What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-12 · 115 added, 82 removed, 131 unchanged (60% of the section changed)

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HDV is estimated to impact approximately 5% of those chronically infected with HBV, or approximately 12 million people.

In addition, our research organization is working on discovering and developing small molecules targeting an additional novel, currently undisclosed HBV target.

While we continue our efforts to develop finite and curative therapies for patients with chronic HBV and HDV infection, our research organization recently launched an exploratory virology discovery program for compounds directed at a number of non-HBV viral targets.

These targets, which we currently expect to disclose in mid-2022, were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need.

The ongoing COVID-19 pandemic and its broad, global impacts, including supply chain disruptions, have impacted certain aspects of our business, including where and how our employees work in our labs and offices and how and when our nonclinical and clinical studies are conducted.

Early in the pandemic, our clinical and preclinical studies were largely unaffected, but as the pandemic has continued, we have experienced enrollment delays for two of our multi-drug combination clinical studies, delayed animal studies and delayed shipping of compounds necessary for our research programs.

Although the clinical studies that experienced enrollment delays are now fully enrolled, the lockdowns resulting from China’s strict “zero covid” policy are also impacting execution of one of these multi-drug clinical studies.

In addition, our research organization is working on discovering and developing a novel, small molecule interferon-α receptor (IFNAR) agonist designed to selectively activate the interferon-α pathway within the liver and offer the convenience of oral dosing.

While we continue our efforts to develop finite and curative therapies for patients with chronic HBV and improved chronic therapy for HDV infection, our research organization is advancing early-stage programs evaluating two additional undisclosed virus targets.

These targets, which we currently expect to disclose in the third quarter of 2022, were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need.

The ongoing COVID-19 pandemic and its broad, global impacts, including supply chain disruptions, have impacted certain aspects of our business, including where and how our employees work in its labs and offices and how and when our nonclinical and clinical studies are conducted.

Early in the pandemic, our clinical and nonclinical studies were largely unaffected, but as the pandemic has continued, its impacts have increased.

Certain nonclinical animal studies and shipping of compounds necessary for our research programs have each been delayed, and conduct of a clinical study in China (Study 203), which is currently in the process of being closed, has been impacted by the shutdowns occurring in the first half of 2022 in China.

We rely on contract research organizations (CROs), some of which are in China and India.

While these CROs have experienced pandemic-related impacts from time to time, the latest shutdowns in China have impacted us more than earlier in the pandemic.

While these CROs have experienced pandemic-related impacts from time to time.

In addition to the Company’s CROs in China and India, the Company also contracts with a CRO in Ukraine, which shut down operations due to Russia’s invasion of Ukraine.

Though this CRO has resumed operations, we have reallocated certain work to other global CROs incase it shuts down again.

As previously announced, in January 2021, we wound down our Microbiome program to prioritize and focus our resources on our virology programs.

Our Microbiome program had been developing a novel class of oral live microbial biotherapeutics candidates designed to treat disorders associated with the microbiome.

Recent Developments

On July 19, 2022, our Board of Directors approved a strategic plan (the Plan) to:

(1) discontinue development of our first-generation core inhibitor, vebicorvir (VBR), based on review of interim on-treatment efficacy data from on-going triple combination studies that do not support additional clinical studies;

(2) advance our next-generation core inhibitors, ABI-H3733 (3733) and ABI-4334 (4334), in clinical studies;

and (3) prioritize research activities, including our HBV/HDV entry inhibitor and IFNAR agonist programs, as well as two additional undisclosed viral

The Plan include d a reduction of our workforce by 30 employees, resulting in a total of approximately 70 remaining employees.

Implementation of the Plan is expected to preserve capital while appropriately resourcing the advancement of 3733, 4334 and our novel research pipeline and to optimize manufacturing of all candidates.

Our Primary Focus:

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No currently approved oral therapies target cccDNA activity directly, which makes molecules that can modulate cccDNA generation or disrupt its function highly sought in the HBV field.

As a result, most of our research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a viral protein involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA.

As a result, most of our HBV research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a viral protein involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA.

Through our research efforts, we have discovered several chemically distinct series of small molecule core inhibitors that directly target and allosterically inhibit core protein functions.

Vebicorvir (VBR), our lead core inhibitor product candidate, is licensed from Indiana University.

VBR, is licensed from Indiana University.

The conduct of our initial Phase 2 studies, Study 201, 202 and 211, is complete.

In these studies, VBR administered with NrtI therapy demonstrated a favorable safety profile and led to greater viral suppression of both HBV DNA and viral pgRNA than NrtI therapy alone.

Our most recently completed study for VBR, Study 211, involved transitioning patients who met the requisite stopping criteria, as determined in collaboration with our lead investigators and the U.S.

Food and Drug Administration (FDA), off of therapy to test for sustained virologic response (SVR).

SVR refers to sustained viral suppression (more than six months) of HBV DNA below LLOQ and would be consistent with a successful finite treatment for chronic HBV infection.

During the trial, it became clear that patients who stopped therapy in Study 211 had not achieved SVR, as all patients relapsed, meaning they had detectable HBV and the dual combination therapy of VBR + NrtI was insufficient to cure chronic HBV infection in the studied population.

Based on these results, we terminated Study 211 in the fourth quarter of 2020.

We presented follow-up data from Study 211 related to virologic response, safety and resistance following treatment discontinuation, at the European Association for the Study of the Liver’s (EASL) International Liver Congress TM in June 2021 (EASL 2021).

In Study 201 and 202, VBR administered with NrtI therapy demonstrated a favorable safety profile and led to greater viral suppression of both HBV DNA and viral pgRNA than NrtI therapy alone.

However, patients who stopped therapy in Study 211 did not achieve sustained virologic response as all patients relapsed, meaning they had detectable HBV off therapy, and the dual combination therapy of VBR + NrtI was insufficient to cure chronic HBV infection in the studied population.

At the American Association for the Study of Liver Diseases (AASLD) Annual Meeting in November 2021 (AASLD 2021), we presented additional follow-up data from Study 211 demonstrating that patients had increases of HBV DNA and pgRNA after discontinuation of VBR despite continued NrtI treatment, further supporting that core inhibitors deepen viral suppression in combination with NrtIs.

At the EASL International Liver Congress TM in June 2022 (EASL 2022), we plan to present additional VBR data related to the correlation between deeper virologic suppression and fibrosis-4 index in treatment naïve patients with HBeAg positive chronic HBV infection, an evaluation of the drug-drug interaction profile of VBR and an evaluation of the disposition and mass balance recovery of VBR in rats and humans.

At the EASL International Liver Congress TM in June 2022 (EASL 2022), we presented additional VBR data related to the correlation between deeper virologic suppression and fibrosis-4 index in treatment naïve patients with HBeAg positive chronic HBV infection, an evaluation of the drug-drug interaction profile of VBR and an evaluation of the disposition and mass balance recovery of VBR in rats and humans.

Based on discussions with leading viral hepatitis experts, global regulatory discussions and feedback, and, with respect to the China territory, discussions and agreement with our collaboration partner, BeiGene, Ltd.

(BeiGene), in early 2021, we decided to not move forward with the global registrational studies for VBR as a chronic suppressive treatment (CST) in combination with NrtI.

(BeiGene), in early 2021, we decided to not move forward with the global registrational studies for VBR as a chronic suppressive therapy (CST) in combination with NrtI.

The decision was made to focus on the greatest unmet medical need of patients, which lies predominantly in cure, rather than CST.

As a result, we terminated Study 205 and began to focus our efforts with VBR in combination with NrtI and additional mechanisms targeting finite and curative combination therapy.

We currently have three Phase 2 triple combination studies involving VBR ongoing.

As a result, we began to focus our efforts with VBR in combination with NrtI and additional mechanisms targeting finite and curative combination therapy.

We currently have three Phase 2 triple combination studies involving VBR ongoing, two of which have been terminated early.

These studies are detailed below.

See “—Multi-Drug Combination Studies.”

See “—Multi-Drug Combination Studies.” In July 2022, we announced that we have discontinued further clinical development of VBR based on review of interim on-treatment efficacy from two triple combination studies.

Next Generation Core Inhibitors

Our first of two next-generation core inhibitor product candidates, ABI-H3733 (3733), was internally discovered and developed.

The chemical scaffold of 3733 is novel and distinct from each of VBR, ABI-4334 (4334) and our discontinued core inhibitor product candidate, ABI-H2158 (2158).

In connection with our discontinuation of the development of VBR, we have prioritized clinical development of the next-generation core inhibitors, 3733 and 4334.

Our first of two next-generation core inhibitor product candidates, 3733, was internally discovered and developed.

The chemical scaffold of 3733 is novel and distinct from each of 4334 and both of our discontinued core inhibitor product candidates, VBR and ABI-H2158 (2158).

In 2020, we initiated and completed a Phase 1a clinical study of 3733 to evaluate safety, tolerability and pharmacokinetics (PK) following single ascending dose and multiple ascending dose administration in healthy subjects in New Zealand.

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Results detailing 3733’s safety and PK from this study were presented in a poster presentation at AASLD 2021.

In June 2022, we initiated a randomized, multi-center, double-blind and placebo-controlled Phase 1b trial of 3733 evaluating the safety, PK and antiviral activity of 3733 in adults with chronic HBV ( cHBV ) infection .

Initial data from this study are anticipated in the second half of 2022.

In addition, at EASL 2021, we presented observations on 3733’s enhanced potency and target coverage for both antiviral activity and inhibition of cccDNA generation as compared to VBR and 2158.

At EASL 2022, we plan to present 3733’s improved PK profile resulting from new formulation activities.

We expect to initiate a Phase 1b study with the improved formulation of 3733 in patients with chronic HBV infection in the first half of 2022.

At EASL 2022, we presented 3733’s improved PK profile resulting from new formulation activities.

In mid-2021, we announced the selection of 4334, our other next-generation core inhibitor product candidate.

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Preclinical characterization of 4334 was shared in a poster presentation at AASLD in November 2021.

At EASL 2022, we plan to present preclinical data demonstrating that 4334 promotes formation of empty capsids and pre v ents cccDNA formation by disrupting incoming capsids.

Our preclinical work on 4334 is ongoing, with the aim of completing Investigational New Drug (IND) enabling studies and initiating a Phase 1a clinical study in the second half of 2022.

In September 2021, we discontinued development of 2158 following the observation of elevated alanine transaminase (ALT) levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity.

At EASL 2022, we presented preclinical data demonstrating that 4334 promotes formation of empty capsids and prevents cccDNA formation by disrupting incoming capsids.

Our preclinical work on 4334 is ongoing, with the aim of completing nonclinical studies to support regulatory filings for clinical studies and initiating a Phase 1a clinical study in the second half of 2022 to evaluate safety, tolerability, and PK following single ascending dose and multiple ascending dose administrations in healthy participants.

In September 2021, we discontinued development of 2158 following the observation of elevated alanine transaminase levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity.

Multi-Drug Combination Studies

We believe that core inhibitors and NrtI will be central to finite and curative therapies for chronic HBV infection.

Therefore, as we continue to develop and advance our current and future core inhibitors through clinical studies, we plan to conduct multi-drug combination studies in parallel that add additional drugs (or compounds) with nonoverlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone.

We currently have three ongoing triple combination studies.

Our first triple combination study is being conducted pursuant to a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus Biopharma) and consists of a randomized, multi-center, open-label Phase 2 clinical study to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 (Arbutus Biopharma’s investigational RNAi candidate) compared to the double combinations of VBR + NrtI and AB-729 + NrtI in virologically suppressed patients.

Therefore, as we have continued to develop and advance our current and future next-generation core inhibitors through clinical studies, we initiated multi-drug combination studies in parallel that add additional drugs (or compounds) with nonoverlapping mechanisms of action to the first-generation core inhibitor + NrtI antiviral backbone.

We currently have three ongoing triple combination studies with VBR, two of which have been discontinued early, as described in more detail below.

Our first triple combination study, Study 204, is being conducted pursuant to a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus Biopharma) and consists of a randomized, multi-center, open-label Phase 2 clinical study to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 (Arbutus Biopharma’s investigational RNAi candidate) compared to the double combinations of VBR + NrtI and AB-729 + NrtI in virologically suppressed patients.

This clinical study initiated in the first quarter of 2021 and completed enrollment in February 2022.

We expect to share interim on-treatment results from this study in the second half of 2022.

Our second triple combination study evaluates VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects.

Our second triple combination study, Study 203, was designed to evaluate VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects.

This study was also initiated in the first quarter of 2021 and completed enrollment in March 2022.

We expect to share interim on-treatment results from this study in the second half of 2022.

Our third triple combination study is being conducted pursuant to a Clinical Trial Collaboration Agreement with Antios Therapeutics, Inc.

The interim data from Study 204 and Study 203 indicate that the triple combinations do not show a benefit in multiple key viral parameters compared to the dual combinations without VBR in either study and informed our decision to discontinue further development of VBR.

We announced the early termination of Study 203 in July 2022.

In consultation with Arbutus Biopharma, our two companies intend to continue Study 204 and evaluate the primary endpoints of safety and tolerability of the combination regimen.

Our third triple combination study was initiated in April 2022 pursuant to a Clinical Trial Collaboration Agreement with Antios Therapeutics, Inc.

(Antios) to evaluate ATI-2173, Antios’s investigational proprietary active site polymerase inhibitor nucleotide (ASPIN), VBR and tenofovir disoproxil fumarate, an NrtI.

This multi-center, double-blinded, placebo-controlled study to explore the safety, PK and antiviral activity of this all-oral triple combination.

This study, which will enroll ten treatment-naïve or off-treatment HBeAg negative or positive patients in a 12-week treatment study, was initiated in April 2022.

The study plan initially included a site in Ukraine, but the study will no longer be conducted there due to the instability resulting from Russia’s invasion.

We expect these changes to our study plan to result in a delayed data readout.

Both our first and second triple combination studies have experienced enrollment delays due to the ongoing COVID-19 pandemic.

This multi-center, double-blinded, placebo-controlled study was designed to explore the safety, PK and antiviral activity of this all-oral triple combination.

This study, which was expected to enroll ten treatment-naïve or off-treatment HBeAg negative or positive patients in a 12-week treatment study, was initiated in April 2022.

On May 18, 2022, we were notified by Antios that ATI-2173, Antios’s ASPIN, had been placed on clinical hold by the FDA following submission of a

safety report involving a patient who received a triple combination of the VBR + ATI-2173 + NrtI .

Effective May 20, 2022, because of the clinical hold, we terminated the Clinical Trial Collaboration Agreement and Antios, as the s ponsor , is closing the study .

Study 204 and Study 203 both experienced enrollment delays due to the ongoing COVID-19 pandemic, and conduct of Study 203 has been impacted by the COVID-related shutdowns occurring in the first half of 2022 in China.

The pandemic has impacted patients and study sites through patient screening delays, travel restrictions and hesitancy to travel to study sites.

The pandemic has also impacted our vendors, as our central laboratories have been unable to meet their contractual obligations, and our vendors have experienced staffing constraints and supply chain challenges as they seek to obtain lab kits, reagents and other items necessary to enroll patients in our studies.

As a result, we were unable to fully enroll our first and second triple combination studies in 2021 as initially planned;

however, enrollment for both of these studies was completed in the first quarter of 2022, and we do not believe these delays will impact interim data readouts for these studies, which remains on schedule in the second half of 2022.

Enrollment for both of these studies was completed in the first quarter of 2022, and we do not believe these delays will impact the data readouts for the ongoing Study 204.

Beyond Core Inhibitors

In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing small molecules to inhibit HBV and HDV viral entry and small molecules targeting an additional novel, currently undisclosed HBV target, which we expect to announce in the first half of 2022, to complement our HBV cure strategy.

HBV/HDV Inhibitor

In March 2022, we announced our new research focused on a novel, orally bioavailable small molecule approach to inhibit entry of HBV and HDV.

In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing small molecules to inhibit HBV and HDV viral entry and small molecule interferon-α receptor (IFNAR) agonists, to complement our HBV cure strategy.

HBV/HDV Entry Inhibitor

In March 2022, we announced our new research program focused on a novel, orally bioavailable small molecule approach to inhibit entry of HBV and HDV.

While HDV is less well known in the U.S., it is a significant and serious health problem with inadequate treatment in many parts of Europe, Africa, the Middle East, East Asia and parts of South America.

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HDV is known to accelerate disease progression and increase the incidence of liver cirrhosis and liver cancer, which results in higher morbidity and mortality rates than HBV alone.

The current standard of care treatment for HDV is a large, complex molecule that requires daily injections.

The current standard of care treatment for HDV off-label pegylated interferon injected weekly or, in some regions, a large, complex molecule that requires daily injections.

Our research team has identified a potential opportunity to develop a safe and effective oral small molecule, which could significantly improve convenience and potentially enhance treatment uptake and diagnosis rates.

Based on current progress, our research team’s aim is to nominate a product candidate for development in the first half of 2023.

In July 2022, we introduced our new research program advancing a novel, small molecule IFNAR agonist designed to selectively activate the interferon-α pathway within the liver and offer the convenience of oral dosing.

Interferon-α (IFN-α) is a subcutaneous injectable therapy approved for HBV that has demonstrated functional cure of HBV in some HBV patients, but its poor tolerability profile significantly limits its use.

Substantial side effects include flu-like symptoms, cytopenias, serious depression and psychiatric effects.

In addition, multiple contraindications limit its use, and it requires weekly injections that result in systemic exposure for up to a year.

By focusing exposure on the liver, our investigational IFNAR agonist program aims to engage interferon-α’s validated antiviral and immune modulatory mechanisms, retaining the efficacy of IFN-α while reducing systemic exposure to improve tolerability.

cccDNA Disruptors

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Prior to the termination of collaboration with Door Pharma, we worked with Door Pharma on identifying cccDNA disruptors aimed at inhibiting different intra-nuclear steps in the viral replication cycle that complement the activity of our core inhibitors.

We terminated this collaboration to focus our resources on our other internal HBV programs and our programs targeting other viruses.

We terminated this collaboration to focus resources on our other internal HBV programs and programs targeting other viruses.

Additional Antiviral Opportunities

In addition to our work toward developing finite and curative therapies for patients with chronic HBV infection, we have expanded our research and development organizations’ reach by pursuing exploratory research on novel compounds targeting other viruses.

Our expanded focus leverages the depth and breadth of virology expertise of our research and development organization to diversify our pipeline into areas of high unmet medical need.

We expect to disclose more information regarding these discovery programs on additional viral targets in mid-2022.

In addition to our work toward developing finite and curative therapies for patients with chronic HBV infection, our research organization is advancing early-stage programs evaluating two additional undisclosed virus targets.

targets were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need.

We expect to disclose more information regarding these discovery programs on additional viral targets in the third quarter of 2022.

We currently have corporate and administrative offices and res earch laboratory space in South San Francisco, California as well as registrational offices in China.

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We have generated significant losses to date, and we expect to continue to generate losses as we develop our product candidates.

As of March 31, 2022, we had an accumulated deficit of $654.5 million.

As of June 30, 2022, we had an accumulated deficit of $679.0 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.

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There has not been any significant interruption to date of essential activities at our offices, including work in our laboratories with proper protections and procedures in place.

hand and reallocation of certain resources that allow our employees to practice “social distancing” and comply with applicable laws.

Early in the pandemic, our clinical and preclinical studies were largely unaffected, but as the pandemic has continued, we have experienced enrollment delays for two of our multi-drug combination clinical studies , delayed animal studies and delayed shipping of compounds necessary for our research programs.

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.

Early in the pandemic, our clinical and nonclinical studies were largely unaffected, but as the pandemic has continued, its impacts have increased.

Certain nonclinical animal studies and shipping of compounds necessary for our research programs have each been delayed, and conduct of Study 203, which is currently in the process of being closed, has been impacted by the shutdowns occurring in the first half of 2022 in China.

We continually work with our CROs and other vendors to ensure, to the extent possible, that services are provided in a timely manner while also identifying alternative vendors and strategies to utilize in the event that COVID- or third party-related delays threaten our ability to meet our timelines.

However, some of our CROs are in China and India, and while these CROs have experienced pandemic-related impacts from time to time, the latest shutdowns in China have impacted us more than earlier in the pandemic.

However, some of our CROs are in China and India, and these CROs have experienced pandemic-related impacts from time to time.

We cannot currently predict the specific extent, duration or full impact the COVID-19 pandemic will have on our ongoing and planned research efforts, clinical studies and other business operations.

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

Comparison of the Three Months Ended June 30, 2022 and 2021

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 March 31,

Three Months Ended June 30,

External expenses:

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Total research and development expenses

Research and development expenses were $17.2 million for the three months ended March 31, 2022 compared to $18.6 million for the same period in 2021.

VBR external expenses decreased due to the termination of Studies 211 and 205 and because costs under two of our currently ongoing Phase 2 triple combination studies are being shared with collaboration partners.

Decreases in 2158 and Microbiome external expenses were due to the termination of both programs and were largely offset by increases in our external expenses for 3733, 4334 and our research

discovery program as we advance those programs.

Employee and contractor-related expenses increased by $3.3 million primarily due to the reversal of $3.6 million of previously recognized stock-based compensation expense related to forfeited awards of terminated employees during the three months ended March 31, 2021 , $2.7 million of which resulted from the wind-down of our Microbiome program .

Facility and other expenses consist primarily of rent and maintenance of our premises and other costs which are allocated based on headcount in each department .

The decrease in facility and other expenses of $1.4 million is primarily attributable to asset impairment and other charges incurred during the three months ended March 31, 2021 in connection with the wind-down of the Microbiome program .

Research and development expenses were $17.8 million for the three months ended June 30, 2022 compared to $16.7 million for the same period in 2021.

The increase was primarily driven by external expenses generated from the advancement of 3733, 4334 and our research discovery program.

In addition, employee and contractor-related expenses increased by $1.5 million primarily due to increases in salary and benefits as well as accrued severance benefits related to an executive officer associated with the reorganization announced in July 2022.

These increases were partially offset by a decrease in VBR’s external expenses due to the termination of Studies 211 and 205 as well as costs under two of our Phase 2 triple combination studies being shared with collaboration partners.

The remaining offset relates to a decrease in 2158’s external expenses due to the termination of the program.

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 March 31,

Three Months Ended June 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 stock-based compensation expense associated with equity awards to our employees and directors.

General and administrative expenses were $6.0 million for the three months ended March 31, 2022 compared to $8.7 million for the same period in 2021.

General and administrative expenses consist of stock-based compensation expense of $0.7 million for the three months ended March 31, 2022 and $1.8 million for the same period in 2021.

The decrease in stock-based compensation expense of $1.1 million was due to a decrease in the grant date fair value of recent option grants, a decrease in the number of employees and a reversal of $0.4 million of previously recognized expense in the three months ended March 31, 2022 related to forfeited awards from terminated employees.

We also experienced decreases of $0.7 million in facility-related expenses due to termination of lease agreements related to the Microbiome program, $0.3 million in recruitment expenses due to hiring of fewer employees during the three months ended March 31, 2022 compared to the same period in 2021, $0.3 million in professional fees primarily due to decreases in legal expenses and $0.2 million in salary and benefits primarily attributable to a decrease in headcount.

General and administrative expenses were comparable with $6.8 million during the three months ended June 30, 2022 and $6.9 million for the same period in 2021.

The impact to salaries and benefits associated with the termination of an executive officer as part of the reorganization announced in July 2022 was offset by a reduction in salaries and benefits due to employee turnover.

Comparison of the Six Months Ended June 30, 2022 and 2021

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,

External expenses:

Research and discovery

Total external expenses

Employee and contractor-related expenses

Facility and other expenses

Total research and development expenses

Research and development expenses were $35.0 million for the six months ended June 30, 2022 compared to $35.3 million for the same period in 2021.

Decreases in external expenses of $3.6 million and facility and other expenses of $1.5 million were materially offset by increases in employee and contractor-related expenses of $4.8 million.

The decrease in external expenses was due to the termination of Studies 211 and 205, the termination of the 2158 and the Microbiome program as well as cost savings from sharing costs with our collaboration partners under two of our Phase 2 triple combination studies with VBR.

This was partially offset by external expenses generated from the advancement of 3733, 4334 and our research discovery program.

The decrease in facility and other expenses of $1.5 million was primarily attributable to asset impairment and other charges incurred in connection with the wind-down of the Microbiome program announced in January 2021.

The increase in employee and contractor-related expenses of $4.8 million was primarily due to the reversal of $4.1 million of previously recognized stock-based compensation expense related to forfeited awards of terminated employees during the six months ended June 30, 2021, of which $2.7 million resulted from the wind-down of our Microbiome program, as well as increases in salaries and benefits primarily due to accrued severance benefits to an executive officer associated with the reorganization announced in July 2022.

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,

General and administrative expenses

General and administrative expenses were $12.7 million for the six months ended June 30, 2022 compared to $15.6 million for the same period in 2021.

The decrease in general and administrative expenses primarily relates to a decrease in stock-based compensation expense of $1.4 million due to a decrease in the grant date fair value of recent option grants.

We also experienced decreases of $0.6 million in facility-related expenses primarily due to termination of lease agreements related to the wind-down of the Microbiome program in 2021, $0.5 million in professional fees primarily due to decreases in legal expenses and $0.4 million in recruitment expenses due to hiring of fewer employees during six months ended June 30, 2022 compared to the same period in 2021.

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 March 31, 2022 principally through equity financings, raising an aggregate of $604.6 million in net proceeds, and strategic collaborations, raising an aggregate of $90.0 million through upfront payments.

Cash Flows for the Three Months Ended March 31, 2022 and 2021

We have funded our operations through June 30, 2022 principally through equity financings, raising an aggregate of $604.6 million in net proceeds, and strategic collaborations, raising an aggregate of $90.0 million through upfront payments.

Cash Flows for the Six Months Ended June 30, 2022 and 2021

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

Three Months Ended March 31,

Cash provided by (used in):

Six Months Ended June 30,

Cash (used in) provided by:

Operating activities

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Net Cash from Operating Activities

Net cash used in operating activities was $27.5 million for the three months ended March 31, 2022.

This was primarily due to our $23.1 million net loss and a decrease of $4.4 million in other accrued expenses due to payment of our 2021 annual bonuses during the three months ended March 31, 2022.

Net cash used in operating activities was $33.3 million for the three months ended March 31, 2021.

This was primarily due to our $27.2 million net loss and a decrease of $8.3 million in other accrued expenses due to payment of our 2020 annual bonuses and accrued severances associated with the wind-down of our Microbiome program, partially offset by a $1.6 million loss on disposal of property and equipment associated with the wind-down of our Microbiome program during the three months ended March 31, 2021.

Net cash used in operating activities was $45.4 million for the six months ended June 30, 2022.

This was primarily due to our $47.6 million net loss, adjusted for $3.0 million recognized for stock-based compensation expense.

Net cash used in operating activities was $55.2 million for the six months ended June 30, 2021.

This was primarily due to our $50.8 million net loss and a decrease of $7.6 million in other accrued expenses due to payment of our 2020 annual bonuses and accrued severances associated with the wind-down of our Microbiome program.

These were partially offset by a $1.6 million loss on disposal of property and equipment associated with the wind-down of our Microbiome program during the six months ended June 30, 2021.

Net Cash from Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2022 was $33.0 million, due to proceeds from sales and maturities of marketable securities, net of purchases.

Net cash provided by investing activities for the three months ended March 31, 2021 was $18.0 million.

Net cash provided by investing activities for the six months ended June 30, 2022 was $42.6 million due to proceeds from sales and maturities of marketable securities, net of purchases.

Net cash provided by investing activities for the six months ended June 30, 2021 was $14.9 million.

This was due to proceeds of $17.2 million from sales and maturities of marketable securities, net of purchases, offset by our purchase of leased equipment for $3.1 million that we then sold for $0.9 million in connection with the wind-down of the Microbiome program.

Net Cash from Financing Activities

We did not have any cash flows from financing activities for the three months ended March 31, 2022.

Net cash provided by financing activities for the three months ended March 31, 2021 was $34.1 million resulting from the sale of 5,991,858 shares of our common stock under the 2020 ATM .

Cash flows from financing activities were not significant for the six months ended June 30, 2022.

Net cash provided by financing activities for the six months ended June 30, 2021 was $40.2 million resulting from the sale of 7,449,901 shares of our common stock under the 2020 ATM .

Funding Requirements

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Our future capital requirements will depend on many factors, including:

our ability to successfully execute our Plan, including reducing the size of our organization to align with the Plan;

the scope, progress, 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;

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis