ASSEMBLY BIOSCIENCES, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The interim condensed consolidated financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission on March 4, 2020 (2019 Annual Report). In addition to historical information, this discussion and analysis contains 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 (the Exchange Act). These forward-looking statements are subject to risks and uncertainties, including those set forth under “Part I. Item 1A. Risk Factors” in our 2019 Annual Report, “Part II. Item 1A. Risk Factors” in this report, and elsewhere in this report, that could cause actual results to differ materially from historical results or anticipated results. Overview We are a clinical-stage biotechnology company developing innovative therapeutics targeting chronic hepatitis B virus (HBV) infection and disorders associated with the microbiome. Our HBV Cure program is focused on advancing a new class of potent, oral core inhibitors that have the potential to increase cure rates for chronically infected patients. Our Microbiome program is developing novel oral live microbial biotherapeutic candidates with our fully integrated platform, including a robust process for strain identification and selection, current Good Manufacturing Practice (cGMP) manufacturing expertise and targeted delivery to the lower gastrointestinal tract with the GEMICEL® technology. Like most companies, the spread of the novel coronavirus, SARS-CoV-2, which causes coronavirus disease (COVID-19), and the ongoing COVID-19 pandemic has affected certain aspects of our business. As further detailed below, those effects have been primarily limited to where and how our employees work in our labs and offices. To date, our current and future planned clinical trials and pre-clinical studies have not been subject to significant impact. Business Highlights During the second quarter of 2020, we continued to grow our business and advance our development pipeline of product candidates in both our HBV Cure and Microbiome programs. Key highlights and accomplishments during the quarter, as well as upcoming milestones and subsequent events include: HBV Cure Program • ABI-H0731 (H0731), our lead core inhibitor product candidate in the HBV Cure program : o Continuation of our ongoing open-label extension study, ABI-H0731-211 (Study 211), and transition of patients who achieve agreed-upon stopping criteria off therapy. Study 211 is the first clinical trial with a core inhibitor to stop therapy and monitor for sustained virologic response in patients with chronic HBV infection. o Upcoming reporting of additional interim analyses from Study 211 at the European Association for the Study of the Liver’s (EASL) Digital International Liver Congress TM in an oral presentation (HBeAg negative patients) and late-breaker poster presentation (HBeAg positive patients). EASL’s 2020 meeting had been scheduled to occur in April 2020, but it was rescheduled to August 27 to 29, 2020 as a digital meeting due to the COVID-19 pandemic. o Initiation of a study evaluating treatment intensification with H0731 in patients with chronic HBV infection who are only partially virologically suppressed on nucleos(t)ide analog reverse transcriptase inhibitor (NrtI) therapy alone after at least a year of treatment. 22 • ABI-H2158 (H2158), our second -generation core inhibitor product candidate in the HBV Cure program : o Initiation of a Phase 2 clinical study using a 300 mg dose of H2158. o Upcoming reporting of detailed data on the final dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b clinical study of H2158 at EASL 2020 in a late-breaker poster presentation. o Receipt of Fast Track Designation from the U.S. Food and Drug Administration (FDA). • ABI-H3733 (H3733), our third core inhibitor product candidate in the HBV Cure program : o Continuation of a Phase 1 clinical study to evaluate safety, tolerability, and pharmacokinetics (PK) of H3733 in healthy subjects. • China HBV Collaboration : o Subsequent to the period, on July 17, 2020, entry into a Collaboration Agreement (China Collaboration Agreement) with BeiGene, Ltd. (BeiGene) to develop, manufacture and commercialize H0731, H2158 and H3733. o Under the terms of the agreement, we granted BeiGene an exclusive, royalty-bearing license to develop and commercialize products containing H0731, H2158 and H3733 in the People’s Republic of China, Hong Kong, Taiwan and Macau. Microbiome Program • Presentation of preclinical data from our immuno-oncology microbiome program for presentation as an e-poster at the American Association for Cancer Research (AACR) 2020 Virtual Annual Meeting II. • Return of worldwide rights to all of our microbiome gastrointestinal programs previously licensed to Allergan Pharmaceuticals International Limited (Allergan) under the Research, Development, Collaboration and License Agreement (Allergan Collaboration Agreement) pending completion of transition in the fourth quarter of 2020 and exploration of strategic alternatives to continue development of the Microbiome programs following the return of rights. Corporate Highlights • Strengthening of our leadership team with the addition of William Delaney IV, Ph.D. as Chief Scientific Officer, Virology. HBV Cure Program Over 250 million people worldwide are chronically infected with HBV. Our HBV Cure program is pursuing multiple drug candidates that inhibit the HBV lifecycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of increasing the current low cure rate for patients with HBV. We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core protein. ABI-H0731 H0731, our lead core inhibitor product candidate in the HBV Cure program, is licensed from Indiana University. In the fourth quarter of 2019, we presented final 24-week data from HBeAg positive patients enrolled in our Phase 2 studies of H0731, Study 201, which enrolled NrtI-treated patients, and ABI-H0731-202 (Study 202), which enrolled treatment-naïve patients. In addition, we presented interim data from Study 211. The conduct of Study 201 and 202 is now complete, and Study 211 is ongoing. Most currently enrolled patients are continuing with normal study visits. For those patients unable to come to the clinic as a result of COVID-19, study drug is being shipped to their homes, and sites are conducting telehealth visits. 23 We presented certain top-line information and other updates regarding Study 201 and Study 211 in May 2020, and we expect to report additional data from Study 201 as well as further interim data from Study 211 at EASL 2020 in August 2020 . In addition, we recently determined the stopping criteria by which we will transition patients off therapy in Study 211. These criteria have been discussed with our lead investigators and reviewed and agreed upon by the FDA. In June 2020, we began transitioning patients who met the stopping criteria off treatment to observe for sustained virologic response. At this time, the ongoing COVID-19 pandemic has not impacted our timeline for transition of patients off treatment or completion of Study 211, but we will continue to monitor the situation closely. ABI-H2158 H2158, our second-generation core inhibitor product candidate in the HBV Cure program, was internally discovered and developed and is chemically distinct from H0731. In the second quarter of 2019, we presented final data from the Phase 1a portion of a Phase 1a/1b dose-ranging clinical study. The Phase 1a study assessed safety, tolerability and PK in 48 healthy volunteers. In the fourth quarter of 2019, we reported interim data from the first, low-dose cohort of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study, which enrolled HBeAg positive patients. We presented additional top-line data from the dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study in May 2020, and we expect to report the detailed data from these cohorts at EASL 2020. Based on data from the Phase 1b dose-ranging study, we initiated a Phase 2 clinical study in June 2020 using a 300 mg dose of H2158. This study will be conducted in approximately ten countries in Asia, North America and Europe. While we will continue to monitor the situation closely, at this time, we do not expect our timelines for this study to be significantly impacted by the COVID-19 pandemic. ABI-H3733 H3733, our third core inhibitor product candidate in the HBV Cure program, has completed Investigational New Drug (IND) enabling studies. H3733 has a novel chemical scaffold separate from both H0731 and H2158. We presented a preclinical profile of this candidate in the first quarter of 2019. In the first quarter of 2020, we initiated a Phase 1 clinical study to evaluate safety, tolerability and PK following single ascending dose and multiple ascending dose administration of H3733 in healthy subjects in New Zealand. After a short delay in enrollment of the study due to the government-mandated shutdown of all clinical studies unrelated to COVID-19, we resumed enrollment during the second quarter of this year. This delay did not have a significant impact on our clinical development timelines for H3733 . Other Product Candidates In addition to our three clinical-stage product candidates, our research discovery team is actively focused on identifying and developing additional product candidates for our HBV Cure program. China HBV Collaboration Agreement On July 17, 2020, we entered into the China Collaboration Agreement with BeiGene, granting BeiGene an exclusive, royalty-bearing license to develop and commercialize products containing H0731, H2158 and H3733 in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory). Under the China Collaboration Agreement, we and BeiGene will collaborate on development activities with respect to the licensed products in accordance with a mutually agreed upon development plan. Pursuant to the terms of the China Collaboration Agreement, BeiGene paid us an upfront amount of $40.0 million, and we are eligible to receive up to approximately $500.0 million in milestone payments, comprised of up to $113.8 million in development and regulatory and $385.0 million in net sales milestone payments. In addition, we are eligible to receive tiered royalties at percentages ranging from the mid-teens to the low 30s of net sales. BeiGene has also agreed to pay all development and regulatory costs up to an aggregate of $45.0 million in the territory for H0731, H2158 and H3733. Following this initial investment, we and BeiGene will share development costs for the Territory equally. 24 The China Collaboration Agreement also contains provisions such as representations and warranties of the parties , terms as to governance of the collaboration, commercialization and regulatory responsibilities of the parties, and manufacturing and supply, including potential adjustments in the event supply costs exceed certain levels. In addition, during the term of the China Collaboration Agreement, neither party will commercialize any competing products in the T erritory. If, after ABI-H2158 and ABI-H3733 reach the end of Phase 2 clinical trials, we and BeiGene are unable to mutually agree on the terms of a Phase 3 global study, BeiGene may elect to terminate the China Collaboration Agreement solely as it relates to that compound, as applicable. Such a termination would result in us regaining all rights to the applicable compound in the Territory. In addition, BeiGene may terminate the China Collaboration Agreement for convenience at any time upon 90 days’ advance written notice to us. The China Collaboration Agreement also contains customary provisions for termination by either party, including in the event of breach of the China Collaboration Agreement, subject to cure. Microbiome Program In recent years, there has been increasing scientific evidence suggesting the therapeutic potential of the human microbiome—the billions of microbes living in and on people—to impact health and disease. Our Microbiome program builds upon experience reported in the literature of successfully treating various disease indications with fecal microbiota transplants and seeks to provide a pharmacologically relevant therapy using a “drug like” approach that delivers targeted and specific microbiome therapies in an oral capsule. Our Microbiome program consists of a fully integrated platform that includes a biological-function-based strain isolation, identification, characterization and selection process, methods for strain purification and growth under conditions compliant with cGMP requirements, and a licensed patented delivery system that we call GEMICEL®, which is designed to allow for targeted oral delivery of live biologic and conventional therapies to the lower GI tract. ABI-M201 Our Microbiome program’s lead candidate, M201, is in a multi-center, randomized, double-blind, placebo-controlled Phase 1b clinical trial to evaluate its safety and efficacy in patients with mildly to moderately active ulcerative colitis (UC) who are being treated with mesalamine. The study’s primary objective is safety and tolerability, and its secondary objectives focus on the effect of M201 treatment on disease activity measures in patients with UC. This Phase 1b study is ongoing; however, continued enrollment has been delayed as a result of the COVID-19 pandemic and the limitations placed on some trial sites to conduct certain procedures as part of the patient screening process. We expect enrollment activities to resume in mid-2020, and we continue to monitor the situation closely. For currently enrolled patients who are unable to come to the clinic, study drug or placebo is being shipped to their homes and sites are conducting telehealth monitoring and home health nurse visits. Preclinical data from the M201 program was selected for presentation as a poster at Digestive Disease Week (DDW) in May 2020; however, DDW 2020 was cancelled due to the COVID-19 pandemic. M201 is being developed as part of the Allergan Collaboration Agreement, which provides for the development and commercialization of microbiome gastrointestinal programs. We expect the Phase 1b study of M201 to continue despite the pending termination of the Allergan Collaboration Agreement. See “—Allergan Collaboration Agreement.” Additional Product Candidates Using our microbiome platform capabilities, we are also exploring additional product candidates for other disease indications, including Crohn’s disease and irritable bowel syndrome in connection with the Allergan Collaboration Agreement, as well as immune-mediated and metabolic disorders and oncology, which indications we will pursue either internally or in collaboration with other third parties. Preclinical data from our immuno-oncology microbiome program was presented as an e-poster at AACR in June 2020. 25 Allergan Collaboration Agreement In May 2020, AbbVie Inc. (AbbVie) completed its acquisition of Allergan. In June 2020, AbbVie notified us that it decided to terminate the Allergan Collaboration Agreement. This decision was not based on any efficacy, safety or other data related to collaboration programs. The termination will be effective on October 10, 2020, until which time AbbVie is obligated to continue to reimburse us for certain research and development costs. After such time, we will regain worldwide rights to all microbiome candidates subject to the collaboration, including M201. We have begun exploring strategic alternatives to continue development of the Microbiome programs following the return of the related intellectual property rights. Operations We currently have corporate and administrative offices and research laboratory space in South San Francisco, California and research, development and small-scale manufacturing activities in Groton, Connecticut. We also currently have an administrative office and research laboratory space in Shanghai, China and a regulatory office in Beijing, China. Since our inception, we have had no revenue from product sales and have funded our operations principally through equity financings and collaborations. Our operations to date have been primarily limited to organizing and staffing our company, licensing our product candidates, discovering and developing our product candidates, establishing small-scale manufacturing capabilities for certain of our product candidates, maintaining and improving our patent portfolio and raising capital. We have generated significant losses to date, and we expect to continue to generate losses as we continue to develop our product candidates. As of June 30, 2020, we had an accumulated deficit of $458.8 million. Because we do not generate revenue from any of our product candidates, our losses will continue as we further develop and seek regulatory approval for, and commercialize, our product candidates. As a result, our operating losses are likely to be substantial over the next several years as we continue the development of our product candidates and thereafter if none are approved or successfully launched. We are unable to predict the extent of any future losses or when we will become profitable, if at all. In mid-March 2020, as a result of the COVID-19 pandemic, six San Francisco Bay Area counties announced a shelter-in-place order, restricting all residents to their homes, with few exceptions. Within a week, both California and Connecticut issued state-wide stay-at-home orders. As a biotechnology company, we were exempt from such orders. California’s state-wide and local orders remain in place. Connecticut’s order expired in May 2020. Because of the exemptions described above, there has not been any significant interruption to date of essential activities at our offices, including work in our laboratories in both South San Francisco and Groton with proper protections and procedures in place. While we have experienced some shipping delays or shortages of personal protective equipment (PPE) that are important to maintaining normal workflows in our laboratories, we have been able to continue our critical research activities through schedule shifts, use of PPE on-hand and reallocation of certain resources that allow our employees to practice “social distancing” and comply with applicable laws. Notwithstanding the expiration of Connecticut’s stay-at-home order, substantially all of our U.S.-based non-research employees at both our South San Francisco and Groton facilities have been working from their homes since mid-March 2020. Clinical study-related impacts of the COVID-19 pandemic to date have been limited to short enrollment delays for our Phase 1 study of H3733 and our Phase 1b study of M201. We cannot currently predict the specific extent, duration or full impact that the COVID-19 pandemic will have on our ongoing and planned research efforts, clinical trials and other business operations. We continue to monitor the situation regularly for additional potential delays, or modifications to our ongoing and planned trials and, if circumstances warrant, we may adjust our budget and operating plan. Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States (U.S. GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. 26 We evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation, on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and significant estimates are detailed in our 2019 Annual Report. Our critical accounting policies and significant estimates have not changed from those previously disclosed in our 2019 Annual Report, except for those accounting subjects discussed in the section of Note 2 to the unaudited condensed consolidated financial statements titled Adoption of Recent Accounting Pronouncements included in this Quarterly Report on Form 10-Q. Results of Operations Comparison of the Three Months Ended June 30, 2020 and 2019 Collaboration Revenue The following table summarizes the period-over-period changes in our collaboration revenue (in thousands, except for percentages): Three Months Ended June 30, $ Change % Change 2020 2019 2020 vs. 2019 2020 vs. 2019 Collaboration revenue $ 39,376 $ 3,080 $ 36,296 1178 % Collaboration revenue includes the recognition of deferred revenue and reimbursements incurred under the Allergan Collaboration Agreement, for which AbbVie (formerly Allergan pre-acquisition) gave written notice of termination in June 2020. As a result, we recognized in collaboration revenue the remaining deferred revenue balance of $36.0 million upon receipt of the termination notice. Research and Development Expense The following table summarizes the period-over-period changes in our research and development expenses (in thousands, except for percentages): Three Months Ended June 30, $ Change % Change Program/Description 2020 2019 2020 vs. 2019 2020 vs. 2019 HBV Cure program $ 16,001 $ 12,141 $ 3,860 32 % Microbiome program (1) 7,326 6,559 767 12 % Total research and development expenses $ 23,327 $ 18,700 $ 4,627 25 % (1) Expenses presented for the Microbiome program exclude collaboration revenue related to expense reimbursements under the Allergan Collaboration Agreement as discussed in Note 8 to the Condensed Consolidated Financial Statements. Research and development expenses were $23.3 million for the three months ended June 30, 2020 compared to $18.7 million for the same period in 2019. The increase was primarily due to an increase of $3.9 million in research and development expenses related to the HBV Cure program and an increase of $0.8 million in research and development expenses related to the Microbiome program. Research and development expenses include non-cash stock-based compensation expenses of $3.6 million for the three months ended June 30, 2020 and $3.1 million for the same period in 2019. 27 General and Administrative Expense The following table summarizes the period-over-period changes in our general and administrative expenses (in thousands, except for percentages): Three Months Ended June 30, $ Change % Change 2020 2019 2020 vs. 2019 2020 vs. 2019 General and administrative expenses $ 9,470 $ 4,080 $ 5,390 132 % General and administrative expense consists primarily of salaries, consulting fees and other related costs, professional fees for legal services, accounting and tax services, insurance and travel expenses, as well as the stock-based compensation expense associated with equity awards to our employees, consultants, and directors. General and administrative expenses were $9.5 million for the three months ended June 30, 2020 compared to $4.1 million for the same period in 2019. The increase includes an increase of $0.7 million in salary and benefits and an increase of $0.2 million in recruitment expenses due to additional employees as well as an increase of $0.3 million in professional fees. These increases were partially offset by a decrease of $0.4 million in travel related expenses due to state and local laws restricting travel in response to the COVID-19 pandemic. General and administrative expenses include non-cash stock-based compensation expenses of $3.5 million for the three months ended June 30, 2020 and a $1.1 million reduction of expense for the same period in 2019. Stock-based compensation expense for the three months ended June 30, 2019 includes the reversal of previously recognized expense of $3.6 million related to forfeited awards resulting from the departure of one of the Company’s former officers during the period. Comparison of the Six Months Ended June 30, 2020 and 2019 Collaboration Revenue The following table summarizes the period-over-period changes in our collaboration revenue (in thousands, except for percentages): Six Months Ended June 30, $ Change % Change 2020 2019 2020 vs. 2019 2020 vs. 2019 Collaboration revenue $ 43,457 $ 6,966 $ 36,491 524 % Collaboration revenue includes the recognition of deferred revenue and reimbursements incurred under the Allergan Collaboration Agreement, for which AbbVie (formerly Allergan pre-acquisition) gave written notice of termination in June 2020. As a result, we recognized in collaboration revenue the remaining deferred revenue balance of $36.0 million upon receipt of the termination notice. Research and Development Expense The following table summarizes the period-over-period changes in our research and development expenses (in thousands, except for percentages): Six Months Ended June 30, $ Change % Change Program/Description 2020 2019 2020 vs. 2019 2020 vs. 2019 HBV Cure program $ 31,637 $ 27,854 $ 3,783 14 % Microbiome program (1) 14,736 13,551 1,185 9 % Total research and development expenses $ 46,373 $ 41,405 $ 4,968 12 % (1) Expenses presented for the Microbiome program exclude collaboration revenue related to expense reimbursements under the Allergan Collaboration Agreement as discussed in Note 8 to the Condensed Consolidated Financial Statements. 28 Research and development expense s were $ 46.4 million for the six months ended June 30, 2020 compared to $ 41.4 million for the same period in 2019 . The increase was primarily due to an increase of $ 3.8 million in research and development expenses related to the HBV Cure program and an increase of $ 1.2 million in research and development expenses related to the Microbiome program . Research and development expenses include non-cash stock-based compensation expenses of $ 5.6 million for the six months ended June 30, 2020 and $ 5.8 million for the same period in 2019 . General and Administrative Expense The following table summarizes the period-over-period changes in our general and administrative expenses (in thousands, except for percentages): Six Months Ended June 30, $ Change % Change 2020 2019 2020 vs. 2019 2020 vs. 2019 General and administrative expenses $ 18,199 $ 13,597 $ 4,602 34 % General and administrative expense consists primarily of salaries, consulting fees and other related costs, professional fees for legal services, accounting and tax services, insurance and travel expenses, as well as the stock-based compensation expense associated with equity awards to our employees, consultants, and directors. General and administrative expenses were $18.2 million for the six months ended June 30, 2020 compared to $13.6 million for the same period in 2019. The increase includes an increase of $1.2 million in salary and benefits and an increase of $0.2 million in recruitment expenses due to additional employees partially offset by a decrease of $0.6 million in travel related expenses due to state and local laws restricting travel in response to the COVID-19 pandemic. General and administrative expenses include non-cash stock-based compensation expenses of $6.5 million for the six months ended June 30, 2020 and $2.8 million for the same period in 2019. Stock-based compensation expense for the six months ended June 30, 2019 includes the reversal of previously recognized expense of $3.6 million related to forfeited awards resulting from the departure of one of the Company’s former officers during the period. Liquidity and Capital Resources Sources of Liquidity As a result of our significant research and development expenditures and the lack of any FDA-approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated in October 2005. We have funded our operations through June 30, 2020 principally through equity financings, raising an aggregate of $546.4 million in net proceeds, and a strategic collaboration raising an aggregate of $50.0 million through an upfront payment. Cash Flows for the Six Months Ended June 30, 2020 and 2019 The following table summarizes our cash flow activities (in thousands): Six Months Ended June 30, Cash provided by (used in): 2020 2019 Operating activities $ (48,334 ) $ (44,944 ) Investing activities 97,242 36,885 Financing activities $ 1,069 $ 846 Net Cash from Operating Activities Net cash used in operating activities was $48.3 million for the six months ended June 30, 2020. This was primarily due to a $19.4 million net loss, $0.1 million of accretion of discount of marketable securities and a decrease of $43.5 million of operating assets and liabilities, which includes the recognition of the remaining deferred revenue balance of $36.0 million as revenue during the six months ended June 30, 2020 in connection with AbbVie’s decision to terminate the Allergan Collaboration Agreement as discussed in Note 8. These decreases were partially offset by $12.1 million non-cash expense recorded for stock-based compensation, $2.3 million of amortization of operating lease right-of-use (ROU) assets and $0.2 million of depreciation and amortization expense. 29 Net cash used in operating activities was $ 44.9 million for the six months ended June 30, 2019 . This was primarily due to a $ 45.6 million net loss , $ 1.1 million of accretion of discount of marketable securities and a decrease of $ 9.4 million of operating assets and liabilities, which were offset by $ 8.6 million non-cash expense recorded for stock-based compensation, $ 2.2 million of amortization of operating lease ROU assets and $ 0.3 million of depreciation and amortization expense. Net Cash from Investing Activities Net cash provided by investing activities for the six months ended June 30, 2020 was $97.2 million due to $119.3 million of redemptions of marketable securities and $22.7 million of sale of marketable securities, which were partially offset by the purchase of $44.2 million of marketable securities and $0.5 million of property and equipment. Net cash provided by investing activities for the six months ended June 30, 2019 was $36.9 million primarily due to $131.6 million of redemptions of marketable securities and $0.5 million of sale of marketable securities , which were partially offset by the purchase of $93.7 million of marketable securities and $1.5 million of property and equipment. Net Cash from Financing Activities Net cash provided by financing activities for the six months ended June 30, 2020 was $1.1 million resulting from the exercise of stock options to purchase 91,713 shares of common stock and the issuance of 42,266 shares of common stock under our ESPP. Net cash provided by financing activities for the six months ended June 30, 2019 was $0.8 million resulting from the exercise of stock options to purchase 50,875 shares of common stock and the issuance of 36,804 shares of common stock under our ESPP. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research, development and clinical studies of our product candidates and pursue our intellectual property strategy. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. We monitor our cash needs and the status of the capital markets on a continuous basis. From time to time, we opportunistically raise capital and have done so numerous times by issuing equity securities, most recently in December 2019. We intend to continue to raise capital when and as needed and at the time and in the manner most advantageous to us. Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. We expect that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including: • the scope, progress, timing, results and costs of our ongoing drug discovery, nonclinical development, laboratory testing and clinical studies of our product candidates and any additional clinical studies we may conduct in the future; • the extent to which we further acquire or in-license other product candidates and technologies; • our ability to manufacture, and to contract with third parties to manufacture, adequate supplies of our product candidates for our clinical studies and any eventual commercialization; • the costs, timing and outcome of regulatory review of our product candidates; • the costs and timing of recruiting additional employees to support the growth of our business; 30 • the costs of preparing, filing and prosecuting patent applications in the United States and abroad, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and • our ability to establish and maintain collaborations on favorable terms, if at all. Identifying potential product candidates and conducting nonclinical testing and clinical studies is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of therapeutics that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financings to achieve our business objectives. Adequate additional financings may not be available to us on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Off-Balance Sheet Arrangements None. Contractual Obligations There were no material changes in our commitments under contractual obligations as disclosed in our 2019 Annual Report. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our 2019 Annual Report.