, 2024 was mainly due to legal services associated with patent applications and intellectual property matters, as well as other professional services. Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California. Stock compensation expense, a non-cash expense, was based upon the valuation of stock options and restricted stock units granted to employees. This expense decreased $1.2 million, or 11%, for the three months ended June 30, 2024 and $3.1 million, or 9%, for the nine months ended June 30, 2024 compared to the same period of 2023. The decrease was mainly due to the decreased compensation costs related to performance awards. Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters. The Company anticipates these general and administrative expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials including commercialization efforts, in addition to inflationary pressure on goods and services and the labor market. Other Income (Expense) Other income (expense) is primarily related to interest income and expense. Other income increased $2.8 million for the three months ended June 30, 2024 compared to the same period of 2023. The increase was primarily due to the higher 28 yields on investments due to higher interest rates, offset by the non-cash interest expense on the liability related to the sale of future royalties. The balance remained consistent for the nine months ended June 30, 2024 compared to the same period of 2023. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations through the sale of its equity securities, revenue from its licensing and collaboration agreements, and the sale of certain future royalties. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure as the Company’s pipeline continues to expand and matures into later stage clinical trials. Additionally, the Company expanded its facilities in Verona, Wisconsin and leased additional facilities in San Diego, California. Each of these expansions is designed to increase the Company’s internal manufacturing and discovery capabilities and requires significant capital investment. The Company’s cash, cash equivalents and restricted cash decreased to $69.4 million at June 30, 2024 compared to $110.9 million at September 30, 2023. Cash invested in available-for-sale securities was $367.3 million at June 30, 2024 compared to $292.7 million at September 30, 2023. On December 2, 2022, the Company entered into the Open Market Sale Agreement, pursuant to which the Company may, from time to time, sell up to $250.0 million in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering. As of June 30, 2024, no shares have been issued under the Open Market Sale Agreement. On January 2, 2024, the Company entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at an offering price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.3 million after deducting advisory fees and offering expenses. The Company believes its current financial resources are sufficient to fund its operations through at least the next twelve months from the date of the issuance of these financial statements. The following table presents a summary of cash flows: Nine Months Ended June 30, 2024 2023 (in thousands) Cash Flow from: Operating activities $ (325,635) $ (127,964) Investing activities (197,149) (126,664) Financing activities 481,431 252,232 Net decrease in cash, cash equivalents and restricted cash $ (41,353) $ (2,396) Cash, cash equivalents and restricted cash at end of period $ 69,399 $ 105,334 During the nine months ended June 30, 2024, cash flow used in operating activities was $325.6 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses. Cash used in investing activities amounted to $197.1 million, which was primarily attributable to capital expenditures of $117.2 million and investment purchases of $428.6 million, offset by proceeds from sales and maturities of investments of $348.6 million. Cash provided by financing activities of $481.4 million was related to cash received from the issuance of common stock, a milestone payment from Royalty Pharma, and stock option exercises (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.”). During the nine months ended June 30, 2023, cash flows used in operating activities was $128.0 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses, partially offset by the receipt of $110.0 million from collaboration and license agreements. Cash used in investing activities was $126.7 million, which was primarily related to capital expenditures, $112.8 million of construction in progress and investment purchases of $234.0 million, offset by maturities of investments of $220.2 million. Cash provided by financing activities of $252.2 million was primarily related to the $250.0 million payment from Royalty Pharma as well as cash received from stock option exercises. See Note 11 – Liability Related to the Sale of Future 29 Royalties of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.” Contractual Obligations There has been no material change in the Company’s contractual obligations from that described in Item 7 of its Annual Report on Form 10-K for the year ended September 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company ’ s exposure to market risk from that described in Item 7A of its Annual Report on Form 10-K for the year ended September 30, 2023.