What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-05 · 100 added, 99 removed, 152 unchanged (57% of the section changed)

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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.

To date, our current and future planned clinical trials and pre-clinical studies have not been subject to significant impact as a result of the COVID-19 pandemic.

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.

During the third 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 :

Vebicorvir (VBR or ABI-H0731 (H0731)), our lead core inhibitor product candidate in the HBV Cure program :

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.

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.

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.

Study 211 is the first clinical trial with a core inhibitor to stop therapy and monitor for sustained virologic response (SVR) in patients with chronic HBV infection.

Patients who stopped therapy in Study 211 have not achieved meaningful SVR rates as 39 of 41 patients have now relapsed.

We continue to collect and analyze Study 211 data and intend to submit more detailed findings to a future medical meeting.

Presentation of additional interim analyses on HBeAg positive and negative patients from Study 211 at the European Association for the Study of the Liver’s (EASL) Digital International Liver Congress TM .

Continuation of a study, ABI-H0731-205, evaluating treatment intensification with VBR 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.

End-of-Phase 2 Meeting with National Medical Products Administration, Center for Drug Evaluation, China, in July 2020 with agreement on Phase 3 registrational program for chronic suppressive therapy.

ABI-H2158 (H2158), our second -generation core inhibitor product candidate in the HBV Cure program :

Initiation of a Phase 2 clinical study using a 300 mg dose of H2158.

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.

Receipt of Fast Track Designation from the U.S.

Food and Drug Administration (FDA).

Continuation of a Phase 2 clinical study, ABI-H2158-201, using a 300 mg dose of H2158.

Presentation 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.

ABI-H3733 (H3733), our third core inhibitor product candidate in the HBV Cure program :

Continuation of a Phase 1 clinical study to evaluate safety, tolerability, and pharmacokinetics (PK) of H3733 in healthy subjects.

China HBV Collaboration :

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.

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.

Continuation of a Phase 1 clinical study, ABI-H3733-101, to evaluate safety, tolerability, and pharmacokinetics (PK) of H3733 in healthy subjects.

Upcoming HBV presentations at the American Association for the Study of Liver Diseases (AASLD) Annual Meeting (The Liver Meeting®), November 13 to 16, 2020:

“Analysis of the longer-term safety profile of the hepatitis B virus core inhibitor ABI-H0731 in an open-label extension study”;

“Persistently detectable serum HBV pgRNA is associated with subsequent hepatocellular carcinoma development in chronic HBV patients receiving chronic NrtI treatment”;

“Amino acid substitutions in the inhibitor binding pocket of HBV core protein confer differential changes in susceptibility to three generations of HBV core inhibitors”;

“Changes in viral antigens are more strongly associated with HBV pgRNA than HBV DNA in studies of VBR and NrtI in treatment-naïve patients with chronic HBV infection.”

Triple Combination HBV Studies :

Entry into a Clinical Trial Collaboration Agreement (Triple Combination Collaboration Agreement) with Arbutus to evaluate VBR in combination with Arbutus’ proprietary GalNAc delivered RNAi compound AB-729 and NrtI therapy for the treatment of patients with chronic HBV infection.

Initiation of a Phase 2 triple combination study evaluating the addition of interferon to VBR and NrtI expected in the first half of 2021.

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.

Continuation of process identifying strategic alternatives to continue development of the Microbiome programs following the return of rights to such programs from Allergan Pharmaceuticals International Limited (Allergan) upon termination of the Research, Development, Collaboration and License Agreement (Allergan Agreement).

Corporate Highlights

Strengthening of our leadership team with the addition of William Delaney IV, Ph.D.

as Chief Scientific Officer, Virology.

Appointment of Gina Consylman to our Board of Directors (the Board) and the Board’s Audit Committee.

HBV Cure Program

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We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core protein.

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.

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.

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.

VBR, our lead core inhibitor product candidate in the HBV Cure program, is licensed from Indiana University.

The conduct of the Phase 2 studies, Study 201 and 202, is now complete, and our open-label extension study, Study 211, is ongoing.

We continue to present interim updates on our clinical studies at conferences, including EASL 2020 in August 2020 and AASLD 2020 in November 2020.

The stopping criteria for transitioning patients off therapy in Study 211 were discussed with our lead investigators and reviewed and agreed upon by the FDA.

All patients who met the stopping criteria are off treatment and being observed for SVR.

Patients who stopped therapy in Study 211 have not achieved meaningful SVR rates as 39 of 41 patients have now relapsed.

We continue to collect and analyze Study 211 data and intend to submit more detailed findings to a future medical meeting.

When enrolled patients are unable to come to the clinic as a result of the COVID-19 pandemic, study drug is shipped to their homes, and sites conduct telehealth visits.

All currently enrolled patients are continuing with normal study visits, and we continue to monitor for a potential impact of the COVID-19 pandemic on the study.

H2158, our second-generation core inhibitor product candidate in the HBV Cure program, was internally discovered and developed and is chemically distinct from VBR.

We reported the final data from dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study 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.

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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.

Collaboration Agreements

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 July 2020, we entered into a Collaboration Agreement with BeiGene, granting BeiGene an exclusive, royalty-bearing license to develop and commercialize products containing VBR, H2158 and H3733 (the BeiGene Agreement) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory).

Under the BeiGene Agreement, we and BeiGene will collaborate on development activities with respect to the licensed products in accordance with a mutually agreed upon development plan.

A registrational study is expected to initiate in the first half of 2021 and will initially focus on vebicorvir in combination with NrtI as chronic suppressive therapy.

Pursuant to the terms of the BeiGene 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 $11 3.8 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.

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.

BeiGene has also agreed to pay all development and regulatory costs up to an aggregate of $45 .0 million in the territory for VBR, H2158 and H3733 .

Following this initial investment, we and BeiGene will share development costs for the T erritory equally.

The BeiGene 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 BeiGene Agreement, neither party will commercialize any competing products in the Territory.

If, after H2158 and 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 BeiGene 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.

In addition, BeiGene may terminate the BeiGene Agreement for convenience at any time upon 90 days’ advance written notice to us.

The BeiGene Agreement also contains customary provisions for termination by either party, including in the event of breach of the BeiGene Agreement, subject to cure.

Triple Combination HBV Collaboration

In August 2020, we entered into the Triple Combination Collaboration Agreement, pursuant to which we and Arbutus will conduct a randomized, multi-center, open-label Phase 2 clinical trial to explore the safety, PK and antiviral activity of the triple combination of VBR, AB-729 and an NrtI compared to the double combinations of VBR with an NrtI and AB-729 with an NrtI.

This clinical trial is projected to initiate in the first half of 2021 and enroll approximately 60 virologically suppressed patients with HBeAg negative or positive chronic HBV infection.

Microbiome Program

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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.

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, GEMICEL®, which is designed to allow for targeted oral delivery of live biologic and conventional therapies to the lower GI tract.

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.

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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.

Enrollment had been delayed due to the COVID-19 pandemic and the limitations placed on some trial sites to conduct certain procedures as part of the patient screening process.

Enrollment has resumed, and we continue to monitor the situation closely.

When enrolled patients are unable to come to the clinic, study drug or placebo is 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.”

M201 was initially developed as part of the Allergan Agreement , which provide d for the development and commercialization of microbiome gastrointestinal programs.

While we explore strategic alternatives for continued development of our Microbiome programs, the Phase 1b study of M201 will continue despite the termination of the Allergan Agreement .

See “— Allergan 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.

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 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.

Allergan Collaboration Agreement

Allergan 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.

In June 2020, AbbVie notified us that it decided to terminate the Allergan 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.

On October 10, 2020, the termination became effective, and we regained 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.

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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 of September 30, 2020, we had an accumulated deficit of $462.2 million.

Because we do not generate revenue from any of our product candidates, our losses will continue as we further develop, 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.

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Results of Operations

Comparison of the Three Months Ended June 30, 2020 and 2019

Comparison of the Three Months Ended September 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,

Three Months Ended September 30,

Collaboration revenue

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.

Collaboration revenue for the three months ended September 30, 2020 includes the recognition of $31.0 million recognized for the transfer of the VBR License upon entering into the BeiGene Agreement as well as reimbursements incurred under the Allergan Agreement.

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,

Three Months Ended September 30,

Program/Description

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Total research and development expenses

(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.

(1) Expenses presented for the Microbiome program exclude collaboration revenue related to expense reimbursements under the Allergan Agreement as discussed in Note 8 to the Condensed Consolidated Financial Statements.

Research and development expense s were $ 26.9 million for the three months ended September 30, 2020 compared to $ 21.7 million for the same period in 2019 .

The increase was due to an increase of $ 4.0 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.

These increases were primarily due to increases in clinical activities, chemistry and manufacturing control activities to support VBR, 2158, 3733 and microbiome clinical trials and increased salary and benefits due to additional employees.

Research and development expenses include non-cash stock-based compensation expenses of $ 2.8 million for the three months ended September 30, 2020 and $ 2.5 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):

Three Months Ended June 30,

Three Months Ended September 30,

General and administrative expenses

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.

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 stock-based compensation expense associated with equity awards to our employees, consultants, and directors.

General and administrative expenses were $11.7 million for the three months ended September 30, 2020 compared to $8.5 million for the same period in 2019.

The increase was primarily due to an increase of $2.7 million in professional fees due to the amortized incremental contract costs associated with entering into the BeiGene Agreement, $0.3 million in equipment rental, $0.4 million in stock-based compensation expense and $0.1 million in salary and benefits due to additional employees.

These increases were partially offset by a decrease of $0.2 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

General and administrative expenses include non-cash stock-based compensation expenses of $3.3 million for the three months ended September 30, 2020 and $2.9 million for the same period in 2019.

Comparison of the Nine Months Ended September 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,

Nine Months Ended September 30,

Collaboration revenue

As a result, we recognized in collaboration revenue the remaining deferred revenue balance of $36.0 million upon receipt of the termination notice.

Collaboration revenue for the nine months ended September 30, 2020 includes the recognition of $31.0 million recognized for the transfer of the VBR License upon entering into the BeiGene Agreement.

It also includes the remaining deferred revenue balance and reimbursements incurred under the Allergan Agreement, for which AbbVie (formerly Allergan pre-acquisition) gave written notice of termination in June 2020.

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,

Nine Months Ended September 30,

Program/Description

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Total research and development expenses

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 .

Research and development expenses were $73.3 million for the nine months ended September 30, 2020 compared to $63.1 million for the same period in 2019.

The increase was due to an increase of $7.7 million in research and development expenses related to the HBV Cure program and an increase of $2.4 million in research and development expenses related to the Microbiome program.

Research and development expenses include non-cash stock-based compensation expenses of $8.3 million for both the nine months ended September 30, 2020 and 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,

Nine Months Ended September 30,

General and administrative expenses

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.

General and administrative expenses were $29.9 million for the nine months ended September 30, 2020 compared to $22.1 million for the same period in 2019.

The increase was primarily driven by an increase of $2.7 million in professional fees due to the amortized incremental contract costs associated with entering into the BeiGene Agreement, $1.3 million in salary and benefits, $4.1 million in stock-based compensation expense, $0.4 million in equipment rental and $0.1 million in recruitment expenses due to additional employees partially offset by a decrease of $0.7 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 $9.8 million for the nine months ended September 30, 2020 and $5.7 million for the same period in 2019.

Stock-based compensation expense for the nine months ended September 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

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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

We have funded our operations through September 30, 2020 principally through equity financings, raising an aggregate of $546.4 million in net proceeds, and strategic collaborations, raising an aggregate of $90.0 million through upfront payments.

Cash Flows for the Nine Months Ended September 30, 2020 and 2019

The following table summarizes our cash flow activities (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Cash provided by (used in):

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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.

Net cash used in operating activities was $37.7 million for the nine months ended September 30, 2020.

This was primarily due to a $22.7 million net loss, $0.1 million of accretion of discount of marketable securities and a decrease of $36.8 million of operating assets and liabilities, which includes the recognition of the remaining deferred revenue balance of $36.0 million as revenue during the nine months ended September 30, 2020 in connection with AbbVie’s decision to terminate the Allergan Agreement as discussed in Note 8.

These decreases were partially offset by $18.1 million non-cash expense recorded for stock-based compensation, $3.5 million of amortization of operating lease right-of-use (ROU) assets and $0.4 million of depreciation and amortization expense.

Net cash used in operating activities was $ 44.9 million for the six months ended June 30, 2019 .

Net cash used in operating activities was $63.5 million for the nine months ended September 30, 2019.

This was primarily due to a $70.6 million net loss, $1.5 million of accretion of discount of marketable securities and a decrease of $9.3 million of operating assets and liabilities, which were offset by $14.0 million non-cash expense recorded for stock-based compensation, $3.3 million of amortization of operating lease ROU assets and $0.4 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 provided by investing activities for the nine months ended September 30, 2020 was $47.4 million due to $165.3 million of redemptions of marketable securities and $35.6 million of sale of marketable securities, which were partially offset by the purchase of $153.0 million of marketable securities and $0.5 million of property and equipment.

Net cash provided by investing activities for the nine months ended September 30, 2019 was $44.7 million primarily due to $166.9 million of redemptions of marketable securities and $28.7 million of sale of marketable securities, which were partially offset by the purchase of $149.3 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.

Net cash provided by financing activities for the nine months ended September 30, 2020 was $1.9 million resulting from the exercise of stock options to purchase 172,779 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 nine months ended September 30, 2019 was $2.2 million resulting from the exercise of stock options to purchase 243,481 shares of common stock and the issuance of 36,804 shares of common stock under our ESPP.

Funding Requirements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis