What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2019-11-06 compared with 2019-08-07 · 116 added, 86 removed, 103 unchanged (66% of the section changed)

6 unchanged sentences

Company Overview

We are a clinical-stage biopharmaceutical company developing novel ribonucleic acid (RNA)-modulating drug candidates (designed to be eukaryotic ribosomal selective glycosides (ERSG)) that are formulated to treat rare and ultra-rare premature stop codon diseases.

We are a clinical-stage biopharmaceutical company developing novel ribonucleic acid (RNA)-modulating drug candidates, each designed to be a eukaryotic ribosomal selective glycoside (ERSG), formulated to treat rare and ultra-rare premature stop codon diseases.

Premature stop codons are point mutations that disrupt the stability of the impacted messenger RNA (mRNA) and the protein synthesis from that mRNA.

4 unchanged sentences

As opposed to a typical gene therapy approach of targeting a single, unique mutation in a target disease, this small molecule strategy enables targeting an entire class of mutations across the rare disease landscape.

Our small molecule approach has the potential to address a range of different premature stop codons in a single gene since our ERSG are targeted to the ribosomes.

Our small molecule approach has the potential to address a range of different premature stop codons in a single gene since our ERSG compounds are targeted to the ribosomes.

ELX-02, our lead investigational drug product candidate, is a small molecule designed to restore production of full-length functional proteins.

ELX-02 is in the early stages of clinical development for systemic administration for cystic fibrosis and cystinosis.

ELX-02 is in the early stages of clinical development for systemic administration for cystic fibrosis and nephropathic cystinosis.

ELX-02 is an investigational drug that has not been approved by any global regulatory body.

In addition, we recently announced a new program studying intravitreal administration of ERSG compounds for rare inherited retinal disorders with an initial focus on Usher Syndrome.

During the quarter ended June 30, 2019, w e completed a multiple ascending dose (MAD) study for ELX-02 and the clinical program has progressed into Phase 2 studies.

In addition, w e completed a renal study with ELX-02 in subjects with mild, moderate, and severe renal impairment.

To date, the preliminary results from the renal impairment study provide support for both continuing our clinical development programs and evaluating the suitability of our ERSG library for development in additional renal disorders, including autosomal dominant polycystic kidney disease, and cystinuria .

During the quarter ended September 30, 2019, we advanced our clinical program for ELX-02 into Phase 2 studies in cystic fibrosis and nephropathic cystinosis.

We also completed a renal impairment study with ELX-02 in subjects with mild, moderate, and severe renal impairment.

The results from the renal impairment study provide support for both continuing our clinical development programs and evaluating the suitability of our ERSG library for development in additional renal disorders, including autosomal dominant polycystic kidney disease, and cystinuria .

Our preclinical candidate pool consists of a library of novel ERSG drug candidates identified based on read-through potential and cytoplasmic ribosomal selectivity.

From the outset, our research and development strategy targets rare or ultra-rare diseases where:

a high unmet medical need exists, identified nonsense mutation-bearing patient population is established, preclinical read-through can be established in predictive personalized medicine models, and a defined path through Orphan Drug development, regulatory approval, patient access and commercialization is identifiable.

Our research and development strategy targets rare or ultra-rare diseases where a high unmet medical need exists, identified nonsense mutation-bearing patient population is established, preclinical read-through can be established in predictive personalized medicine models, and a defined path through Orphan Drug development, regulatory approval, patient access and commercialization is identifiable.

We believe patient advocacy to be an important element of patient focused drug development and seek opportunities to collaborate with patient advocacy groups throughout the discovery and development process.

Our current clinical program for our lead investigational drug product candidate, ELX-02 includes studies in both cystic fibrosis and cystinosis.

Our current clinical program for our lead investigational drug product candidate, ELX-02, includes studies in both cystic fibrosis and nephropathic cystinosis.

We intend to be the global leader in the application of the science of translational read-through and the associated pathway of nonsense mediated decay (NMD).

5 unchanged sentences

Our subcutaneously injected ERSG molecules have the potential to be self-administered for systemic disease and to be active at most tissue locations across the body.

We believe that our library of related novel small molecules holds the potential to be disease-modifying therapies that may change the course of hundreds of genetic diseases and improve the lives of patients.

Our ear ly preclinical data in animal models of nonsense mutations suggests that drug product candidates from our read-through compound library may have potential beneficial effects for each of the following diseases:

cystic fibrosis, cystinosis, a variety of inhe rited retinal diseases (including Usher Syndrome), primary ciliary dyskinesia, polycystic kidney disease, mucopolysaccharidosis type 1, Duchenne muscular dystrophy and Rett syndrome, and have shown potential for beneficial effects in multiple organs such a s the brain, eye, kidney, muscles and others.

Of the novel compounds in the ERSG Library, approximately 30 compounds have been selected, based on read-through activity, for continued preclinical research and we anticipate additional compounds advancing tow ard Investigation New Drug (IND) filings.

Currently our lead program, ELX-02, is focused on development for cystic fibrosis and cystinosis patients with diagnosed nonsense mutations.

We believe that our library of related novel small molecules holds the potential to be disease-modifying the rapies that may change the course of hundreds of genetic diseases and improve the lives of patients.

Our early preclinical data in animal models of nonsense mutations suggests that drug product candidates from our read-through compound ERSG library may hav e potential beneficial effects for the following diseases:

cystic fibrosis, nephropathic cystinosis, a variety of inherited retinal dis orders (including Usher Syndrome), primary ciliary dyskinesia, autosomal dominant polycystic kidney disease, cystinuria, mucopolysaccharidosis type 1, Duchenne muscular dystrophy and Rett syndrome, and have shown potential for beneficial effects in multiple organs such as the brain, eye, kidney, muscles and others.

Of the novel compounds in our ERSG l ibrary , approximately 30 compounds have been selected, based on read-through activity, for continued preclinical research and we anticipate additional compounds advancing toward Investigation New Drug (IND) filings.

Currently our lead program, ELX-02, is focused on development for cystic fibrosis and nephropathic cystinosis patients with diagnosed nonsense mutations.

With ELX-02, we have completed a Phase 1 single ascending dose (SAD) trial at sites in Israel (ClinicalTrials.gov Identifier:

2 unchanged sentences

(ClinicalTrials.gov Identifier:

NCT03309605) and a renal study in the U.S.

NCT03309605), and a renal impairment study in the U.S.

(ClinicalTrials.gov Identifier:

1 unchanged sentence

The results of the SAD study were published in the Journal of Clinical Pharmacology in Drug Development in January 2019.

An abstract on the results of the MAD study will be presented at the 2019 North American Cystic Fibrosis Conference (NACFC) on October 31-November 2, 2019 in Nashville, Tennessee.

With the completion of our Phase 1 studies, the program is now focused on our Phase 2 clinical studies.

In the U.S., our IND for cystic fibrosis Phase 2 is open and the Cystic Fibrosis Foundation (CFF) has endorsed our protocol.

Ahmet Uluer, Director of the Adult Cystic Fibrosis Program at the Boston Children’s Hospital/ Brigham and Women’s Hospital CF Center, is the lead study investigator in the U.S.

In Europe, our clinical trial application (CTA) has been approved by the Federal Agency for Medicines and Health Products (FAMHP) in Brussels and our Phase 2 protocol has been given a “high priority” ranking by the European Cystic Fibrosis Society Clinical Trial Network.

Professor Eitan Kerem, M.D., Head of the Division of Pediatrics, Children’s Hospital, Hadassah Medical Center in Israel will serve as the global lead investigator.

In Canada, our cystinosis CTA is approved and with the support of the Genome Canada Genomic Applications Partnership Program, we are currently enrolling 6 patients in this Phase 2 clinical trial.

Paul Goodyer, Professor of Pediatrics at McGill University will serve as our principal investigator.

In Canada, our nephropathic cystinosis CTA is approved and with the support of the Genome Canada Genomic Applications Partnership Program, we are currently enrolling 6 patients in this Phase 2 clinical trial (ClinicalTrials.gov Identifier:

NCT04069260).

Paul Goodyer, Professor of Pediatrics at McGill University, is serving as our principal investigator.

This trial will evaluate multiple doses of ELX-02 for the primary endpoint of safety and exploratory endpoints that will include white blood cell cystine levels.

We expect to report top line cystinosis data early in the fourth quarter and top line cystic fibrosis data before year-end.

We presented positive data in three presentations at the 42 nd European Cystic Fibrosis Society Conference on June 5-8, 2019 in Liverpool, U.K., demonstrating that ELX-02 increases functional CFTR protein in organoid, human bronchial epithelial cells, and Ussing chamber systems and restores CFTR mRNA to healthy control levels.

We have had three ELX-02 abstracts accepted for presentation at the 2019 North American Cystic Fibrosis Conference (NACFC) on October 31-November 2, 2019 in Nashville, Tennessee.

We have initiated a new program studying inherited retinal disease and are conducting IND enabling studies for several ERSG compounds from our library.

We presented at the Ophthalmology Innovation Summit at the 2019 American Society of Retina Specialists (OIS@ASRS) in a special session hosted by Foundation Fighting Blindness (FFB), the 2019 USH Connections Conference, the Sixth Annual Retinal Cell and Gene Therapy Innovation Summit and the Association for Research in Vision and Ophthalmology (ARVO) 2019 Annual Meeting.

We entered into a multiyear partnership with the FFB to support its inherited retinal degenerative disease registry and educational programs.

We presented as part of the FFB “Investing in Cures” 2019 meeting and we believe that the ongoing research and development consultation and support provided by the FFB will accelerate our development programs that seek to support patients with ocular disease and high unmet medical need.

Our Phase 2 cystinosis trial involves two sequential cohorts with three escalating doses per cohort.

A cohort is complete when each patient has escalated through each of the three dosing levels or if the Safety Review Committee recommends halting escalation.

Following the completion of each dose, the Safety Review Committee meets to review the patient safety data prior to escalation to the next dose level.

The first two doses in the first cohort are complete and the safety review committee has authorized us to start the final dose in this first cohort which is currently ongoing.

To date, based on preliminary results, ELX-02 has been well tolerated through the first two dose levels, and at the second 1.0 mg/kg dose level, ELX-02 demonstrated a statistically significant reduction in white blood cell cystine levels.

Upon completion of the first cohort, we will review data with the Principal Investigator and conduct a separate review with a panel of cystinosis scientific and clinical experts before reporting top line data later this year.

We believe that the emerging profile of ELX-02 for cystinosis is suitable for continued development and we intend to seek regulatory advice, following top line results, on initiating an extension study for patients in the first cohort and to expand the trial to include sites and patients in the United States.

We believe that achievement of proof of concept for ELX-02 in cystinosis will provide a basis for expansion to studies of additional kidney diseases, as well as increasing our probability of success in other clinical uses of this dosage range.

We are actively recruiting patients for two Phase 2 cystic fibrosis trials at sites in Europe and Israel and also in the United States.

During the quarter ended September 30, 2019, we announced that the Cystic Fibrosis Foundation (the “CF Foundation”) is providing funding for a portion of the U.S.

Phase 2 cystic fibrosis clinical trial and that we will form a joint program advisory group with the CF Foundation focused on the development of ELX-02 for cystic fibrosis.

The Cystic Fibrosis Therapeutics Development Network (“TDN”) has sanctioned the Phase 2 study protocol (ClinicalTrials.gov Identifiers:

NCT04126473 and NCT04135495) , which will be conducted at TDN member sites.

Ahmet Uluer, Director of the Adult Cystic Fibrosis Program at the Boston Children’s Hospital/ Brigham and Women’s Hospital CF Center, is the lead study investigator and Boston Children’s Hospital is currently recruiting patients for the trial.

We are opening additional clinical sites for the U.S.

trial and anticipate enrolling our first patients for this trial in the fourth quarter of 2019.

Professor Eitan Kerem, M.D., Head of the Division of Pediatrics, Children’s Hospital, Hadassah Medical Center in Israel, is the global lead investigator.

We are currently enrolling patients at sites in Israel and plan to open additional European sites during the fourth quarter of 2019.

We expect full enrollment to be achieved during the first quarter of 2020.

We are changing our guidance on the time for top line data in cystic fibrosis to better align with the opening of these clinical trial sites and expected completion of patient dosing.

We expect to report top line data in cystic fibrosis during the first half of 2020.

During October 2019, we completed an interim CMC review meeting with the U.S.

Food and Drug Administration and we have gained alignment with the agency on our manufacturing formulation and process, which we believe will be suitable for our expected drug supply needs through completion of our pivotal trials.

We presented positive data in three scientific presentations at the North American Cystic Fibrosis Conference on October 31-November 2, 2019 in Nashville, Tennessee, from our completed Phase 1 clinical trial program for ELX-02, including results from the SAD study, the MAD study, and additional preclinical data for ELX-02.

These data demonstrated that ELX-02 increases functional CFTR protein in patient-derived organoids and hum an bronchial epithelial cells, Ussing chamber systems, FRT and transgenic mice, and that it restores CFTR mRNA to healthy control levels.

ELX-02 results in a pronounced increase in both CFTR protein expression and mRNA stability and the preclinical efficac y-associated exposures from the completed MAD study translate to the selected Phase 2 clinical trial ascending dose ranges and exposures.

Two abstracts for ELX-02 have been accepted for scientific presentations at the American Society of Nephrology (ASN) K idney Week on November 5-10, 2019 in Washington, D.C.

In our inherited retinal disease program, we are conducting IND enabling studies for several ERSG compounds from our library.

We continue to collaborate and engage in our multi-year partnership with the Foundation Fighting Blindness (FFB) to support its inherited retinal degenerative disease registry and educational programs.

In October 2019, we presented as part of the FFB New York Vision Seminar and we believe that the ongoing research and development consultation and support provided by the FFB will accelerate our development programs that seek to support patients with ocular disorders associated with nonsense mutations, an area of high unmet medical need.

At the FFB New York Vision Seminar, we presented some of our in vivo proof-of-concept data in a nonsense model of oculocutaneous albinism type 2.

We have demonstrated a functional restoration of the OCA2 protein in this model after a single intravitreal injection.

These data support that our ERSG compounds are suitable for reaching and promoting read-through in target cells within the retina.

We are also evaluating the suitability of our ERSG library for development in rare renal disorders associated with nonsense mutations, such as autosomal dominant polycystic kidney disease, and cystinuria.

Currently, the European Medicines Agency (EMA) has designated ELX-02 as an orphan medicine for the treatment of cystic fibrosis and mucopolysaccharidosis type I (MPS I), and the FDA has granted orphan drug designation to ELX-02 for the treatment of cystinosis, MPS I, and Rett Syndrome.

We hold worldwide development and commercialization rights to ELX-02 and all other novel compounds in our ESRG library, for all indications, in all territories, under a license from the Technion Research and Development Foundation Ltd.

We hold worldwide development and commercialization rights to ELX-02 and all other novel compounds in our ERSG library, for all indications, in all territories, under a license from the Technion Research and Development Foundation Ltd.

Professor Timor Baasov, the inventor of our compounds, has served as our senior consultant since our incorporation.

We believe that our cash , cash equivalents and marketable securities of $ 76.3 million at June 30 , 2019 will enable us to meet the anticipated cash needs required to reach top line Phase 2 data in cystic fibrosis and cystinosis in 2019 and maintain our current and planned operations into the first quarter of 202 1 .

During the quarter ended September 30, 2019, we appointed Dr.

Thomas Haverty as our Chief Medical Officer.

Haverty has over 30 years of pharmaceutical and biotechnology experience leading clinical research and operations teams with responsibility for large development portfolios in virtually all classes of molecules and indications.

Prior to joining us in his current capacity, Dr.

Haverty, a Board-certified Nephrologist, served as a consultant to us following a long tenured career at Johnson & Johnson, Schering Plough and Merck Research Labs.

Haverty has successfully led the development and approval of over 20 leading drugs.

We believe that our cash, cash equivalents and marketable securities of $64.9 million at September 30, 2019 will enable us to meet the anticipated cash needs required to reach top line Phase 2 data in cystic fibrosis and in cystinosis and maintain our current and planned operations into the first quarter of 2021.

Since our inception, we have incurred significant operating losses.

As of June 30 , 2019, we had an accumulated deficit of $ 1 12.5 million.

To date, we have financed our operations primarily through equity capital investments, and to a less er extent, from loans and grants from the Israeli Innovation Authority of the Ministry of Economy and Industry, or the IIA.

As of September 30, 2019, we had an accumulated deficit of $125.4 million.

To date, we have financed our operations primarily through equity capital investments, and to a lesser extent, from loans and grants from the Israeli Innovation Authority of the Ministry of Economy and Industry, or the IIA.

We have devoted substantially all of our financial resources and efforts to research and development.

1 unchanged sentence

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.

Our net losses may fluctuate si gnificantly from quarter to quarter and year to year.

Our net losses may fluctuate significantly from quarter to quarter and year to year.

We anticipate that our expenses will increase substantially if, and as, we:

5 unchanged sentences

establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval;

maintain, expand and protect our intellectual property portfolio;

maintai n, expand and protect our intellectual property portfolio;

hire additional clinical, regulatory, management and scientific personnel;

4 unchanged sentences

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, as well as the reported revenue and expense during the reporting periods.

These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

2 unchanged sentences

The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this Report are described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K.

There have been no material changes to our critical accounting policies through June 30, 2019, from those discussed in our Annual Report on Form 10-K filed with the SEC on March 14, 2019.

There have been no material changes to our critical accounting policies through September 30, 2019, from those discussed in our Annual Report on Form 10-K filed with the SEC on March 14, 2019.

Results of Operations

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

6 unchanged sentences

Research and development expense

Research and development expenses were $7.3 million for the three months ended June 30, 2019 compared to $4.2 million for the same period ended June 30, 2018, an increase of $3.2 million.

Research and development expenses increased $2.2 million primarily related to fees incurred for subcontractors, consultants and advisors in connection with ongoing clinical trials and research and development activities and $1.0 million due to an increase in headcount and related salaries, stock-based compensation, and other personnel related costs.

Research and development expenses for the three months ended June 30, 2019 and June 30, 2018 included non-cash stock-based compensation expense totaling $0.7 million and $0.3 million, respectively.

Research and development expenses were $13.3 million for the six months ended June 30, 2019 compared to $8.5 million for the same period ended June 30, 2018, an increase of $4.8 million.

Research and development expenses were $6.8 million for the three months ended September 30, 2019 compared to $5.4 million for the same period in 2018, an increase of $1.4 million.

Research and development expenses increased $0.4 million primarily related to fees incurred for subcontractors, consultants and advisors in connection with ongoing clinical trials and research and development activities and $1.0 million due to an increase in headcount and related salaries, stock-based compensation, and other personnel related costs.

Research and development expenses for the six months ended June 30, 2019 and June 30, 2018 included non-cash stock-based compensation expense totaling $1.3 million and $0.4 million, respectively.

Research and development expenses for the three months ended September 30, 2019 and 2018 included non-cash stock-based compensation expense totaling $0.7 million and $0.5 million, respectively.

Research and development expenses were $ 20.2 million for the nine months ended September 30, 2019 compared to $ 14.0 million for the same period in 2018, an increase of $ 6.2 mi llion.

Research and development expenses increased $ 3.3 million primarily related to fees incurred for subcontractors, consultants and advisors in connection with ongoing clinical trials and research and development activities and $ 2.9 million due to an in crease in headcount and related salaries, stock-based compensation, and other personnel related costs.

Research and development expenses for the nine months ended September 30, 2019 and 2018 included non-cash stock-based compensation expense totaling $ 2.0 million and $ 0.9 million, respectively.

General and administrative expenses

General and administrative expenses were $7.0 million for the three months ended June 30, 2019, compared to $9.6 million for the same period ended June 30, 2018, a decrease of $2.6 million.

The decrease in general and administrative expenses was primarily due to a decrease in non-cash stock-based compensation offset by higher personnel, other personnel related costs, stock-based compensation and other infrastructure-related costs of $1.0 million, including legal, accounting and other professional fees following the reverse merger.

General and administrative expenses for the three months ended June 30, 2019 and June 30, 2018 included non-cash stock-based compensation expense totaling $2.3 million and $5.8 million, respectively.

General and administrative expenses were $12.9 million for the six months ended June 30, 2019, compared to $13.0 million for the same period ended June 30, 2018, a decrease of $24 thousand.

This change was primarily the result of higher personnel costs offset by lower non-cash stock-based compensation and other infrastructure-related costs, including legal, accounting and other professional fees following the reverse merger.

General and administrative expenses for the six months ended June 30, 2019 and June 30, 2018 included non-cash stock-based compensation expense totaling $4.4 million and $6.5 million, respectively.

General and administrative expenses were $6.0 million for the three months ended September 30, 2019, compared to $5.9 million for the same in 2018, an increase of $0.1 million.

The increase in general and administrative expenses was primarily due to an increase in stock-based compensation and other infrastructure-related costs of $0.4 million offset by a decrease in other personnel related costs of $0.3 million, including legal, accounting and other professional fees following the reverse merger.

General and administrative expenses for the three months ended September 30, 2019 and 2018 included non-cash stock-based compensation expense totaling $2.2 million in each period.

General and administrative expenses were $18.9 million for the nine months ended September 30, 2019 and for the same period in 2018, with an insignificant increase in the current period.

This current year period had higher personnel costs and other infrastructure costs, including legal, accounting and other professional fees following the reverse merger, offset by lower non-cash stock-based compensation.

General and administrative expenses for the nine months ended September 30, 2019 and 2018 included non-cash stock-based compensation expense totaling $6.6 million and $8.7 million, respectively.

Reverse merger related expenses

During the three months ended June 30, 2018, we recorded a decrease in reverse merger related expenses of $0.2 million in professional service fees incurred.

During the six months ended June 30, 2018, we recorded $0.6 million in professional service fees for the six months ended June 30, 2018, related to the reverse merger we completed on December 19, 2017.

There was no reverse merger related expenses recorded during the three and six months ended June 30, 2019.

O ther expense (income ), net

We recorded $138 thousand in other expense, net for the three months ended June 30, 2019, compared to $137 thousand in other income, net for the same period ended June 30, 2018.

The change in other expense, net was primarily due to an increase in debt issuance costs and interest expense of $0.5 million associated with our bank debt issued in first quarter of 2019 offset by interest income of $0.2 million.

Our interest income increase was primarily due to higher cash resulting from $32.2 million received from our public offering in June 2019.

We recorded $78 thousand in other expense, net for the six months ended June 30, 2019, compared to $94 thousand in other income, net for the same period ended June 30, 2018.

The change in other expense, net was primarily due to an increase in debt issuance costs and interest expense of $0.7 million associated with our bank debt issued in the first quarter of 2019 offset by interest income $0.5 million for the same reason described above.

During the nine months ended September 30, 2018, we recorded $0.6 million in professional service fees related to the reverse merger we completed on December 19, 2017.

There were no reverse merger related expenses recorded during the three and nine months ended September 30, 2019.

Other expense (income), net

We recorded $0.1 million in other expense, net for the three months ended September 30, 2019, compared to $0.2 million in other income, net for the same period in 2018.

The change in other expense, net was primarily due to debt issuance costs and interest expense of $0.3 million associated with our bank debt issued in the first quarter of 2019 offset by interest income of $0.1 million.

Our interest income increased primarily due to higher cash balances as a result of $32.2 million received from our public offering of common stock in June 2019.

We recorded $0.2 million in other expense, net for the nine months ended September 30, 2019, compared to $0.3 million in other income, net for the same period in 2018.

The change in other expense, net was primarily due to an increase in debt issuance costs and interest expense of $0.9 million associated with our bank debt issued in the first quarter of 2019 offset by interest income $0.3 million, for the same reason described above, and foreign exchange changes of $0.1 million.

Liquidity and Capital Resources

1 unchanged sentence

Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

Since our inception and through June 30, 2019, we have funded our operations primarily through equity and capital investments.

We have a history of net losses and negative cash flows from operating activities since inception, and as of June 30, 2019, had an accumulated deficit of $112.5 million.

Since our inception and through September 30, 2019, we have funded our operations primarily through equity and capital investments.

We have a history of net losses and negative cash flows from operating activities since inception, and as of September 30, 2019, had an accumulated deficit of $125.4 million.

We expect to continue to incur net losses and use cash in our operations in the foreseeable future.

1 unchanged sentence

A successful transition to profitable operations is dependent upon achieving a level of revenue adequate to support our cost structure.

We have financed our operations primarily from the sale of our equity securities.

We have financed our operations primarily from the sale of our equity securities and to a lesser extent, loans and grants .

We may never achieve profitability, and unless and until we do, we will continue to need to raise additional cash to fund our operations.

We believe that our cash, cash equivalents and marketable securities of $76.3 million at June 30, 2019 will enable us to meet the anticipated cash needs required to reach top line Phase 2 data in cystic fibrosis and cystinosis in 2019 and maintain our current and planned operations into the first quarter of 2021.

Our cash and cash equivalents are highly liquid investments with original maturities of 90 days or less at the date of purchase and consist of cash in operating accounts and secured investments, primarily in U.S.

Our cash, cash equivalents and marketable securities are highly liquid investments with original maturities of 90 days or less at the date of purchase and consist of cash in operating accounts and secured investments, primarily in U.S.

Management intends to fund future operations through private or public debt or equity financing transactions and may seek additional capital through arrangements with strategic partners or from other sources.

6 unchanged sentences

(collectively, the “Sales Agents”), pursuant to which we may sell and issue shares of our common stock up to an aggregate of $50.0 million through the Sales Agents.

The shares were offered pursuant to the April 2018 Shelf.

The shares were offered pursuant to the April 2018 shelf registration statement, which is more fully described below.

In January 2019, we sold 35,362 shares of common stock and received net proceeds of $0.7 million.

At June 30, 2019, there was approximately $47 million available for future sales pursuant to the Agreement.

On January 30, 2019, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”), in its capacity as administrative agent, collateral agent and lender, and WestRiver Innovation Lending Fund VIII, L.P.

At September 30, 2019, there was approximately $47.0 million available for future sales pursuant to the Agreement.

On January 30, 2019, we entered into a Loan and Security Agreement (the “SVB Loan Agreement”) with Silicon Valley Bank (“SVB”), in its capacity as administrative agent, collateral agent and lender, and WestRiver Innovation Lending Fund VIII, L.P.

(“WestRiver”, together with SVB, the “Lenders”).

Pursuant to the terms and conditions of the Loan Agreement, the Lenders agreed to extend term loans to us in an aggregate principal amount of up to $25 million, comprised of (i) an initial loan ad vance of $15 million and (ii) a subsequent loan advance of $10 million, subject to first achieving certain conditions (collectively, the “Term Loan Advances”).

Pursuant to the terms and conditions of the SVB Loan Agreement, the Lenders agreed to extend term loans to us in an aggregate principal amount of up to $25.0 million, comprised of (i) an initial loan advance of $15.0 million and (ii) a subsequent loan advance of $10.0 million, subject to first achieving certain conditions (collectively, the “Term Loan Advances”).

The initial term loan was funded on January 30, 2019.

The subsequent loan advance is available a t our election prior to December 31, 2019 after the occurrence of certain milestone events relating to data from our clinical trials and receipt by us of certain minimum cash proceeds of at least $75 million from an additional equity offering through a pri vate placement or a public offering.

The subsequent loan advance is available at our election prior to December 31, 2019 after the occurrence of certain milestone events relating to data from our clinical trials and receipt by us of certain minimum cash proceeds of at least $75.0 million from an additional equity offering through a private placement or a public offering.

On June 24, 2019, we completed an underwritten public offering of 3,833,334 shares of common stock at the public offering price of $9.00 per share (the “2019 Offering”).

1 unchanged sentence

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

Six Months Ended June 30,

Nine months ended

September 30,

Net cash used in operating activities

1 unchanged sentence

Net cash provided by financing activities

Our operating activities used cash of $18.8 million and $14.2 million during the six months ended June 30, 2019 and June 30, 2018, respectively.

For the six months ended June 30, 2019, net cash used in operating activities resulted primarily from our net loss of $26.4 million partially offset by total non-cash charges of $6.1 million and total changes in working capital of $1.5 million.

Non-cash charges primarily related to $5.7 million of stock-based compensation, $0.2 million of amortization of our lease asset, $0.2 million of our amortization of debt discount and $50 thousand of depreciation expense offset by $0.1 million of amortization on our investments.

Changes in working capital were primarily related to higher prepaid and other current assets of $0.3 million and higher payables.

For the six months ended June 30, 2018, net cash used in operating activities resulted primarily from our net loss of $22.0 million partially offset by non-cash charges of $6.9 million related to stock-based compensation, and $0.8 million related to changes in working capital.

Our investing activities used cash of $26.9 million and $101 thousand during the six months ended June 30, 2019 and June 30, 2018, respectively.

For the six months ended June 30, 2019, cash used in investing activities was primarily for the purchase of marketable securities of $33.6 million offset by proceeds of $6.8 million received upon the maturity of marketable securities.

For the six months ended June 30, 2018, cash used in investing activities was primarily for the purchase of property and equipment and deposits on leased office space.

Our financing activities provided cash of $46.4 million and $53.7 million during the six months ended June 30, 2019 and June 30, 2018, respectively.

For the six months ended June 30, 2019, net cash provided by financing activities resulted primarily from net proceeds of $32.2 million from the 2019 offering, issuance of debt of $15 million in January 2019 and proceeds of $0.6 million from the purchase of common stock offset by the payment of taxes of $1.1 million associated with the vesting of restricted stock units.

For the six months ended June 30, 2018, net cash provided by financing activities resulted primarily from net proceeds from the 2018 Offering of $53.6 million and $0.1 million of proceeds from stock-based compensation arrangements.

Our operating activities used cash of $30.1 million and $22.3 million during the nine months ended September 30, 2019 and 2018, respectively.

For the nine months ended September 30, 2019, net cash used in operating activities resulted primarily from our net loss of $39.2 million partially offset by total non-cash charges of $9.2 million and total changes in working capital of $0.1 million.

Non-cash charges primarily related to $8.6 million of stock-based compensation, $0.3 million of amortization of our lease asset, $0.4 million of our amortization of debt discount and $0.1 million of depreciation expense offset by $0.2 million of amortization on our investments.

Changes in working capital were primarily related to higher prepaid and other current assets of $0.2 million and advances from collaboration partners of $0.4 million related to the achievement of a milestone in connection with the CF Foundation funding commitment for our cystic fibrosis development program in the U.S .

For the nine months ended September 30, 2018, net cash used in operating activities resulted primarily from our net loss of $33.2 million partially offset by non-cash charges of $9.6 million related to stock-based compensation, $0.1 million of depreciation expense and $1.2 million related to changes in working capital primarily for accounts payable and accrued expenses.

Our investing activities used cash of $42.6 million and $0.1 million during the nine months ended September 30, 2019 and 2018, respectively.

For the nine months ended September 30, 2019, cash used in investing activities was primarily for the purchase of marketable securities of $56.0 million offset by proceeds of $13.5 million received upon the maturity of marketable securities.

For the nine months ended September 30, 2018, cash used in investing activities was primarily driven by the net purchase of property and equipment and long-term deposits.

Our financing activities provided cash of $46.3 million and $53.7 million during the nine months ended September 30, 2019 and 2018, respectively.

For the nine months ended September 30, 2019, net cash provided by financing activities resulted primarily from net proceeds of $32.2 million from the 2019 Offering, issuance of debt of $15.0 million in January 2019 and proceeds of $0.4 million from the sale of common stock offset by the payment of taxes of $1.2 million associated with the vesting of restricted stock units and $0.3 million of debt issuance costs.

For the nine months ended September 30, 2018, net cash provided by financing activities resulted primarily from net proceeds from the 2018 Offering of $53.6 million and $0.1 million of proceeds from stock-based compensation arrangements.

Form S-3 and Equity Sales Agreement

On April 10, 2018, we filed a shelf registration statement (“April 2018 Shelf”) on Form S-3 with the Securities and Exchange Commission (the “SEC”).

On April 10, 2018, we filed a shelf registration statement (the “April 2018 Shelf”) on Form S-3 with the U.S.

Securities and Exchange Commission (the “SEC”).

The April 2018 Shelf (File No.

333-224207) was declared effective on April 20, 2018 and covers the offering, issuance and sale of up to $125.0 million of our common stock, preferred stock, debt securities or warrants and other securities, either individually or in combination.

On November 16, 2018, we filed a shelf registration statement (“November 2018 Shelf”) on Form S-3 with the SEC.

On November 16, 2018, we filed a shelf registration statement (the “November 2018 Shelf”) on Form S-3 with the SEC.

The November 2018 Shelf (File No.

1 unchanged sentence

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

During the periods presented, we did not have, and we do not have, any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Quantitative and Qualitati ve Disclosures about Market Risk

1 unchanged sentence

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