What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-11 compared with 2020-05-14 · 98 added, 99 removed, 193 unchanged (51% of the section changed)

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Several of our programs target indications that we believe present the potential for our product candidate, if approved, to target portions of market opportunities of at least $1.0 billion in annual sales.

We have initiated a rolling New Drug Application, or NDA, submission for one of our product candidates, and have three product candidates in clinical trials that, if positive, we believe could support the filing of an application for marketing authorization.

We focus on genetic diseases because they exist at the intersection of high unmet patient need and tractable biology.

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To date, we have funded our operations with proceeds from the sale of our equity securities, issuance of convertible notes, debt borrowings and, to a lesser extent, revenue from collaboration arrangements.

On July 1, 2019, immediately prior to the completion of the initial public offering of our common stock or the IPO, we engaged in a series of transactions whereby BridgeBio Pharma LLC, or BBP LLC, became a wholly-owned subsidiary of BridgeBio Pharma, Inc., or BBP Inc., collectively with BBP LLC, BridgeBio.

As part of the transactions, holders of Preferred Units, Founder Units, Common Units and Management Incentive Units of BBP LLC exchanged all outstanding units for an aggregate of 99,999,967 shares of common stock of BBP Inc.

On July 1, 2019, we completed the IPO.

As part of the IPO, we issued and sold 23,575,000 shares of our common stock, which included 3,075,000 shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares of common stock, at a public offering price of $17.00 per share.

In July 2019, we received net proceeds of approximately $366.2 million from the IPO, after deducting underwriters’ discounts and commissions of $28.1 million and offering costs of $6.5 million .

W e have experience d some delays in enrollment of ongoing clinical trials and delay in the start of planned trials due to the global outbreak of SARS-CoV-2, the novel strain of coronavirus that causes Coronavirus disease 19 , or COVID-19.

We have experienced some delays in enrollment of ongoing clinical trials and delay in the start of planned trials due to the global outbreak of SARS-CoV-2, the novel strain of coronavirus that causes Coronavirus disease 19, or COVID-19.

The ultimate impacts of COVID-19 on our business are currently unknown.

We will continue to actively monitor the situation and may take furt her precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders .

We cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions , may have on our business or strategy, including the effects on our ongoing and planned clinical development activities and p rospects, or on our financial and operating results.

We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders.

We cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions, may have on our business or strategy, including the effects on our ongoing and planned clinical development activities and prospects, or on our financial and operating results.

Financial Operations Overview

Cash, Cash Equivalents and Marketable Securities

As of March 31, 2020 we had cash, cash equivalents and marketable securities of $928.4 million, or $731.9 million excluding Eidos.

As of June 30, 2020 we had cash, cash equivalents and marketable securities of $840.9 million.

On March 9, 2020, we issued an aggregate principal amount of $550.0 million of our 2.50% Convertible Senior Notes due 2027, or the 2027 Notes, in a private offering (the “Note Offering”) to qualified institutional buyers.

We received net proceeds from the Note Offering approximately $537.0 million, after deducting purchasers’ discount and offering expenses.

We received net proceeds from the Note Offering of approximately $537.0 million, after deducting purchasers’ discount and offering expenses.

We used approximately $49.3 million of the net proceeds from the Note Offering to pay for the cost of capped call transactions and approximately $75.0 million to pay for the repurchase of shares of our common stock.

We also received net proceeds of $24.1 million from Eidos’ at-the-market issuance of shares in February 2020.

During the three months ended March 31, 2020, we used cash of approximately $83.9 million to support our operations.

During the six months ended June 30, 2020, we used cash of approximately $171.8 million to support our operations.

Operating Expenses

Research and Development Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Research and development

Research and development expense increased by $23.4 million for the three months ended March 31, 2020 compared to the same period in 2019 primarily due to increase in external-related costs and in our headcount to support progression in our research and development programs including our increasing research pipeline.

Research and development expense increased by $34.3 million and $57.6 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019 primarily due to increase in external-related costs and in our headcount to support progression in our research and development programs including our increasing research pipeline.

Research and development costs consist primarily of external costs, such as fees paid to consultants, contractors, contract manufacturing organizations or CMOs and contract research organizations or CROs in connection with our preclinical and clinical development activities and are tracked on a program-by-program basis.

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The following table summarizes our research and development expenses by program incurred for the following periods:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

BBP-265 (Eidos) (1)

Acoramidis (Previously known as

BBP-265 or AG10) (Eidos) (1)

Infigratinib (Previously known as

BBP-831) (QED)

Fosdenopterin (Previously known as

BBP-870) (Origin)

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BBP-812 (ASPA)

BBP-551 (Retinagenix)

BBP-681 (Venthera)

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Amounts presented above may differ from the financial statements of Eidos due to intercompany income and expenses, which are eliminated in the condensed consolidated financial statements of BridgeBio for all periods presented.

In light of recent developments relating to the COVI D-19 global pandemic, the focus of healthcare providers and hospitals on controlling the spread of the virus, and consistent with the U.S.

Food and Drug Administration’s updated industry guidance for conducting clinical trials issued on March 18, 2020, we are experiencing delays in or temporary suspension of the enrollment of patients in our subsidiaries’ ongoing clinical trials.

We additionally expect to experience delays in certain ongoing key program activities, including commencement of planned clinical trials, as well as non-clinical experiments and investigational new drug application-enabling good laboratory practice toxicology studies.

We continue to assess the delays and overall impact to our business , and we are monitoring the COVID-19 outbreak as it continues to evolve.

Based on the impact of COVID-19 to-date, we have experienced delays in the initiation and completion of certain of our ongoing and planned clinical studies , which may impact key milestones associated with those programs .

For example :

We anticipate that enrollment of the Phase 3 ATTRibute-CM study of BBP-265 in ATTR-CM will now be completed in the first half of 2021 and initiation of the planned Phase 3 clinical trial of BBP-265 in ATTR-PN will occur in the second half of 2020

We anticipate sharing topline data from our completed Phase 1/2 study of BBP-589 will now occur in 2021

We anticipate that initiation of a Phase 2/3 clinical trial of zuretinol may now occur in 2021

We continue to anticipate that our rolling NDA submission for fodsdenopterin will be completed in 2020 and that our NDA for infigratinib as a treatment for advanced cholangiocarcinoma with FGFR2 fusions or translocations in the second line or later setting will be submitted in 2020.

In light of recent developments relating to the COVI D-19 global pandemic, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the U.S.

Food and Drug Administration’s updated industry guidance for conducting clinical trials issued on March 18, 2020, we have experienced delays in or temporary suspension of the enrollment of patients in our subsidiaries’ ongoing clinical trials.

We additionally may experience delays in certain ongoing key program activities, including commencement of planned clinical trials, as well as non -clinical experiments and investigational new drug application-enabling good laboratory practice toxicology studies.

The exact timing of delays and their overall impact on our business are currently unknown, and we are monitoring the COVID-19 outbreak as i t continues to rapidly evolve.

We are continuing to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders.

We cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions, may have on our business or strategy, including the effects on our ongoing and planned clinical development activities and prospects, or on our financial and operating results.

General and Administrative Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

General and administrative

General and administrative expenses increased by $15.4 million for the three months ended March 31, 2020 compared to the same period in 2019 due to increase in headcount to support the growth of our operations and external-related costs incurred as a result of continuing compliance as a public company.

General and administrative expenses increased by $21.0 million and $36.3 million for the three and six months ended June 30, 2020 compared to the same periods in 2019 due to increase in headcount to support the growth of our operations and external-related costs incurred as a result of continuing compliance as a public company.

Other Income (Expense), Net

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Interest income consists of interest income earned on our cash equivalents and marketable securities.

The change in interest income between the two periods was not significant.

The changes in interest income for the three and six months ended June 30, 2020 compared to the same periods in 2019 were not significant.

Interest Expense

Interest expense for the three months ended March 31, 2020 consists primarily of interest expense incurred under our term loans with Hercules Capital, Inc.

pursuant to our Loan and Security Agreement, dated June 19, 2018, as amended, and Eidos’ term loan with Silicon Valley Bank and Hercules pursuant to its Loan and Security Agreement, dated November 13, 2019, or the “SVB and Hercules Loan Agreement”, and our 2027 Notes issued in March 2020.

Interest expense for the three and six months ended June 30, 2020 consists primarily of interest expense incurred under our term loans with Hercules Capital, Inc.

pursuant to our Loan and Security Agreement, dated June 19, 2018, as amended, Eidos’ term loan with Silicon Valley Bank and Hercules pursuant to its Loan and Security Agreement, dated November 13, 2019, or the “SVB and Hercules Loan Agreement”, and our 2027 Notes issued in March 2020.

Interest expense for the same period in 2019 consists primarily of interest expense incurred under our term loans with Hercules.

The increase of $2.3 million was primarily attributed to increase in principal amounts.

The increases of $8.8 million and $11.2 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019 was primarily attributed to increase in principal amounts.

Loss from an Equity Investment

Loss from an equity investment for the three months ended March 31, 2019 pertain to our share of losses from our investment in PellePharm totaling $4.6 million.

Loss from an equity investment for the three and six months ended June 30, 2019 pertain to our share of losses from our investment in PellePharm totaling $5.0 million and $9.6 million, respectively.

We recognize our share of losses from the PellePharm equity method investment as incurred.

After our equity method investment was reduced to zero during the three months ended March 31, 2019, we recognized our percentage of net losses consistent with our preferred stock ownership percentage until the investment was also reduced to zero during the remaining period of 2019.

We have not recognized our share of net losses for the three months ended March 31, 2020 as our equity investment balances were reduced to zero as of December 31, 2019.

We have not recognized our share of net losses for the three and six months ended June 30, 2020 as our equity investment balances were reduced to zero as of December 31, 2019.

Other Income (Expense)

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The LEO Call Option is subject to remeasurement to fair value at each balance sheet date until the LEO Call Option is either exercised or expires.

The LEO Call Option income of $0.5 million and expense of $1.5 million for the three months ended March 31, 2020 and 2019, respectively, were due to change in fair value.

Net Loss Attributable to Redeemable Convertible Noncontrolling Interests and Noncontrolling Interests

The LEO Call Option income (expense) of $(1.7) million and $(1.2) million for the three and six months ended June 30, 2020, respectively, and $0.2 million and $(1.3) million for the three and six months ended June 30, 2019, respectively, were due to change in fair value.

Net Loss Attributable to Redeemable Convertible Noncontrolling Interests and No ncontrolling Interests

Net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests in our condensed consolidated statements of operations consists of the portion of the net loss of those consolidated entities that is not allocated to us.

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Refer to Note 6 to our condensed consolidated financial statements.

Net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests was $12.2 million for the three months ended March 31, 2020, compared to $8.3 million for the same period in 2019.

Net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests was $15.2 million and $27.4 million for the three and six months ended June 30, 2020, respectively, compared to $8.4 million and $16.6 million for the same periods, respectively, in 2019.

Liquidity and Capital Resources

We have historically financed our operations primarily through the sale of our equity securities, issuance of convertible notes, debt borrowings and revenue from certain licensing arrangements.

As of March 31, 2020, we had cash, cash equivalents and marketable securities of $928.4 million or $731.9 million excluding Eidos.

The funds that were held by our wholly-owned subsidiaries and controlled entities are available for specific entity usage, except in limited circumstances.

The cash and cash equivalents of $196.5 million as of March 31, 2020 belonging to Eidos may only be used solely by Eidos.

As of March 31, 2020, our outstanding debt was $461.3 million, net of debt discounts and issuance costs and accretion or $445.0 million excluding Eidos’ debt.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $840.9 million or $666.1 million excluding Eidos.

The funds held by our wholly-owned subsidiaries and controlled entities are available for specific entity usage, except in limited circumstances.

The cash and cash equivalents of $174.8 million as of June 30, 2020 belonging to Eidos may only be used solely by Eidos.

As of June 30, 2020, our outstanding debt was $466.6 million, net of debt discounts and issuance costs and accretion or $450.0 million excluding Eidos’ debt.

Since inception, we have incurred significant operating losses.

For the years ended December 31, 2019, 2018 and 2017, we incurred net losses of $288.6 million, $169.5 million and $43.8 million, respectively.

For the three months ended March 31, 2020, we incurred net losses of $104.1 million.

We had an accumulated deficit as of March 31, 2020 of $531.9 million.

We expect to continue to incur net losses over the next several years as we continue our drug discovery efforts and incur significant preclinical and clinical development costs related to our current research and development programs as well as costs related to commercial launch readiness.

For the six months ended June 30, 2020, we incurred net losses of $240.3 million.

We had an accumulated deficit as of June 30, 2020 of $652.9 million.

We expect to continue to incur net losses over the next several years as we continue our drug development and discovery efforts and incur significant clinical and preclinical development costs related to our current research and development programs as well as costs related to commercial launch readiness for our late-stage programs.

In particular, to the extent we advance our programs into and through later-stage clinical trials without a partner, we will incur substantial expenses.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates at our wholly-owned subsidiaries and controlled entities.

Our current business plan is also subject to significant uncertainties and risks as a result of, among other factors, our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates at our consolidated entities.

Our current business plan is also subject to significant uncertainties and risks as a result of, among other factors, our ability to generate product revenue sufficient to achieve profitability, which will depend heavily on the successful development and eventual commercialization of our product candidates at our consolidated entities.

We expect our cash and cash equivalents and marketable securities will fund our operations for at least the next 12 months based on current operating plans and financial forecasts.

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initial public offering of its common stock of which net proceeds received were $95.5 million.

As of March 31, 2020, we held 24,575,501 shares of common stock of Eidos.

As of June 30, 2020, we held 24,575,501 shares of common stock of Eidos.

In December 2019 and February 2020, Eidos received net proceeds of $23.9 million and $24.1 million, respectively, from its at-the-market issuance of shares.

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We received net proceeds of approximately $366.2 million from the IPO, after deducting underwriters’ discounts and commissions of $28.1 million and offering costs of $6.5 million.

On July 7, 2020, we filed a shelf registration statement on Form S-3 (the “2020 Shelf”) with the SEC in relation to the registration of common stock, preferred st ock, debt securities, warrants and units or any combination thereof.

We also simultaneously entered into an Open Market Sale Agreement with Jefferies LLC and SVB Leerink LLC (the “Sales Agents”), to provide for the offering, issuance and sale by us of up t o an aggregate of $350.0 million of our common stock from time to time in “at-the-market” offerings under the 2020 Shelf and subject to the limitations thereof (the “2020 Sales Agreement”).

We will pay to the applicable Sales Agents cash commissions of up to 3.0 percent of the gross proceeds of sales of common stock under the 2020 Sales Agreement.

We have not issued any shares or received any proceeds from this offering through August 1 1 , 2020.

On March 9, 2020, we issued an aggregate principal amount of $550.0 million of our 2027 Notes, pursuant to an Indenture dated March 9, 2020, or the Indenture, between BridgeBio and U.S.

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Upon maturity, the 2027 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

We received net proceeds from the Note Offering approximately $537.0 million, after deducting the Initial Purchasers’ discount and offering expenses.

We received net proceeds from the Note Offering of approximately $537.0 million, after deducting the Initial Purchasers’ discount and offering expenses.

We used approximately $49.3 million of the net proceeds from the Note Offering to pay for the cost of the Capped Call Transactions, and approximately $75.0 million to pay for the repurchases of shares of our common stock.

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In addition, following certain corporate events that occur prior to the maturity date, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2027 Notes in connection with such a corporate event.

The maximum number of shares issuable should there be an increase in the conversion rate is 17,707,635 shares of our common stock.

We may not redeem the 2027 Notes prior to the maturity date, and no sinking fund is provided for the 2027 Notes.

If we undergo a fundamental change (as defined in the Indenture), holders may require us to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

If we undergo a fundamental change (as defined in the Indenture), hold ers may require us to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2 027 Notes then outstanding may declare the entire principal amount of all the Notes plus accrued special interest, if any, to be immediately due and payable.

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The outstanding balance of the Hercules Term Loan is to be repaid by BridgeBio monthly beginning on the Modified Amortization Date and extending through the Modified Maturity Date.

The interest rate for the Hercules Term Loan was established as follows:

Prior to the Fourth Amendment to the Loan and Security Agreement (the “Amended Hercules Term Loan”) described below, the interest rate for the Hercules Term Loan was established as follows:

(1) Tranche I bears interest at a floating rate equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 3.85% and (ii) 8.85% (8.85% as of March 31, 2020 based on the prime rate as of that date), payable monthly;

(i) the prime rate as reported in the Wall Street Journal plus 3.85% and (ii) 8.85%, payable monthly;

(2) Tranche II bears interest at a floating rate equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 2.85% and (ii) 8.60% (8.60% as of March 31, 2020), payable monthly;

(i) the prime rate as reported in the Wall Street Journal plus 2.85% and (ii) 8.60%, payable monthly;

and (3) Tranche III bears interest at a floating rate equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 3.10% and (ii) 9.10% (9.10% as of March 31, 2020), payable monthly.

(i) the prime rate as reported in the Wall Street Journal plus 3.10% and (ii) 9.10%, payable monthly.

The Hercules Term Loan contains customary representations and warranties, events of default, and affirmative and negative covenants for a term loan facility of this size and type.

However, Hercules imposes no liquidity covenants on us and Hercules cannot limit or restrict our ability to dispose of assets, make investments, or make acquisitions.

As pledged collateral for our obligations under the Hercules Term Loan, we granted Hercules a security interest in all our assets or personal property, including all equity interests owned or hereafter acquired by us.

As pledged collateral for our obligations under the Hercules Term Loan, we granted Hercules a security interest in all of our assets or personal property, including all equity interests owned or hereafter acquired by us.

Further, at Hercules’ sole discretion we must make a mandatory prepayment equal to 75% of net cash proceeds received from the sale or licensing of any pledged or collateral assets, including intellectual property, of a consolidated entity owned by us, or the repurchase or redemption of any pledged collateral by certain specified operating companies.

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In March 2020, we executed the Third Amendment to the Loan and Security Agreement primarily to allow us to issue our 2027 Notes and to enter into the Capped Call and Share Repurchase Transactions.

On April 27, 2020, we entered into the Fourth Amendment to the Loan and Security Agreement (the “Amended Hercules Term Loan”) to amend the existing Loan and Security Agreement, as amended from time to time.

The Amended Hercules Term Loan, among other things,

(1) extends the interest-only period under the Loan and Security Agreement to July 1, 2022 (the “Amended Amortization Date” which may be further extended to January 1, 2023 and July 1, 2023, in each case, subject to certain conditions set forth in the Amended Hercules Term Loan),

(2) extends the maturity date for the term loans under the Loan and Security Agreement to November 1, 2023 (the “Amended Maturity Date”, which may be further extended to May 1, 2024, subject to certain conditions set forth in the Amended Hercules Term Loan),

(3) provides for an interest rate on the Tranche I equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 3.85% and (y) 8.75%,

(4) provides for an interest rate on the Tranche II equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 2.85% and (y) 8.60%,

(5) provides for an interest rate on the Tranche III equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 3.10% and (y) 8.85%, and

(6) provides for, subject to Hercules’ approval in its sole and absolute discretion, an additional increase in available loan facilities aggregating to $125.0 million as follows:

(a) an additional incremental loan in the amount of $25.0 million,

available no later than December 15, 2020, (b) an additional incremental loan in the amount of $25 .0 million , availabl e no later than December 15, 2021, (c) an additional incremental loan following the achievement of certain performance milestones in the amount of $ 25.0 million , available no later than December 15, 2021 and (d) an additional $ 50.0 million discretionary in cremental tranche, available no later than December 15, 2022.

In April 2020, we entered into the Amended Hercules Term Loan, which among other things,

extended the interest-only period under the Loan and Security Agreement to July 1, 2022 (the “Amended Amortization Date”, which may be further extended to January 1, 2023 and July 1, 2023, in each case, subject to certain conditions set forth in the Amended Hercules Term Loan),

extended the maturity date for the term loans under the Loan and Security Agreement to November 1, 2023 (the “Amended Maturity Date”, which may be further extended to May 1, 2024, subject to certain conditions set forth in the Amended Hercules Term Loan),

provide d for an interest rate on the Tranche I equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 3.85% and (y) 8.75% (8.75% as of June 30, 2020), payable monthly,

provided for an interest rate on the Tranche II equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 2.85% and (y) 8.60% (8.60% as of June 30, 2020), payable monthly,

provided for an interest rate on the Tranche III equal to the greater of (x) a floating interest rate linked to the prime rate as reported in the Wall Street Journal plus 3.10% and (y) 8.85% (8.85% as of June 30, 2020), payable monthly, and

provided for, subject to Hercules’ approval in its sole and absolute discretion, an additional increase in available loan facilities aggregating to $125.0 million as follows:

(a) an additional incremental loan in the amount of $25.0 million, available no later than December 15, 2020, (b) an additional incremental loan in the amount of $25.0 million, available no later than December 15, 2021, (c) an additional incremental loan following the achievement of certain performance milestones in the amount of $25.0 million, available no later than December 15, 2021 and (d) an additional $50.0 million discretionary incremental tranche, available no later than December 15, 2022.

The Amended Hercules Term Loan also provides us with more flexibility to consummate acquisitions and investments, incur additional debt, dispose of assets and repurchase and/or redeem stock, each subject to certain conditions set forth in the Amended Hercules Term Loan.

There have not been any additional draws on the $125.0 million additional available facilities as of June 30, 2020.

Silicon Valley Bank (SVB) and Hercules Loan Agreement

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The Tranche A loan of $17.5 million was drawn on November 13, 2019.

There have not been any additional draws on the other tranches as of March 31, 2020.

The Tranche A loan bears interest at a fixed rate equal to the greater of either (i) 8.50% or (ii) 3.25% plus the prime rate as reported in The Wall Street Journal (8.50% as of March 31, 2020).

There have not been any additional draws on the other tranches as of June 30, 2020.

The Tranche A loan bears interest at a fixed rate equal to the greater of either (i) 8.50% or (ii) 3.25% plus the prime rate as reported in The Wall Street Journal (8.50% as of June 30, 2020).

The Tranche A loan repayment schedule provides for interest only payments until November 1, 2021, followed by consecutive equal monthly payments of principal and interest commencing on this date continuing through the maturity date of October 2, 2023.

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The following table summarizes our cash flows during the periods indicated:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

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Net Cash Flows Used in Operating Activities

Net cash used in operating activities was $83.9 million for the three months ended March 31, 2020, consisting primarily of our net loss of $104.1 million, adjusted for non-cash items such as $10.2 million in stock-based compensation expense and $1.8 million accretion of our 2027 Notes and term loans, partially offset by net cash inflow of $7.7 million related to changes in operating assets and liabilities.

The $7.7 million net cash inflow related to changes in operating assets and liabilities was attributed mainly to an increase of $8.6 million in accrued research and development liabilities and an increase of $4.2 million in accounts payable mostly due to increase in our CROs’ and CMOs’ expenses for research activities, and a decrease of $2.8 million in prepaid expenses and other current assets primarily due to the receipt of a receivable from a related party.

The increase in these operating assets and liabilities was partially offset by a decrease in accrued compensation and benefits of $7.7 million due to timing of payments.

Net cash used in operating activities was $59.1 million for the three months ended March 31, 2019, consisting primarily of our net loss of $69.4 million, adjusted for non-cash items such as $4.6 million share in net loss of our equity method investment, $2.2 million for stock-based compensation expense, $2.0 million for acquired in-process research and development assets and $1.5 million of expense relate d to the revaluation of the LEO Call Option liability, as well as net cash outflow of $0.7 million related to changes in operating assets and liabilities.

The $0.7 million net cash outflow related to changes in operating assets and liabilities was attributed mainly to a decrease of $2.0 million in accounts payable due to timing of payments to vendors and an increase of $1.9 million in other assets due to deferred offering costs, which were partially offset by an increase of $1.7 million in accrued research and development

liabilities due to increased activities at CROs and CMOs and an increase of $ 1 .4 million in accrued professional services due to increased consulting expenses as we prepared for our IPO .

Net Cash Flows Provided by (Used in) Investing Activities

Net cash provided investing activities was $38.0 million for the three months ended March 31, 2020, consisting primarily of $42.5 million maturities of marketable securities, partially offset by $4.5 million related to purchase of property and equipment.

Net cash used in investing activities was $2.4 million for the three months ended March 31, 2019, which consisted of $2.0 million paid for in-progress research and development assets acquired in connection with the Phoenix Tissue Repair, Inc.

Net cash used in operating activities was $171.8 million for the six months ended June 30, 2020, consisting primarily of our net loss of $240.3 million, adjusted for non-cash items such as $28.6 million in stock-based compensation expense and $7.0 million accretion of our 2027 Notes and term loans, partially offset by net cash inflow of $29.3 million related to changes in operating assets and liabilities.

The $29.3 million net cash inflow related to changes in operating assets and liabilities was attributed mainly to an increase of 16.3 million in accrued research and development liabilities, an increase of $6.4 million in accrued professional services, an increase of $5.3 million in other accrued and other liabilities, and an increase of $4.0 million in accounts payable mostly due to increase in our CROs’ and CMOs’ expenses for research activities and other expenses to support the growth of our operation.

Net cash used in operating activities was $127.4 million for the six months ended June 30, 2019, consisting primarily of our net loss of $143.8 million, adjusted for non-cash items such as $9.6 million share in net loss of our equity method investment, $5.6 million for stock-based compensation expense, $2.5 million for acquired in-process research and development assets and $1.3 million of expense related to the revaluation of the LEO Call Option liability, as well as net cash outflow of $3.7 million related to changes in operating assets and liabilities.

The $3.7 million net cash outflow related to changes in operating assets and liabilities was attributed mainly to an increase of $3.3 million in prepaid expenses and other assets and of $2.1 million in other assets, both increases were primarily due to the advance payments made for research due to increased activities at CROs and CMOs.

These increases were partially offset by an increase of $1.0 million in accrued professional services due to increased consulting expenses as we prepared for our IPO.

Net Cash Flows Used in Investing Activities

Net cash used in investing activities was $91.0 million for the six months ended June 30, 2020, consisting primarily of purchases of marketable securities of $168.8 million and purchases of property and equipment of $4.8 million, partially offset by $82.5 million in maturities of marketable securities.

Net cash used in investing activities was $3.0 million for the six months ended June 30, 2019, which consisted of $2.5 million paid for in-progress research and development assets acquired primarily in connection with the Phoenix Tissue Repair, Inc.

asset acquisition related to a Contribution Agreement and Asset Purchase Agreement entered into in July 2017 and $0.5 million related to purchase of property and equipment.

Net Cash Flows Provided by (Used in) Financing Activities

Net cash provided by financing activities was $439.2 million for the three months ended March 31, 2020, consisting primarily of the net proceeds from the issuance of our 2027 Notes of $537.6 million and at-the-market issuance of noncontrolling interest by Eidos of $24.1 million, offset by repurchase of our common stock of $75.0 million and purchase of capped calls of $49.3 million, both in relation to the issuance of our 2027 Notes.

Net cash used in financing activities of $1.7 million for the three months ended March 31, 2019 was primarily related to $1.0 million in cash distributions to our members from the sale of our investment in MyoKardia, Inc.

and $0.9 million payment of deferred offering costs, partially offset by $0.2 million in proceeds from repayment of nonrecourse notes.

Net cash provided by financing activities was $439.9 million for the six months ended June 30, 2020, consisting primarily of the net proceeds from the issuance of our 2027 Notes of $537.0 million and at-the-market issuance of noncontrolling interest by Eidos of $24.1 million, offset by repurchase of our common stock of $75.0 million and purchase of capped calls of $49.3 million, both in relation to the issuance of our 2027 Notes.

Net cash used in financing activities of $11.6 million for the six months ended June 30, 2019 was primarily due to $28.6 million payment in relation to repurchase of common stock of Eidos from a noncontrolling interest holder and $2.5 million payment of deferred offering costs, partially offset by proceeds from our term loan of $19.8 million.

Contractual Obligations

The following table summarizes our contractual obligations as of March 31, 2020:

The following table summarizes our contractual obligations as of June 30, 2020:

Payments Due by Period

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Total contractual obligations

We have performance-based milestone compensation arrangements with certain employees, whose vesting is contingent upon meeting various regulatory and development milestones, with fixed monetary amounts known at inception that can be settled in the form of cash, equity, or either cash or equity at our sole election, upon achievement of each contingent milestones.

As of March 31, 2020, the potential milestone compensation amount is up to $23.6 million.

Since the timing of the payments is contingent on the occurrence of these performance-based milestones, these payments are not included in the contractual obligations above.

We have performance-based milestone compensation arrangements with certain employees, whose vest ing is contingent upon meeting various regulatory and development milestones, with fixed monetary amounts known at inception that can be settled in the form of cash or equity at our sole election, upon achievement of each contingent milestone.

As of June 3 0 , 20 20 , the potential milestone compensation amount is up to $ 5 4.9 million.

Since the timing of the payments is contingent on the occurrence of these performance-based milestones, these payments are not included in the contractual obligations table above.

We also have performance-based milestone compensation arrangements with certain employees as part of the Exchange Program, which is further discussed in Note 14 to our condensed consolidated financial statements.

The compensation arrangements under the Ex change Program are excluded from the table above because such compensation arrangements are to be settled in the form of equity only.

We have certain payment obligations under various license and collaboration agreements.

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The payment obligations under the license and collaboration agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory and commercial milestones, and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our condensed consolidated balance sheet as of March 31, 2020, or in the contractual obligations table above.

As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our condensed consolidated balance sheet as of June 30, 2020, or in the contractual obligations table above.

In addition, we enter into agreements in the normal course of business with CROs and other vendors for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

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Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Form 10-K for the year ended December 31, 2019, as filed with the SEC, except for the adoption in January 1, 2020, of Accounting Standards Codification 842 discussed in Note 1, as well as the accounting for the 2027 Notes and the Capped Call and Repurchase Transactions discussed in Note 9, in our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2020.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Form 10-K for the year ended December 31, 2019, as filed with the SEC, except for the adoption in January 1, 2020, of Accounting Standards Codification 842 discussed in Note 1, as well as the accounting for the 2027 Notes and the Capped Call and Repurchase Transactions discussed in Note 9, and the 2020 Stock and Equity Award Exchange Program discussed in Note 14 in our unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2020.

JOBS Act and Emerging Growth Company Status

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As a result, our condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) December 31, 2024, (ii) the last day of our first fiscal year in which we have total annual gross revenues of $1.07 billion or more, (iii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years, or (iv) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates as of the immediately preceding June 30.

We will cease to be an EGC on December 31, 2020 because our aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2020, our most recently completed second fiscal quarter, was greater than $700 million.

Effective January 1, 2021, we will no longer be able to use the exemptions from certain reporting requirements available to EGCs.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” to our condensed consolidated financial statements appearing under Part 1, Item 1 for more information.

Quantitative and Qualitati ve Disclosures About Market Risk

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To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of marketable securities of high credit quality.

As of March 31, 2020, we held cash, cash equivalents and marketable securities of $928.4 million.

Our cash equivalents consist of amounts invested in money market accounts, such as money market funds and overnight repurchase agreements collateralized with securities issued by the U.S.

government or its agencies.

As of June 30, 2020, we held cash, cash equivalents and marketable securities of $840.9 million.

Our cash equivalents consist of amounts invested in money market accounts, such as money market funds and short-term commercial paper.

Our marketable securities consisted of commercial paper, corporate debt securities and U.S.

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We do not believe that our cash, cash equivalents or marketable securities have a significant risk of default or illiquidity.

As of March 31, 2020, we had $92.5 million in variable rate debt outstanding.

The Hercules Term Loan, which had a principal balance of $75.0 million, matures in January 2023, with interest-only monthly payments until July 2021.

As of June 30, 2020, we had $92.5 million in variable rate debt outstanding.

The Hercules Term Loan, which had a principal balance of $75.0 million, matures in November 2023, with interest-only monthly payments until July 2022.

Tranche I bears interest at a floating rate equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 3.85% and (ii) 8.85% (8.85% as of March 31, 2020);

(i) the prime rate as reported in the Wall Street Journal plus 3.85% and (ii) 8.75% (8.75% as of June 30, 2020);

Tranche II bears interest at a floating rate of equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 2.85% and (ii) 8.60% (8.60% as of March 31, 2020);

(i) the prime rate as reported in the Wall Street Journal plus 2.85% and (ii) 8.60% (8.60% as of June 30, 2020);

and Tranche III bears interest at a floating rate of equal to the greater of:

(i) the prime rate as reported in the Wall Street Journal plus 3.10% and (ii) 9.10% (9.10% as of March 31, 2020).

As discussed in Part I, Item 2 of this report, on April 27, 2020, we entered into the Fourth Amendment of the Hercules Term Loan, which among others, reduced the interest rate on Tranches I and III.

The Silicon Valley Bank and Hercules Loan Agreement entered into by Eidos, which matures in October 2023, had a principal balance of $17.5 million as of March 31, 2020 and bears interest equal to the greater of either (i) 8.50% or (ii) 3.25% plus the prime rate as reported in The Wall Street Journal (8.50% as of March 31, 2020).

Our 2027 Notes had a principal balance of $550.0 million as of March 31, 2020 and bears interest at a fixed rate.

(i) the prime rate as reported in the Wall Street Journal plus 3.10% and (ii) 8.85% (8.85% as of June 30, 2020).

The Silicon Valley Bank and Hercules Loan Agreement entered into by Eidos, which matures in October 2023, had a principal balance of $17.5 million as of June 30, 2020 and bears interest equal to the greater of either (i) 8.50% or (ii) 3.25% plus the prime rate as reported in The Wall Street Journal (8.50% as of June 30, 2020).

Our 2027 Notes had a principal balance of $550.0 million as of June 30, 2020 and bear interest at a fixed rate.

Our cash flows on this debt obligation are not subject to variability as a result of changes in interest rates.

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