What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-05 · 85 added, 106 removed, 127 unchanged (60% of the section changed)

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Our pipeline consists of small molecule product candidates that target cancer signaling pathways where there is a strong scientific and clinical rationale to improve outcomes, and we intend to pair them with molecular or cellular diagnostics to identify those patients most likely to respond to treatment.

We presently have two clinical-stage product candidates for which we own global commercial rights, tipifarnib and KO-539, as well as additional programs that are at a discovery stage.

We plan to advance our product candidates through a combination of internal development and strategic partnerships while maintaining significant development and commercial rights.

We presently have two key product candidates in clinical trials, tipifarnib and KO-539.

Tipifarnib is a potent, selective and orally bioavailable inhibitor of farnesyl transferase that has been previously studied in more than 5,000 cancer patients and demonstrated compelling and durable anti-cancer activity in certain patients with a manageable side effect profile.

Our first product candidate, tipifarnib, is a potent, selective and orally bioavailable inhibitor of farnesyl transferase that has been previously studied in more than 5,000 cancer patients and demonstrated compelling and durable anti-cancer activity in certain patients with a manageable side effect profile.

We are currently evaluating tipifarnib in multiple solid tumor and hematologic indications.

Our most advanced solid tumor indication for tipifarnib is in patients with head and neck squamous cell carcinoma, or HNSCC, that carry mutations in the HRAS gene.

We are currently conducting a global, multi-center, open-label, non-comparative registration-directed clinical trial of tipifarnib in HRAS mutant HNSCC designed with two cohorts:

a treatment cohort, which we call AIM-HN, and a prospective observational cohort.

On July 6, 2020, we amended the AIM-HN trial protocol to enable enrollment of patients with any HRAS mutation in addition to patients with a high HRAS variant allele frequency in order to assess the potential for clinical benefit in the overall HRAS mutant HNSCC population, which increased the number of evaluable HNSCC patients for AIM-HN.

As a result of the COVID-19 pandemic and the additional patients required for the trial, we anticipate we will face delays in our timelines and milestones for the AIM-HN trial and, accordingly, are unable to reasonably forecast at this time when our AIM-HN trial will become fully enrolled.

In addition to studying tipifarnib in recurrent or metastatic HRAS mutant HNSCC as a monotherapy, we are also examining the potential use of tipifarnib in combination with other oncology therapies to address larger patient populations

and pursue earlier lines of therapy.

In particular, we are increasingly interested in HNSCC patients whose tumors are dependent on HRAS and/or PI3 kinase alpha, as evidenced by overexpression of the HRAS protein, or PIK3CA mutation or amplification.

HRAS and PI3 kinase alpha are believed to be “co-dependent” oncoproteins in HNSCC.

Our preclinical data support that notion and suggest that a combination approach has the potential to provide superior antitumor activity relative to inhibiting either target alone .

Based upon the unmet need and our encouraging preclinical data, we are prioritizing the clinical development of tipifarnib in combination with a PI3 kinase alpha inhibitor as a strategy to treat both HRAS -dependent and PI3K alpha- dependent HNSCC patients .

Our second product candidate, KO-539, is a potent, selective, reversible and oral small molecule inhibitor of the Lysine K-specific Methyl Transferase 2A gene, or KMT2A (formerly referred to as the mixed-lineage leukemia 1 gene, or MLL1), protein-protein interaction.

In September 2017, we reported that our ongoing proof-of-concept Phase 2 clinical trial of tipifarnib in patients with HRAS mutant relapsed or refractory HNSCC, or RUN-HN, achieved its primary efficacy endpoint.

In October 2018, we reported updated data from RUN-HN showing a significant association between tumor HRAS mutant allele frequency and clinical benefit from tipifarnib.

Based upon these observations, we introduced a minimum HRAS mutant variant allele frequency as an entry criterion in the RUN-HN trial.

Following feedback from the U.S.

Food and Drug Administration, or the FDA, and other regulatory authorities, we initiated a global, multi-center, open-label, non-comparative registration-directed clinical trial of tipifarnib in HRAS mutant HNSCC in November 2018.

The clinical trial has two cohorts:

a treatment cohort, which we call AIM-HN, and a non-interventional screening and outcomes cohort, which we call SEQ-HN.

AIM-HN is designed to enroll at least 59 evaluable HNSCC patients with high HRAS mutant variant allele frequency who have received prior platinum-based therapy.

In October 2019, we reported updated data from the ongoing RUN-HN trial that we believe confirms the association between HRAS mutant variant allele frequency and

anti-tumor activity, and we believe further support s the design of our amended AIM-HN registration-directed trial in HRAS mutant HNSCC .

On December 16, 2019, we reported that the FDA granted Fast Track Designation to tipifarnib for the treatment of patients with HRAS mutant HNSCC after progression on platinum therapy .

On May 29, 2020, we announced updated clinical data for our RUN-HN study presented at the American Society of Clinical Oncology Virtual Scientific Program, including data collected as part of the trial showing a median overall survival of 15.4 months, a median progression free survival of 5.9 months and an objective response rate , or ORR, of 50% observed in patients with recurrent/metastatic HRAS mutant HNSCC among the 18 patients on the RUN-HN study who were evaluable for efficacy.

In July 2020, we amended the AIM-HN trial protocol to enable enrollment of patients with any HRAS mutation in order to assess the potential for clinical benefit in the overall HRAS mutant HNSCC population.

We also introduced a number of modifications to the protocol that seek to enable us to enroll patients in the study more efficiently as well as modifications that we believe better reflected the evolving standards of care for recurrent/metastatic HNSCC.

While these amendments do not change the primary outcome measure of ORR in patients with high HRAS mutant variant allele frequency, the modifications will require us to enroll an increased number of evaluable HNSCC patients.

As a result of the pandemic caused by the coronavirus disease 2019, or COVID-19, and the additional patients required for the trial, we anticipate we will face delays in our timelines and milestones for the AIM-HN trial and, accordingly, are unable to reasonably forecast when our AIM-HN trial will become fully enrolled.

On February 24, 2021, we announced that tipifarnib has been granted Breakthrough Therapy Designation from the FDA for the treatment of patients with recurrent or metastatic HRAS mutant head and neck squamous cell carcinoma with variant allele frequency ≥ 20% after disease progression on platinum-based chemotherapy.

The Breakthrough Therapy Designation is based upon data from our Phase 2 RUN-HN trial, which has been accepted for publication in an upcoming issue of the Journal of Clinical Oncology , or JCO, and was published online by JCO ahead of print on March 22, 2021.

In addition to evaluating tipifarnib as a monotherapy in patients with recurrent or metastatic HRAS mutant HNSCC, we have also been evaluating the use of tipifarnib in combination with other oncology therapeutics to address larger patient populations and to pursue earlier lines of therapy.

Among these potential combinations, we have prioritized the combination of tipifarnib and an inhibitor of the PI3 Kinase alpha enzyme for clinical evaluation in patients with HNSCC.

In particular, we are planning to commence a Phase 1/2 open-label, biomarker-defined cohort study in the second half of 2021 to evaluate the safety and tolerability of the combination, determine the recommended dose and schedule for the combination, and assess early antitumor activity of tipifarnib and a PI3 kinase alpha inhibitor for the treatment of adult participants who have HRAS-overexpressing, PIK3CA-mutated and/or PIK3CA-amplified HNSCC.

While we believe tipifarnib has potential to modulate the CXCR4-expressing primary tumor cells in AITL, PTCL and other diseases such as relapsed or refractory acute myeloid leukemia, or AML, chronic myelomonocytic leukemia, or CMML, diffuse large B-cell lymphoma, cutaneous T-cell lymphoma and pancreatic cancer, we suspended the initiation of a planned registration directed study for tipifarnib in T-cell lymphoma and of a planned Phase 2 clinical trial for tipifarnib in pancreatic cancer as a result of a strategic review conducted in the spring of 2020.

We have continued preclinical work to validate tipifarnib in the CXCR4 receptor pathway and to assess the timing and strategy for further development.

Our second product candidate, KO-539, is a potent, selective, reversible and oral small molecule inhibitor of the mixed-lineage leukemia 1, or MLL1, gene (now renamed Lysine K-specific Methyltransferase 2A, or KMT2A), or menin-KMT2A, protein-protein interaction.

We have generated preclinical data that support the potential anti-tumor activity of KO-539 in genetically defined subsets of acute leukemia, including those with rearrangements or partial tandem duplications in the KMT2A gene as well as those with oncogenic driver mutations in genes such as nucleophosmin 1, or NPM1.

Our preclinical data support the hypothesis that KO-539 targets epigenetic dysregulation and removes a key block to cellular differentiation to drive anti-tumor activity.

The novel mechanism of action targets epigenetic dysregulation and removes a key block to cellular differentiation to drive anti-tumor activity.

We believe KO-539 has the potential to address approximately 35% of acute myeloid leukemia, or AML, including NPM1-mutant AML and KMT2A-rearranged AML.

In the pediatric population, KMT2A-rearranged leukemias make up approximately 10% of acute leukemias in all age groups and in the case of infant leukemias, the frequency of KMT2A rearrangements is 70–80%.

These pediatric leukemia sub-types portend a poorer prognosis and five-year survival rate that is lower than other leukemia sub-types and therefore represent a significant unmet medical need given the lack of curative therapeutic options.

In April 2020, a competitor reported that its menin-KMT2A inhibitor showed potential anti-tumor activity in patients with KMT2A-rearranged AML.

We received orphan drug designation for KO-539 for the treatment of AML from the FDA in July 2019.

We initiated our Phase 1/2A clinical trial of KO-539 in relapsed or refractory AML in September 2019 and are actively recruiting at multiple sites in the United States and France with the anticipation of expanding to additional sites in the United States, France and other countries during the expansion phase of the study.

Our menin-KMT2A Phase 1/2A clinical trial, which we call the K ura O ncology ME nin-KMT2A T rial, or KOMET-001, has an accelerated design and will determine a recommended Phase 2 dose and schedule, or RP2D, using a modified toxicity probability interval, or MTPI, model.

We expect to determine a RP2D for KO-539 in Q1 2021 and, if we determine the RP2D for KO-539, we intend to advance into genetically-defined expansion cohorts, including NPM1-mutant AML and KMT2A-rearranged AML.

An abstract reporting preliminary data from KOMET-001 and that will be the subject of an oral presentation at the 2020 Annual Meeting of the American Society of Hematology, or ASH, on December 5, 2020 was posted on the ASH website on November 4, 2020.

We anticipate sharing a more mature dataset from KOMET-001, including preliminary data from approximately 10 patients with relapsed/refractory AML, at the ASH oral presentation on December 5, 2020.

The COVID-19 Pandemic

The novel coronavirus pandemic, COVID-19, has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions and business interruptions and shutdowns.

These precautions may continue to disrupt our business operations and prospects.

Since early March 2020, we have taken temporary precautionary measures, including routine screening and remote working initiatives, intended to help minimize the risk of COVID-19 to our employees and their families.

We also suspended non-essential travel worldwide for our employees.

In addition, we have experienced, and expect to continue to experience, patient screening and enrollment at a slower pace at many of our clinical trial sites than what was projected when the trials began.

Some of our clinical sites have experienced challenges in conducting trial activities while they focus critical resources on caring for COVID-19 patients and due to facility restrictions, quarantines, travel restrictions, remote work requirements and other precautions.

To manage the COVID-19 impact on our business, we developed a comprehensive COVID-19 contingency plan designed to work closely with our third-party contractors and investigators to ensure our ongoing clinical trials proceed safely and efficiently.

As a result of these efforts, we continue to accrue patients for our clinical trials, but we expect the disruption caused by and the challenges associated with COVID-19 to continue for the foreseeable future.

The long-term trends impacting our business from COVID-19 are uncertain and will depend on the continued world-wide progress toward managing this health crisis.

These pediatric leukemia sub-types portend a poorer prognosis and five-year survival rate that is lower than other leukemia sub-types and therefore represent significant unmet medical needs given the lack of curative therapeutic options.

In April 2020, a competitor reported that its menin-KMT2A inhibitor showed potential anti-tumor activity in KMT2A-rearranged AML.

We received orphan drug designation for KO-539 for the treatment of acute myeloid leukemia, or AML, from the FDA in July 2019.

We initiated our Phase 1/2 clinical trial of KO-539 in relapsed or refractory AML in September 2019 and are actively recruiting at multiple sites in the United States and France with the anticipation of expanding to additional sites in the United States, France and other countries during the expansion phase of the study.

Our menin-KMT2A Phase 1/2 clinical trial, which we call the K ura O ncology ME nin-KMT2A T rial, or KOMET-001, has an accelerated design and seeks to determine a recommended Phase 2 dose and schedule, or RP2D, using a modified toxicity probability interval, or MTPI, model.

On December 5, 2020, we announced preliminary results from our KOMET-001 Phase 1/2 clinical trial at an oral presentation at the 2020 American Society of Hematology, or ASH.

As of the data cutoff date for the ASH presentation, November 2, 2020, the trial had enrolled 12 patients with relapsed or refractory AML, of whom ten were evaluable for safety and tolerability and eight were evaluable for efficacy.

Clinical or biological activity was reported in six of the eight efficacy-evaluable patients, including two patients achieving a complete remission, one patient achieving a morphological leukemia-free state, and one patient experiencing a marked decrease in hydroxyurea requirements and having attained peripheral blood count stabilization.

As presented at ASH, KO-539 has been well tolerated with a manageable safety profile to date.

As of the data cutoff date, no drug discontinuations due to treatment-related adverse events and no evidence of QTc prolongation were reported.

Treatment related adverse effects (grade ≥ 3) were reported to include pancreatitis, increased lipase, decreased neutrophil count, tumor lysis syndrome and deep venous thrombosis.

On May 6, 2021, we reported that KO-539 continues to demonstrate a wide therapeutic window and compelling single-agent activity in an all-comer population of the KOMET-001 trial and that we have amended the trial protocol to include two Phase 1b expansion cohorts at doses that have already cleared the safety threshold in dose escalation.

Both cohorts will be enriched with NPM1-mutant and KMT2A-rearranged relapsed/refractory AML patients.

We expect to enroll at least 12 patients in each of the Phase 1b expansion cohorts and assess those patients for safety and tolerability, pharmacokinetics and pharmacodynamics and efficacy in order to determine the recommended Phase 2 dose.

In addition, the amended Phase 1b protocol gives us flexibility to enroll up to 18 additional patients per cohort, as appropriate.

We believe the patients enrolled in the cohort selected as the recommended Phase 2 dose have the potential to be included in the subsequent, registration-directed portion of the KOMET-001 trial.

Patient enrollment in the genetically enriched Phase 1b expansion cohorts is expected to begin at existing and new clinical sites in mid-2021.

Liquidity Overview

As of September 30, 2020, we had cash, cash equivalents and short-term investments of $325.4 million.

In May 2020, we completed a public offering that resulted in net proceeds to us, after deducting underwriting discounts, commissions and offering expenses, of approximately $134.9 million.

We have a term loan facility with Silicon Valley Bank under which we may, at our sole discretion, borrow up to an additional $12.5 million at any time until November 30, 2020.

In addition, we

have an at-the-market issuance sales agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, or ATM facility, under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million.

As of March 31, 2021, we had cash, cash equivalents and short-term investments of $603.9 million.

We have an at-the-market issuance sales agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, or ATM facility, under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million.

We have not yet sold any shares of our common stock under the ATM facility.

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Payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses in other research and development projects or otherwise and therefore, no separate economic values, are expensed as research and development costs at the time such costs are incurred.

As of September 30, 2020, we have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.

As of March 31, 2021, we have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates.

At this time, due to the inherently unpredictable nature of preclinical and clinical development, we are unable to estimate with any certainty the costs we will incur and the timelines we will require in the continued development of our product candidates and our other pipeline programs.

Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

Clinical and preclinical

development timelines, the probability of success and development costs can differ materially from expectations.

Our future research and development expenses will depend on the preclinical and clinical success of each product candidate that we develop, as well as ongoing assessments of the commercial potential of such product candidates.

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table sets forth our results of operations for the periods presented, in thousands:

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Research and development expenses

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Other income, net

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

Research and Development Expenses.

The following table illustrates the components of our research and development expenses for the periods presented, in thousands:

Three Months Ended

September 30,

Three Months Ended March 31,

Tipifarnib-related costs

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KO-947-related costs

Discovery stage programs

Personnel costs and other expenses

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Total research and development expenses

The increase in KO-539-related research and development expenses for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our Phase 1/2A clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in personnel costs and other expenses was to support our registration-directed clinical trial of tipifarnib and the Phase 1/2A clinical trial of KO-539.

The increase in tipifarnib-related research and development expenses for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to increases in companion diagnostics development activities, subject screening costs and other clinical costs related to our registration-directed trial of tipifarnib.

The increase in KO-539-related research and development expenses for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to increases in costs related to our Phase 1/2 clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The decrease in KO-947-related costs for the three months ended March 31, 2021 compared to the same period in 2020 was due to the termination of the ERK inhibitor program in May 2020.

The increase in discovery stage programs for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

The increase in personnel costs and other expenses for the three months ended March 31, 2021 compared to the same period in 2020 was to support our registration-directed clinical trial of tipifarnib and the Phase 1/2 clinical trial of KO-539.

Personnel costs and other expenses include employee salaries and related expenses, facilities expense and overhead expenses.

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General and Administrative Expenses .

The increase in general and administrative expenses for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $0.8 million in non-cash share-based compensation expense, $0.7 million in pre-commercial planning expenses and $0.6 million in personnel costs.

The increase in general and administrative expenses for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to increases of $1.7 million in non-cash share-based compensation expense and $1.6 million in personnel costs, offset by a decrease of $0.4 million in pre-commercial planning expenses.

We expect our general and administrative expenses to increase in future periods to support our planned increase in research and development activities.

Other income, net .

The decrease in other income, net, for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease in interest income.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Research and Development Expenses .

The following table illustrates the components of our research and development expenses for the periods presented, in thousands:

Nine Months Ended

September 30,

Tipifarnib-related costs

KO-539-related costs

KO-947-related costs

Personnel costs and other expenses

Share-based compensation expense

Total research and development expenses

The increase in tipifarnib-related research and development expenses for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our ongoing registration-directed clinical trial and other Phase 2 clinical trials, manufacturing and other preclinical development activities.

The increase in KO-539-related research and development expenses was primarily due to increases in costs related to our Phase 1/2A clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The decrease in KO-947-related costs is due to the termination of the ERK inhibitor program.

The increase in personnel costs and other expenses was to support our registration-directed clinical trial of tipifarnib and the Phase 1/2A clinical trial of KO-539.

General and Administrative Expenses .

The increase in general and administrative expenses for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $2.4 million in pre-commercial planning expenses, $2.1 million in non-cash share-based compensation expense, $1.8 million in professional and legal fees and $1.7 million in personnel costs.

Other income, net .

The decrease in other income, net, for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease in interest income.

The decrease in other income, net, for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Liquidity and Capital Resources

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We have devoted our resources to funding research and development programs, including discovery research, preclinical and clinical development activities.

In May 2020, we completed a public offering in which we sold an aggregate of 10,465,000 shares of common stock at a price of $13.75 per share.

Net proceeds from the public offering, after deducting underwriting discounts, commissions and offering expenses, were approximately $134.9 million.

In March 2019, we entered into the ATM facility under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million.

We have not yet sold any shares of our common stock under the ATM facility.

In November 2018, we entered into a loan and security agreement with Silicon Valley Bank providing for up to $20.0 million in a series of term loans.

The loan and security agreement was subsequently amended in April 2020 to extend the second draw period.

The loan and security agreement, as amended, shall be referred to herein as the loan agreement.

Under the terms of the loan agreement, we borrowed $7.5 million, or the Term A Loan, and we may, at our sole discretion, borrow up to an additional $12.5 million at any time until November 30, 2020, or the Term B Loan, and together with the Term A Loan, the Term Loans.

In addition, each Term B Loan must be in an amount equal to the lesser of $5.0 million or the amount that is remaining under the Term B Loan.

All of the Term Loans will be due on the scheduled maturity date of May 1, 2023 , or the Maturity Date.

Repayment of the Term Loans is interest only through November 30, 2020, followed by 30 equal monthly payments of principal plus accrued interest commencing on December 1, 2020.

The per annum interest rate for the Term Loans is the greater of (i) 5.50% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal plus

In addition, a final payment of 7.75% of the amounts of the Term Loans drawn will be due on the earlier of the Maturity Date, acceleration or prepayment of the Term Loans.

If we elect to prepay the Term Loans, a prepayment fee equal to 1% or 2% of the then outstanding principal balance also will be due, depending upon when the prepayment occurs.

Our obligations under the loan agreement are secured by substantially all of our assets other than our intellectual property, but including proceeds from the sale, licensing or other disposition of our intellectual property.

In November 2018, we entered into a loan and security agreement with Silicon Valley Bank, or the SVB Loan Agreement, providing for up to $20.0 million in a series of term loans.

Upon entering into the SVB Loan Agreement, we borrowed $7.5 million, or the Term Loan, the proceeds of which, in part, were used to pay off the outstanding balance of the debt under the loan and security agreement with Oxford Finance LLC and Silicon Valley Bank dated April 27, 2016, as amended in May 2017 and October 2017, or the SVB-Oxford Term Loan.

Net proceeds from the Term Loan, after payoff of the SVB-Oxford Term Loan, were approximately $0.6 million.

The Term Loan is due on the scheduled maturity date of May 1, 2023 , or Maturity Date.

Repayment of the Term Loan was interest only through November 30, 2020, followed by 30 equal monthly payments of principal plus accrued interest which commenced on December 1, 2020.

The per annum interest rate for the Term Loan is the greater of (i) 5.50% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal plus (b) 0.25%.

In addition, a final payment of 7.75% of the amount of the Term Loan drawn will be due on the earlier of the Maturity Date, acceleration or prepayment of the Term Loan.

If we elect to prepay the Term Loan, a prepayment fee equal to 1% of the then outstanding principal balance also will be due.

Our obligations under the SVB Loan Agreement are secured by substantially all of our assets other than our intellectual property, but including proceeds from the sale, licensing or other disposition of our intellectual property.

Our intellectual property is subject to negative covenants, which, among other things, prohibit us from selling, transferring, assigning, mortgaging, pledging, leasing, granting a security interest in or otherwise encumbering our intellectual property, subject to limited exceptions.

We have incurred operating losses since inception and negative cash flows from operating activities.

As of September 30, 2020, we had an accumulated deficit of $276.3 million.

We have incurred operating losses and negative cash flows from operating activities since inception.

As of March 31, 2021, we had an accumulated deficit of $333.2 million.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue and initiate clinical trials of, and seek marketing approval for, our product candidates.

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Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global financial markets have experienced volatility and uncertainty.

There can be no assurance that further volatility and uncertainty in the financial markets and declining confidence in economic conditions will not occur.

If financial markets remain volatile and uncertain, and for so long as they do, it may make any necessary capital financing more difficult to obtain, more costly and/or more dilutive.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

As of September 30, 2020, we had cash, cash equivalents and short-term investments of $325.4 million.

As of March 31, 2021, we had cash, cash equivalents and short-term investments of $603.9 million.

Based on our current plans, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into 2024.

During the period of uncertainty of volatility related to the COVID-19 pandemic, we will continue to monitor our liquidity.

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

the scope, progress, results and costs of drug discovery, pre-clinical development, laboratory testing and clinical trials for our product candidates, including as such activities may be adversely impacted by COVID-19;

the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

the costs, timing and outcome of regulatory review of our product candidates;

the costs of establishing or contracting for sales, marketing and distribution capabilities if we obtain regulatory approvals to market our product candidates;

the costs of securing and producing drug substance and drug product material for use in pre-clinical studies, clinical trials and for use as commercial supply;

the costs of securing and producing drug substance and drug product material for use in preclinical studies, clinical trials and for use as commercial supply;

the costs of securing manufacturing arrangements for development activities and commercial production;

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To date, we have not generated any revenues from product sales, and we do not have any approved products.

We do not know when, or if, we will generate any revenue from product sales.

We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.

We do not know when, or if, we will generate any revenues from product sales.

We do not expect to generate significant revenues from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.

We are subject to all of the risks incident in the development of new therapeutic products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of stock offerings, debt financings, collaborations, strategic partnerships or licensing arrangements.

Other than our term loan facility, we do not have any committed external source of funds.

We do not have any committed external source of funds.

Additional capital may not be available on reasonable terms, if at all.

Subject to limited exceptions, our term loan facility also prohibits us from incurring indebtedness without the prior written consent of the l ender.

Subject to limited exceptions, our term loan facility also prohibits us from incurring indebtedness without the prior written consent of the Lender.

To the extent that we raise additional capital through the sale of stock or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

Debt financing, if available, may involve agreements that include increased fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, selling or licensing intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global financial markets have experienced volatility and uncertainty.

There can be no assurance that further volatility and uncertainty in the financial markets and declining confidence in economic conditions will not occur.

If financial markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.

If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, including our other technologies, future revenue streams or research programs, or grant licenses on terms that may not be favorable to us.

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The following table provides a summary of our net cash flow activities for the periods presented, in thousands:

Nine Months Ended

September 30,

Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Operating Activities.

The increase in net cash used in operating activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to an increase of $18.2 million in net loss, offset by a decrease of $3.2 million in payments of accounts payable and accrued expenses and an increase of $2.1 million in non-cash share-based compensation expense.

The increase in net cash used in operating activities for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to the increase of $11.5 million in net loss and $1.4 million in changes in prepaid expenses and other current assets, partially offset by increases of $1.9 million in non-cash share-based compensation expense, $1.0 million in amortization of premiums and accretion of discounts on marketable securities, net and $0.9 million in changes in accounts payable and accrued expenses.

Investing Activities.

The increase in net cash used in investing activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease of $10.7 million in maturities and sales of marketable securities and an increase of $1.9 million in purchases of property and equipment, offset by a decrease of $3.9 million in purchases of marketable securities.

The increase in net cash used in investing activities for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to an increase of $211.9 million in purchases of marketable securities and a decrease of $2.3 million in maturities of marketable securities, offset by a decrease of $0.5 million in purchases of property and equipment.

Financing Activities.

The increase in net cash provided by financing activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $26.8 million in proceeds from sale of common stock and $5.0 million in proceeds from exercise of stock options and purchases under our employee stock purchase plan.

The decrease in net cash provided by financing activities for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to an increase of $0.8 million in the repayment of long-term debt, offset by an increase of $0.6 million in proceeds from exercises of stock options.

Contractual Obligations

There were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the period ended March 31, 2020.

There were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 .

Off-Balance Sheet Arrangements

As of September 30, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Management Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis