What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 117 added, 77 removed, 135 unchanged (59% of the section changed)

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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.

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 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, which we call SEQ-HN .

In July 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.

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.

While these amendments do not change the primary outcome measure of an objective response rate, or 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 continue to 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.

On February 24, 2021, we announced that tipifarnib has been granted Breakthrough Therapy Designation from the U.S.

Food and Drug Administration, or the FDA, for the treatment of patients with recurrent or metastatic HRAS mutant HNSCC 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 was published in the Journal of Clinical Oncology on June 10, 2021.

In addition to evaluating tipifarnib as a monotherapy in patients with recurrent or metastatic HRAS mutant HNSCC, we have been evaluating the use of tipifarnib in combination with other oncology therapies 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 biomarker-defined subsets of HNSCC.

On July 6, 2021, we announced a clinical collaboration with Novartis Pharma AG, or Novartis, to evaluate the combination of tipifarnib and alpelisib, a PI3 kinase alpha inhibitor, in patients with HNSCC whose tumors have HRAS overexpression or PIK3CA mutation and/or amplification.

We plan to commence a Phase 1/2 open-label, biomarker-defined cohort study, which we call the KURRENT trial, in the fourth quarter 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 the combination for the treatment of such patients.

Under the terms of our collaboration agreement with Novartis, we will sponsor the KURRENT trial and supply tipifarnib, and Novartis will supply alpelisib.

Although we believe tipifarnib has potential to modulate the CXCR4-expressing primary tumor cells in angioimmunoblastic T-cell lymphoma, or AITL, peripheral T-cell lymphomas, or PTCL, and other diseases such as relapsed or refractory acute myeloid leukemia, or AML, chronic myelomonocytic leukemia, 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.

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

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.

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.

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.

We believe KO-539 has the potential to address approximately 35% of 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 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.

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.

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

We initiated our menin-KMT2A Phase 1/2 clinical trial of KO-539 in relapsed or refractory AML which we call the K ura O ncology ME nin-KMT2A T rial, or KOMET-001, in September 2019.

The KOMET-001 trial has an accelerated design and was initially designed to determine a recommended Phase 2 dose and schedule, or RP2D, using a modified toxicity probability interval model.

On December 5, 2020, we announced preliminary results from our KOMET-001 trial at an oral presentation at the 2020 American Society of Hematology Annual Meeting, 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.

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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.

On May 6, 2021, we reported that we amended the KOMET-001 trial protocol to include two Phase 1b expansion cohorts at doses that cleared the safety threshold in dose escalation.

The Phase 1b portion of the study is designed to determine the lowest dose of KO-539 that provides maximum biologic and clinical effect, consistent with guidance from the FDA relating to targeted oncology therapies, known as Project Optimus.

On June 24, 2021, we reported that we dosed our first patient in the Phase 1b expansion cohorts.

Each cohort – a lower dose (200 mg) and a higher dose (600 mg) – will be comprised of NPM1-mutant and KMT2A-rearranged relapsed/refractory AML patients.

Both doses demonstrated preliminary evidence of activity and were determined to be safe and well tolerated in the Phase 1a portion of the study.

We expect to enroll 12 evaluable patients in each cohort and assess those patients for safety and tolerability, pharmacokinetics and efficacy in order to determine the RP2D.

The study protocol gives us the flexibility to enroll up to 30 patients in the selected cohort while we transition into the registration-directed portion of the study.

We believe data from all patients treated at the recommended Phase 2 dose will contribute to the registrational patient population.

We expect to complete enrollment of the 12 patients in each of the Phase 1b expansion cohorts and determine a RP2D by the first quarter of 2022.

Pending determination of the RP2D, we are preparing to conduct a comprehensive clinical development plan for KO-539, aimed at broadening the opportunity to develop treatments for patients with acute leukemias.

Additional development opportunities include combination studies, other genetic subtypes, a pediatric development strategy and other indications, such as acute lymphocytic leukemia and myelodysplastic syndrome.

As previously reported, we are developing a next-generation farnesyl transferase inhibitor which we believe demonstrates improved potency, pharmacokinetic and physicochemical properties relative to tipifarnib.

In June 2021, we nominated a development candidate, KO-2806, which we have advanced into investigational new drug-enabling studies.

We intend to direct this development candidate at innovative biology and larger disease indications in combination with other targeted therapies, and we expect to submit an investigational new drug application for KO-2806 by the end of 2022.

Liquidity Overview

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

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $567.5 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.

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

As of June 30, 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.

In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

In addition, we cannot forecast

which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Completion of clinical trials may take several years or more, and the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

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Other significant general and administrative expenses include the costs associated with obtaining and maintaining our patent portfolio, professional services for audit, legal, pre-commercial planning, investor and public relations, corporate activities and allocated facilities.

Other Income (Expense)

Other income (expense) consists primarily of management fee income, interest income and interest expense.

Management fee income is earned in accordance with the management services agreement, as amended, with Araxes Pharma LLC.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income and interest expense.

Interest expense mainly consists of interest on long-term debt.

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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 March 31,

Three Months Ended

Six Months Ended

Research and development expenses

General and administrative expenses

Other income, net

Other income (expense), net

Comparison of the Three Months Ended June 30, 2021 and 2020

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 March 31,

Three Months Ended

Tipifarnib-related costs

KO-539-related costs

KO-947-related costs

Discovery stage programs

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Total research and development expenses

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.

The increase in tipifarnib-related research and development expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases in patient 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 June 30, 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 increase in discovery stage program research and development expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

Personnel costs and other expenses include employee salaries and related expenses, facilities expenses, overhead expenses and costs related to the terminated ERK inhibitor program.

We expect our research and development expenses to increase in future periods as we continue clinical development activities for tipifarnib and KO-539.

General and Administrative Expenses .

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.

The increase in general and administrative expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases of $2.0 million in non-cash share-based compensation expense, $1.7 million in personnel costs due to additional headcount and $0.7 million in professional fees.

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 March 31, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Other income (expense), net .

The decrease in other income (expense), net for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Comparison of the Six Months Ended June 30, 2021 and 2020

Research and Development Expenses.

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

Six Months Ended

Tipifarnib-related costs

KO-539-related costs

Discovery stage programs

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 six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases in companion diagnostics development activities, patient 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 six months ended June 30, 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 increase in discovery stage program research and development expenses for the six months ended June 30, 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 six months ended June 30, 2021 compared to the same period in 2020

was to support our registration-directed clinical trial of tipifarnib and Phase 1/2 clinical trial of KO-539 , partially offset by a reduction in costs due to the termination of the ERK inhibitor program in 2020 .

Personnel costs and other expenses include employee salaries and related expenses, facilities expense s, overhead expenses and cost s related to the terminated ERK inhibitor program .

General and Administrative Expenses .

The increase in general and administrative expenses for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases of $3.8 million in non-cash share-based compensation expense, $3.2 million in personnel costs due to additional headcount and $0.4 million in professional fees.

Other income (expense), net .

The decrease in other income (expense), net for the six months ended June 30, 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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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.

Upon entering into the SVB Loan Agreement, we borrowed $7.5 million, or the Term Loan.

The Term Loan had a scheduled maturity date of May 1, 2023 .

On May 19, 2021, we paid $6.6 million to repay all amounts owed under the Term Loan, which included a final payment of $0.6 million, representing 7.75% of the Term Loan, and a prepayment fee of $30,000.

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.

As of June 30, 2021, we had an accumulated deficit of $366.9 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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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 March 31, 2021, we had cash, cash equivalents and short-term investments of $603.9 million.

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $567.5 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.

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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 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.

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Operating Activities.

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.

The increase in net cash used in operating activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to the increase of $24.7 million in net loss, $2.2 million in changes in accounts payable and accrued expenses, $1.8 million in changes in prepaid expenses and other current assets and $1.7 million in changes in other long-term assets, partially offset by increases of $5.4 million in non-cash share-based compensation expense and $2.1 million in amortization of premiums and accretion of discounts on marketable securities, net.

Investing Activities.

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.

The increase in net cash used in investing activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to an increase of $256.3 million in purchases of marketable securities, partially offset by an increase of $26.1 million in maturities of marketable securities and a decrease of $0.9 million in purchases of property and equipment.

Financing Activities.

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.

Net cash used in financing activities for the six months ended June 30, 2021 primarily related to the repayment of all amounts owed under the Term Loan, including a final payment and prepayment fees, totaling $7.9 million, partially offset by proceeds of $1.4 million from exercises of stock options and purchases under our employee stock purchase plan.

Net cash provided by financing activities for the six months ended June 30, 2020 consisted of proceeds of $135.2 million from our sale of common stock from our public offering in May 2020 and $2.4 million from exercises of stock options and purchases under our employee stock purchase plan.

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, 2020 .

The following is a summary of our significant contractual obligations as of June 30, 2021, in thousands:

Payments Due by Period

Operating leases (1)

______________________

Future minimum lease payments under our office and lab leases in San Diego, California and Boston, Massachusetts.

We enter into short-term and cancellable agreements in the normal course of operations with clinical sites and contract research organizations, or CROs, for clinical research studies, professional consultants and various third parties for preclinical research studies, clinical supply manufacturing and other services through purchase orders or other documentation, or that are undocumented except for an invoice.

Such short-term agreements are generally outstanding for periods less than one year and are settled by cash payments upon delivery of goods and services.

The nature of the work being conducted under these agreements is such that, in most cases, the services may be cancelled upon prior notice of 90 days of less.

Payments due upon cancellation generally consist only of payments for services provided and expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

These payments are not included in the table of contractual obligations above.

Excluded from the table above are milestone or contractual payment obligations contingent upon the achievement of certain milestones or events if the amount and timing of such obligations are unknown or uncertain.

Our in-license agreements are cancelable by us with written notice within 180 days or less.

We may be required to pay up to approximately $80.2 million in milestone payments, plus sales royalties, in the event that regulatory and commercial milestones under the in-license agreements are achieved.

Off-Balance Sheet Arrangements

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

As of June 30, 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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There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Management Estimates,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We hold certain financial instruments for which a change in prevailing interest rates may cause the principal amount of the marketable securities to fluctuate.

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments.

We invest our excess cash primarily in money market funds, corporate debt securities, U.S.

Treasury securities, commercial paper, non-U.S.

government debt securities, supranational debt securities and U.S.

Agency bonds.

The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk.

Additionally, we established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

For our short-term investments, we do not believe that an increase or decrease in market rates would have a significant impact on the realized values or the unaudited condensed statements of operations and comprehensive loss.

We believe that should a 10.0% change in interest rates were to have occurred on June 30, 2021, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

Any changes would only be realized if we sold the investments prior to maturity.

Inflation Risk

Inflation generally affects us by increasing our clinical trial costs.

We do not believe that inflation has had a material effect on our business, financial condition or results of operations during any periods presented herein .

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