Eledon Pharmaceuticals, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The unaudited interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for the year ended December 31, 2020 included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 31, 2021, as amended. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please see Part II, Item 1A. Risk Factors for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period. Unless otherwise indicated, references to the terms “Eledon”, the “Company”, “we”, “our”, and “us” refer to Eledon Pharmaceuticals, Inc. References to the term “Tokai” refer to Tokai Pharmaceuticals, Inc., the legal predecessor of the Company. ABOUT ELEDON PHARMACEUTICALS Overview Eledon Pharmaceuticals, Inc. (“Eledon” or the “Company”) is a clinical stage biopharmaceutical company focused on discovering or acquiring, and then developing life-changing, targeted medicines for persons requiring an organ or cell-based transplant, living with autoimmune disease, or living with amyotrophic lateral sclerosis (“ALS”) . The company’s lead compound in development is AT-1501, an IgG1, anti-CD40L antibody with high affinity for CD40 ligand (CD40L, also called CD154), a well-validated biological target with broad therapeutic potential. AT-1501 is engineered to potentially both improve safety and provide pharmacokinetic, pharmacodynamic, and dosing advantages compared to other anti-CD40 approaches. The CD40L/CD40 pathway is recognized for its prominent role in immune regulation. CD40L is primarily expressed on activated CD4+ T cells, platelets and endothelial cells while the CD40 receptor is constitutively expressed on antigen presenting cells such as B cells, macrophages, and dendritic cells. By blocking CD40L and not the CD40 receptor, AT-1501 inhibits both the CD40 and CD11 costimulatory signaling pathways, providing the potential for improved efficacy compared to anti-CD40 receptor approaches. Blocking CD40L also increases polarization of CD4+ lymphocytes to Tregs, a specialized subpopulation of T cells that act to suppress an immune response, thus creating a more tolerogenic environment, which may also play a therapeutic role for autoimmune diseases and in the transplant setting. In September 2020, we acquired Anelixis Therapeutics, Inc. (“Anelixis”), the company that owned or controlled the intellectual property related to AT-1501. Our business strategy is to optimize the clinical and commercial value of AT-1501, and become a global biopharmaceutical company with a focused autoimmune franchise. AT-1501 is designed to negate the risk of thrombolytic events seen in the first generation of anti-CD40L antibodies by introducing structural modifications that have been shown in preclinical models to eliminate binding to the Fcγ receptors associated with platelet activation without altering the binding of AT-1501 to CD40L. In non-human primate studies, dosing of AT-1501 up to 200 mg/kg per week for 26 weeks, demonstrated no adverse events regarding coagulation, platelet activation or thromboembolism. We have completed a single ascending dose Phase 1 study of AT-1501 in healthy volunteers and people with ALS. In this study, the doses of AT-1501 studied were well tolerated in healthy subjects and adults with ALS. AT-1501 demonstrated low anti-drug antibody responses that were not dose related, linear dose proportionality across the dose ranges, and a half-life of up to 26 days. We plan to develop AT-1501 in up to four indications: ALS, prevention of kidney allograft rejection, prevention of islet cell allograft rejection, and IgA Nephropathy. We selected our indications based on preclinical and clinical data that was generated with either our molecule or historical anti-CD40L molecules. In October 2020, we initiated a Phase 2a clinical trial of AT-1501 in ALS. In November 2020, we received clearance from Health Canada to proceed with the initiation of a Phase 2 clinical trial of AT-1501 in islet cell transplantation for the treatment of type 1 diabetes. In July 2021, we received clearance from Health Canada to proceed with initiation of a Phase 1b clinical trial of AT-1501 in patients undergoing kidney transplantation. Prior to our acquisition of Anelixis, we had focused on developing medicines for patients with disorders of the ear, nose, and throat (“ENT”). In June 2020, we announced that our lead program did not achieve statistical significance for the primary efficacy endpoints in the treatment of acute otitis media. As a result of this failure to achieve the primary study endpoint, we suspended the clinical development of our legacy ENT assets while we assessed potential development 24 strategies. Following the June 2020 announcement, we significantly curtailed development expenses as we sought to identify strategic alternatives that would maximize stockholder value. As a result of these activities, we acquired Anelixis and raised additional capital in September 2020, as described above . Subsequent to our acquisition of Anelixis, we undertook a strategic review of the legacy ENT assets. We concluded this review and determined that the best path forward was to terminate license agreements associated with these ENT assets and return the rights to the original license holders, which we did in July. There was no financial impact to returning these assets. Amyotrophic Lateral Sclerosis ALS is a progressive, paralytic disorder characterized by degeneration of motor neurons in the brain and spinal cord. In the U.S., the incidence is estimated at approximately 5,000 cases per year with a prevalence of approximately 30,000 cases overall. Despite 2 approved drugs, in most cases, death from respiratory failure occurs approximately 2 to 5 years after diagnosis, with 50% of patients living ≥ 3 years from diagnosis and only 20% of patients living ≥ 5 years from diagnosis. Neuroinflammation in ALS is characterized by the infiltration of lymphocytes and macrophages into the central nervous system, and the activation of microglia and reactive astrocytes. Reactive astrocytes and microglia as well as infiltrating lymphocytes, dendritic cells, monocytes, macrophages and immune complexes have been identified in cerebrospinal fluid and neural tissues in both animal models of ALS and at autopsy in ALS patients. While the exact pathogenic mechanism of ALS is still not fully understood, there is strong evidence indicating that this neuroinflammation plays an important role in the disease’s pathogenesis. AT-1501 is designed to block CD40L binding to CD40, thereby potentially inhibiting neuroinflammatory pathways leading to disease progression in ALS. In vitro proof-of-concept studies have shown that AT-1501 binds to CD40L in human cells and blocks CD40L binding on APCs and activated T cells. The potential for therapeutic benefit of CD40L blockage in treating ALS has been demonstrated in a SOD1 mouse model of ALS, where a murine anti-CD40L antibody, MR1, prolonged survival and delayed the onset of neurological disease progression. These clinical manifestations are believed to be due to reduced immune cell infiltration of macrophages into skeletal muscle and their destroying denervated nerves. The plasticity of the nervous system to repair itself in the absence of this immune cell attack is believed to result in improved neuromuscular junction occupancy and improved muscle function. Blocking CD40L signaling also prevents pro-inflammatory polarization of lymphocytes, reduced neuroinflammation and improved motor neuron survival in rodent ALS models. In October 2020, we initiated a Phase 2a, open-label, multi-center study to evaluate the safety and tolerability of multiple doses of AT-1501 in adult subjects with ALS. Approximately 54 subjects with ALS are planned to be enrolled into the study in the United States and Canada at up to 13 ALS treatment sites. Ascending doses of AT-1501 will be administered as IV infusions to four sequentially enrolling cohorts. The first two cohorts will consist of nine participants, and the last two cohorts of 18 participants, who will each receive six bi-weekly infusions of AT-1501 over a 12-week study period. Blood samples for target engagement, and exploratory biomarkers for inflammation and neurodegeneration will be taken and analyzed. Participant-focused clinical outcomes will also be assessed. Kidney transplantation: prevention of allograft rejection Kidney transplantation is the most common type of solid organ transplantation in the United States with an estimated 200,000 Americans living with a transplanted kidney. In 2019, an estimated 23,000 kidneys were transplanted in the U.S., of which 10-15% were re-transplants in persons that had already received at least one other kidney. Over 90,000 people in the U.S. are waiting for a kidney transplant and in 2014, nearly 5,000 Americans died waiting for a kidney with another nearly 4,000 becoming too sick to receive a transplant. Calcineurin inhibitor (“CNI”s) are a critical component of many immunosuppressive regimens to prevent acute and long-term kidney transplant rejection. However, chronic exposure to certain CNIs, including tacrolimus, is associated with nephrotoxicity, cardiotoxicity, an increase in opportunistic infections, increased malignancies, and an increase in diabetes due to pancreatic Beta cell toxicity. These liabilities may result in a requirement for reduced exposures to CNIs over long periods of time and a resulting decrease in the ability to prevent long-term rejection. 25 AT-1501 seeks to address challenges associated with current immunosuppressive transplantation regimens using CNI-based therapies. The ability to prevent acute and chronic transplant rejection without the need for CNIs has the potential to transform the clinical management of preventing graft rejection by mitigating the adverse events associated with CNIs and improving long-term graft survival , thus potentially decreasing the need for repeat kidney transplants . Several historical studies have described the effects of anti-CD40L antibodies in nonhuman primate models of kidney transplant and shown that even short courses of anti CD40L therapy can prevent both acute rejection and long-term rejection in nonhuman primates with durable efficacy. In July 2021, we received clearance from Health Canada to proceed with initiation of a Phase 1b clinical trial of AT-1501 as a replacement for tacrolimus (a CNI), as an immunosuppressive regimen component in patients undergoing kidney transplantation. Islet cell transplantation (“ICT”): prevention of allograft rejection Type 1 diabetes is a T cell mediated autoimmune disease with progressive loss of insulin producing pancreatic beta cells and affects over one million persons in the U.S. Of these individuals, an estimated 70,000 people have a particularly hard to control type 1 diabetes called Brittle Diabetes (“BT1D”) which is in part characterized by large swings in blood glucose levels and impaired awareness of hypoglycemia. Impaired awareness of hypoglycemia for people with type 1 diabetes is associated with severe hypoglycemic events which can lead to significant symptoms and even death. Pancreatic islet cell transplantation may be a therapeutic option for type 1 diabetes because it can restore physiological insulin secretion, minimize the risk of hypoglycemic unawareness, and reduce the risk of death due to severe hypoglycemia. The advances made in this field over the past decade have improved patient outcomes, and the procedure has been evolving from an experimental treatment to a clinical treatment option. In November 2020, we received clearance from Health Canada to proceed with the initiation of a Phase 2 clinical trial of AT-1501 in islet cell transplantation for the treatment of type 1 diabetes. A number of issues are believed to continue to hamper the overall success of ICT and to need to be addressed in order for there to be widespread clinical acceptance. These include the acute loss of transplanted islets with current immunosuppressive treatments, particularly those with CNI-based therapies, due to islet cell toxicity and alloreactive immunologic responses to transplanted islets. Over time, the progressive loss of islet cells and decline in islet cell function often leads to the need for multiple donors in order for BTID patients to have optimal response to blood glucose levels and possibly achieve insulin independence. AT-1501 seeks to address the challenges associated with current ICT immunosuppressive regimens using CNI-based therapies, by replacing the CNIs with AT-1501. CD40L blockade may abolish many effector mechanisms of inflammation, prevent and intervene in the progression of alloimmunity, and instill transplant tolerance. Historical studies in nonhuman primate models of islet cell transplantation have demonstrated that treatment with anti-CD40L antibodies induces long term islet cell function and graft survival, even as a monotherapy. AT-1501 has shown preclinical, proof-of-concept efficacy in a non-human primate model of type 1 diabetes, where animals undergoing ICT maintained glucose control and sustained levels of C-peptide with chronic AT-1501 treatment for up to a year. Compared to combination immunosuppressive therapy including CNIs, AT-1501 monotherapy was more effective in preventing long term islet cell rejection, associated with better graft function, and showed an improved safety profile. IgA Nephropathy IgA Nephropathy (“IgAN”) is the leading cause of glomerulonephritis. Disease manifestation and clinical presentation involves renal dysfunction characterized by proteinuria with a slow relentless course. Approximately 30%-40% of patients ultimately reach end stage renal disease (ESRD). The standard of care for ESRD is dialysis or kidney transplant, which represents a significant economic burden as well as a major impact on a patient’s quality of life. With an estimated prevalence of approximately 140,000 persons in the United States, IgAN is one of the most common, orphan, kidney diseases. There are currently no European Medicines Agency (“EMA”) or U.S. Food and Drug Administration (“FDA”) approved treatments for IgAN. 26 The pathophysiology of IgAN has been well characterized, and based on its mechanism of action, AT-1501 has the potential to impact the disease process both upstream, at the source of the immune complexes, and downstream in the kidney itself, where it may reduce inflammation in the glomeruli. By disrupting multiple steps in the pathophysiology, AT-1501 has the potential to affect the clinical course of the disease and improve outcomes for patients. The inhibition of CD40L has been shown to be effective in models of multiple glomerulonephritides, including lupus nephritis and focal segmental glomerulosclerosis. COVID-19 Impact The COVID-19 pandemic and resulting global disruptions have adversely affected our business and operations, including, but not limited to, the operations of third parties upon whom we rely. The effects of government orders and public health restrictions, as well as our work-from-home policies may negatively impact our productivity and disrupt our business. As a result of this pandemic, we have experienced delays in certain studies and resulting delays in data collection, and have also experienced inefficiencies in planning and executing trials. In addition, in response to public health directives and orders, we have limited non-essential business travel and implemented flexible work policies allowing for both in-office and work-from-home arrangements. The resurgence of COVID-19 cases, including highly contagious COVID-19 variants (e.g. the Delta variant), could force localities and countries to reinstate more severe restrictions to reduce the spread of the disease. The magnitude of such effects which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial and credit markets. We have utilized a range of financing methods to fund our operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding or increase the cost of funding. Due to the rapidly evolving nature of the global situation, including the emergence and potential impact of new COVID-19 viral strains, it is not possible to predict the extent to which these conditions could adversely affect our liquidity, capital resources, and operations in the future. CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. There have been no significant and material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2021, as compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, filed by the Company with the SEC on March 31, 2021. 27 RESULTS OF OPERATIONS Comparison of the Three Months Ended September 30, 2021 and 2020 The following table provides comparative unaudited results of operations for the three months ended September 30, 2021 and 2020 (in thousands): For the Three Months Ended September 30, 2021 2020 $ Variance Operating expenses: Research and development $ 7,658 $ 615 $ 7,043 General and administrative 2,848 3,731 (883 ) Restructuring expense — 1,802 (1,802 ) Total operating expenses 10,506 6,148 4,358 Loss from operations (10,506 ) (6,148 ) (4,358 ) Other income, net 3 4 (1 ) Loss before income tax benefit (10,503 ) (6,144 ) (4,359 ) Income tax benefit 686 — 686 Net loss $ (9,817 ) $ (6,144 ) $ (3,673 ) Research and Development Expenses Research and development expenses increased $7.0 million, to $7.7 million for the three months ended September 30, 2021, as compared to $0.6 million for the three months ended September 30, 2020. The increase was primarily due to increases in costs related to the production of clinical trial materials and clinical costs of $3.2 million and $1.8 million, respectively, as we advance our AT-1501 program, an increase in consulting costs of $0.8 million, as well as increases in personnel costs of $0.7 million, and stock-based compensation costs of $0.5 million, due to increased headcount. General and Administrative Expenses General and administrative expenses decreased $0.9 million, to $2.8 million for the three months ended September 30, 2021, as compared to $3.7 million for the three months ended September 30, 2020. The decrease was primarily due to $2.2 million of merger related expenses that were incurred in the three months ended September 30, 2020. No merger related expenses were recorded for the three months ended September 30, 2021. This was partially offset by an increase in stock-based compensation costs and personnel costs of $0.6 million and $0.3 million, respectively, due to increased headcount. The remaining increase of $0.4 million was primarily due to an increase in legal fees and professional costs, higher insurance premiums, as well as higher general operating expenses. Restructuring Expense On June 11, 2020, following the prior announcement of topline results of the Phase 2a Clinical Trial of OP0201 in acute otitis media, the Board of the Company approved a reduction in force. Following the acquisition of Anelixis, the severance terms of certain terminated employees were modified. Additionally, on September 3, 2020, the board of directors (the “Board”) of the Company accepted the resignation of Gregory Flesher as the Company’s Chief Executive Officer and a member of the Board. Mr. Flesher’s resignation was effective as of the close of business on September 4, 2020. The resignation of Mr. Flesher was not the result of any dispute or disagreement with the Company on any matter relating to the Company’s operations, policies or practices. The Company incurred charges totaling $1.8 million for the estimated cash payments related to employee separation costs, including severance and post-employment health benefits for the three months ended September 30, 2020. No restructuring expenses were recorded for the three months ended September 30, 2021. Other Income, Net The decrease in other income, net, was primarily due to a decrease in interest income for the three months ended September 30, 2021. 28 Income Tax Benefit The Company recognized an income tax benefit of $0.7 million for the three months ended September 30, 2021 due to the current quarter change in deferred tax liabilities for acquired IPR&D related to the Anelixis acquisition. Comparison of the Nine Months Ended September 30, 2021 and 2020 The following table provides comparative unaudited results of operations for the nine months ended September 30, 2021 and 2020 (in thousands): For the Nine Months Ended September 30, 2021 2020 $ Variance Operating expenses: Research and development $ 17,553 $ 3,095 $ 14,458 General and administrative 9,929 6,730 3,199 Restructuring expense — 2,292 (2,292 ) Total operating expenses 27,482 12,117 15,365 Loss from operations (27,482 ) (12,117 ) (15,365 ) Other income, net 7 39 (32 ) Warrant inducement expense — (4,829 ) 4,829 Loss before income tax benefit (27,475 ) (16,907 ) (10,568 ) Income tax benefit 1,775 — 1,775 Net loss $ (25,700 ) $ (16,907 ) $ (8,793 ) Research and Development Expenses Research and development expenses increased $14.5 million, to $17.6 million for the nine months ended September 30, 2021 as compared to $3.1 million for the nine months ended September 30, 2020. The increase was primarily due to increases in production of clinical trial materials and clinical costs for AT-1501 of $6.3 million and $3.0 million, respectively, as well as increases in personnel costs of $1.6 million and stock-based compensation costs of $1.8 million, due to increased headcount, and consulting costs of $1.8 million . General and Administrative Expenses General and administrative expenses increased $3.2 million, to $9.9 million for the nine months ended September 30, 2021, as compared to $6.7 million for the nine months ended September 30, 2020. The increase was primarily due to an increase in stock-based compensation costs and personnel costs of $2.5 million and $1.1 million, respectively, due to increased headcount, as well as legal and professional costs, higher insurance premiums and general operating expenses of $1.8 million. This was partially offset by a decrease of merger related expenses of $2.2 million that were incurred in the nine months ended September 30, 2020. Restructuring Expense On June 11, 2020, following the prior announcement of topline results of the Phase 2a Clinical Trial of OP0201 in acute otitis media, the Board of the Company approved a reduction in force. The restructuring was completed on June 30, 2020. Following the acquisition of Anelixis, the severance terms of certain terminated employees were modified. Additionally, on September 3, 2020, the Board of the Company accepted the resignation of Gregory Flesher as the Company’s Chief Executive Officer and a member of the Board. Mr. Flesher’s resignation was effective as of the close of business on September 4, 2020. The resignation of Mr. Flesher was not the result of any dispute or disagreement with the Company on any matter relating to the Company’s operations, policies or practices. The Company incurred charges totaling $2.3 million for the estimated cash payments related to employee separation costs, including severance and post-employment health benefits. No restructuring expenses were recorded for the nine months ended September 30, 2021. Other Income, Net 29 The change in other income, net , was related to a de crease in interest income and an in crease in realized losses on foreign currency translation for the nine month s ended September 30, 20 20 . Warrant Inducement Expense In January 2020, the Company recognized warrant inducement expense of $4.8 million as a result of the Warrant Exercise Transaction in addition to the fair value of the Private Placement Warrants issued. Income Tax Benefit The Company recognized an income tax benefit of $1.8 million for the nine months ended September 30, 2021 due to the year to date change in deferred tax liabilities for acquired IPR&D related to the Anelixis acquisition. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2021, we had cash and cash equivalents of $94.0 million, consisting of readily available cash in bank accounts. While we believe our cash is not subject to excessive risk, we maintain significant amounts of cash at one or more financial institutions that are in excess of federally insured limits. To date, our operations have been financed primarily by net proceeds from the sale of preferred and common stock, the sale of warrants, and the issuance of convertible promissory notes. We do not have any approved products for commercial sale and have never generated revenue from product sales, and have incurred significant net losses since our inception and expect to continue to incur net operating losses for the foreseeable future. We do not expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our product candidates or enter into collaborative arrangements with third parties. Our primary use of cash is to fund operating expenses, which consist of research and development expenses and general and administrative expenses. Cash used to fund operating expenses is impacted by the timing of when we pay or prepay these expenses. We expect our expenses to increase in connection with our ongoing activities, particularly as we expand our clinical program with AT-1501, continue the research and development of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We will continue to require additional financing in order to advance our product candidates through clinical development, to manufacture, obtain regulatory approval for and to commercialize our product candidates, to develop, acquire or in-license other potential product candidates, and to fund operations for the foreseeable future. Therefore, we will seek to raise additional capital through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. Adequate additional funding may not be available to us on acceptable terms on a timely basis, or at all. Any such failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay the scope of or suspend one or more of our clinical trials, research and development programs or commercialization efforts, out-license intellectual property rights to our product candidates or sell unsecured assets, or a combination of the above. Any of these actions could materially harm our business. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. Debt financing, if available, would result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Please see Part II, Item 1A. Risk Factors for additional risks associated with our substantial capital requirements and the challenges we may face in raising capital. 30 We plan to continue to fund losses from operations and capital funding needs through cash on hand and future equity or debt financings, as well as potential additional collaborations or strategic partnerships with other companies. The sale of additional equity or convertible debt could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. Our primary uses of capital are, and we expect will continue to be, funding research efforts and the development of our product candidates, compensation and related expenses, hiring additional staff (including clinical, scientific, operational, financial, and management personnel) and costs associated with operating as a public company. We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates. Cash Flows The following table provides a summary of our net cash flow activity (in thousands): For the Nine Months Ended September 30, 2021 2020 Net cash used in operating activities $ (19,705 ) $ (5,779 ) Net cash provided by investing activities — 11,035 Net cash (used in) provided by financing activities (449 ) 100,417 Net change in cash and cash equivalents $ (20,154 ) $ 105,673 Comparison of the Nine Months Ended September 30, 2021 and 2020 Net cash used in operating activities for the nine months ended September 30, 2021 consisted primarily of our net loss of $25.7 million, and a decrease in the deferred tax liability of $1.8 million, partially offset by non-cash items consisting of stock-based compensation of $5.9 million, and amortization of operating lease assets of $0.1 million. Additionally, cash used in operating activities for the nine months ended September 30, 2021 reflected a net increase in cash from changes in operating assets and liabilities of $1.8 million. The increase in cash from changes in operating assets and liabilities was primarily due to an increase in accounts payable and other accrued expenses of $2.0 million, partially offset by an increase in prepaid and other assets as well as an increase in operating lease assets, net of lease liabilities, totaling $0.2 million. Net cash used in operating activities for the nine months ended September 30, 2020 consisted primarily of our net loss of $16.9 million, partially offset by non-cash items consisting primarily of stock-based compensation and depreciation and amortization totaling $1.7 million, as well as warrant inducement expense of $4.8 million. Additionally, cash used in operating activities for the nine months ended September 30, 2020 reflected a net increase in cash from changes in operating assets and liabilities of $4.6 million, due to an increase in accounts payable and accrued expenses and a decrease in prepaid expenses and other asset, offset by a decrease in operating lease liability. There was no cash provided by or used in the Company’s investing activities for the nine months ended September 30, 2021. Net cash provided by investing activities for the nine months ended September 30, 2020 consisted of cash and cash equivalents received from the acquisition of Anelixis. Net cash used in financing activities for the nine months ended September 30, 2021 was comprised of $0.5 million of offering costs accrued as of December 31, 2020 in connection with the sale of shares of common stock and paid during the nine months ended September 30, 2021 . Net cash provided by financing activities for the nine months ended September 30, 2020 was primarily comprised of $95.2 million in net proceeds from the 2020 Purchase Agreement for the sale of 199,112 shares of Series X 1 preferred stock and $5.2 million in net proceeds from the exercise of warrants by stockholders to purchase approximately 0.4 million shares of common stock. 31 CONTRACTUAL OBLIGATIONS AND COMMITMENTS Contractual Obligations Per §229.303 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.