What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 85 added, 120 removed, 139 unchanged (60% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q,

and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K.

The consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in our Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

As disclosed in this report, our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause

or contribute to such differences include, but are not limited to, those discussed in the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections contained in this Form 10-Q

and our Annual Report on Form 10-K

for the year ended December 31, 2021.

As disclosed in this report under “Cautionary Note Regarding Forward-Looking Statements,” our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the quarter ended March 31, 2022.

Our operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period.

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We are a clinical-stage biopharmaceutical company pursuing novel therapeutics for nonalcoholic steatohepatitis (NASH), a liver disease with high unmet medical need.

Our lead product candidate, resmetirom, is a proprietary, liver-directed, selective thyroid hormone receptor-ß, or THR-ß,

agonist being developed as a once-daily oral pill that can potentially be used to treat NASH and a number of disease states with high unmet medical need.

Our lead product candidate, resmetirom, is a proprietary, liver-directed, selective thyroid hormone receptor-ß, or THR-ß, agonist being developed as a once-daily oral pill that can potentially be used to treat NASH and a number of disease states with high unmet medical need.

Our Patient Market Opportunity.

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For NASH, we enrolled 125 patients in a Phase 2 clinical trial with resmetirom.

We achieved the 12-week

primary endpoint for this Phase 2 clinical trial and reported the results in December 2017, and we reported positive topline 36-week

results at the conclusion of the Phase 2 clinical trial in May 2018.

We also completed a 36-week,

open-label extension study in 31 participating NASH patients from our Phase 2 clinical trial, which included 14 patients who received placebo in the main study.

On December 18, 2019 the Company announced it had opened for enrollment MAESTRO-NAFLD-1,

non-invasive,

multi-center, double-blind, placebo-controlled Phase 3 clinical study of patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S.

We achieved the 12-week primary endpoint for this Phase 2 clinical trial and reported the results in December 2017, and we reported positive topline 36-week results at the conclusion of the Phase 2 clinical trial in May 2018.

We also completed a 36-week, open-label extension study in 31 participating NASH patients from our Phase 2 clinical trial, which included 14 patients who received placebo in the main study.

On December 18, 2019 the Company announced it had opened for enrollment MAESTRO-NAFLD-1, a 52-week, non-invasive, multi-center, double-blind, placebo-controlled Phase 3 clinical study of patients with biopsy-confirmed or presumed NASH recruited from sites in the U.S.

Key endpoints are safety, including safety biomarkers.

Secondary endpoints include LDL cholesterol, lipid biomarkers, MRI-PDFF,

NASH and fibrosis biomarkers.

Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study (discussed below

under “—Our Ongoing and Planned Studies”), with resmetirom doses of 80 mg or 100 mg or placebo.

Secondary endpoints include LDL cholesterol, lipid biomarkers, MRI-PDFF, NASH and fibrosis biomarkers.

Except for serial liver biopsies, the study protocol is similar to the MAESTRO-NASH study (discussed below under “—Our Ongoing and Planned Studies”), with resmetirom doses of 80 mg or 100 mg or placebo.

Enrollment objectives for this study were exceeded, with approximately 1,300 patients enrolled overall.

The MAESTRO-NAFLD-1

study will help support the adequacy of the safety database at the time of NDA submission for Subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis.

In November of 2021, we reported data from the open label non-cirrhotic

arm of MAESTRO-NAFLD-1,

and in January 2022 we announced that we achieved primary and secondary endpoints for the double-blind portion of MAESTRO-NAFLD-1.

Further MAESTRO-NAFLD-1

data were presented at a hepatology medical congress in June of 2022.

MAESTRO-NAFLD-1

has completed the double-blind arms and an open-label 100 mg arm.

The MAESTRO-NAFLD-1 study will help support the adequacy of the safety database at the time of NDA submission for Subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis.

In November of 2021, we reported data from the open label non-cirrhotic arm of MAESTRO-NAFLD-1, and in January 2022 we announced that we achieved primary and secondary endpoints for the double-blind portion of MAESTRO-NAFLD-1.

Further MAESTRO-NAFLD-1 data were presented at a hepatology medical congress in June of 2022.

MAESTRO-NAFLD-1 has completed the double-blind arms and an open-label 100 mg arm.

An additional open-label active treatment arm in patients with early (well-compensated) NASH cirrhosis is ongoing.

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Patients with liver biopsy confirmed NASH with stage 2 or 3 fibrosis are being randomized 1:1:1 to receive a single oral daily dose of placebo, resmetirom 80 mg or resmetirom 100 mg.

A second liver biopsy at week 52 in the first 900 patients will be the basis of filing for accelerated approval under subpart H of applicable FDA regulations, which we refer to as subpart H-accelerated

Historically:

the primary endpoint pertained to the percent of patients treated with either dose of resmetirom as compared with placebo who achieve NASH resolution on the week 52 liver biopsy, defined as the absence of hepatocyte ballooning (score=0), and minimal lobular inflammation (score 0-1),

associated with at least a 2-point

reduction in NAS (NAFLD Activity Score), and no worsening of fibrosis stage;

and two key secondary endpoints pertained to reduction in LDL-cholesterol

and a 1-point

or more improvement in fibrosis stage on the week

52 biopsy with no worsening of NASH.

In May 2022, the Company announced that it determined to move the 1-point

fibrosis endpoint up the hierarchy in our MAESTRO-NASH trial to a primary endpoint along with NASH resolution, as dual primary endpoints.

The dual primary endpoint design allows for a successful outcome of the study, which can be filed for subpart H approval, if either the NASH resolution or 1-point

fibrosis reduction endpoint is met.

and two key secondary endpoints pertained to reduction in LDL-cholesterol and a 1-point or more improvement in fibrosis stage on the week 52 biopsy with no worsening of NASH.

In May 2022, the Company announced that it determined to move the 1-point fibrosis endpoint up the hierarchy in our MAESTRO-NASH trial to a primary endpoint along with NASH resolution, as dual primary endpoints.

The dual primary endpoint design allows for a successful outcome of the study, which can be filed for subpart H approval, if either the NASH resolution or 1-point fibrosis reduction endpoint is met.

Patients will continue in the study for a total of approximately 54 months, and will be evaluated for a composite clinical outcome including cirrhosis on liver biopsy, or a liver related event such as hepatic decompensation.

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On June 30, 2021 we announced our achievement of the requisite enrollment of patients to support the planned Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) submission to the US Food and Drug Administration (FDA).

On July 13, 2021 we announced first patient dosed in a planned 52-week

open label active treatment extension study of MAESTRO-NAFLD-1,

named MAESTRO-NAFLD-Open Label Extension (OLE).

The OLE study allows patients who complete MAESTRO-NAFLD-1

to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned to placebo in MAESTRO-NAFLD-1

and patients who were on resmetirom in MAESTRO-NAFLD-1.

On July 13, 2021 we announced first patient dosed in a planned 52-week open label active treatment extension study of MAESTRO-NAFLD-1, named MAESTRO-NAFLD-Open Label Extension (OLE).

The OLE study allows patients who complete MAESTRO-NAFLD-1 to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned to placebo in MAESTRO-NAFLD-1 and patients who were on resmetirom in MAESTRO-NAFLD-1.

Key Developments

Additional Phase 3 MAESTRO-NAFLD-1

In January 2022, we announced that certain primary and key secondary endpoints from the double-blind, placebo-controlled, 969-patient

MAESTRO-NAFLD-1

safety study were achieved;

resmetirom was well-tolerated and provided significant reductions in liver fat, LDL-c

and other atherogenic lipids vs.

In May 2022 and June 2022, we announced additional data and results from the MAESTRO-NAFLD-1

safety study, as described below.

Additional Phase 3 MAESTRO-NAFLD-1 Data

In January 2022, we announced that certain primary and key secondary endpoints from the double-blind, placebo-controlled, 969-patient MAESTRO-NAFLD-1 safety study were achieved;

resmetirom was well-tolerated and provided significant reductions in liver fat, LDL-c and other atherogenic lipids vs.

In May 2022 and June 2022, we announced additional data and results from the MAESTRO-NAFLD-1 safety study, as described below.

Patients in the resmetirom 80 mg and 100 mg double-blind arms achieved reductions in ALT (p=0.002;

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Withdrawals due to adverse events were 2.4% in the 80 mg group, 2.8% in the 100 mg group and 1.3% in the placebo group.

adverse events (diarrhea, nausea) were increased relative to placebo at the initiation of therapy but not after the first few weeks.

GI-related adverse events (diarrhea, nausea) were increased relative to placebo at the initiation of therapy but not after the first few weeks.

FibroScan CAP (controlled attenuation parameter) scores reflective of hepatic fat were statistically significantly (p<0.0001) reduced in resmetirom arms as compared with placebo.

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MAESTRO-NASH Outcomes Study

We plan to initiate a second NASH outcomes study, MAESTRO-NASH Outcomes, a randomized double-blind placebo-controlled study in approximately 700 patients with early NASH cirrhosis to allow for non-invasive

monitoring of progression to liver decompensation events.

In August 2022, we initiated a second NASH outcomes study, MAESTRO-NASH Outcomes, a randomized double-blind placebo-controlled study in approximately 700 patients with early NASH cirrhosis to allow for non-invasive monitoring of progression to liver decompensation events.

Several biomarker and imaging techniques will also be employed to assess correlates with disease progression.

Ongoing open-label studies of more than 180 patients with well-compensated NASH cirrhosis (MAESTRO-NAFLD-1

open-label arm) support the potential of resmetirom in this patient population.

We expect that a positive outcome in MAESTRO-NASH Outcomes could support the full approval of resmetirom for noncirrhotic NASH, and could potentially accelerate the timeline to full approval.

Ongoing open-label studies of more than 180 patients with well-compensated NASH cirrhosis (MAESTRO-NAFLD-1 open-label arm) support the potential of resmetirom in this patient population.

We expect that a positive outcome in MAESTRO-NASH Outcomes could support the full approval of resmetirom for non-cirrhotic NASH, and could potentially accelerate the timeline to full approval.

In addition, this study has the potential to broaden the label for resmetirom to include NASH patients with compensated cirrhosis.

Loan Facility to support expansion of clinical development program and ramp-up

for potential resmetirom launch

Loan Facility to support expansion of clinical development program and ramp-up for potential resmetirom launch

We secured a $250 million Loan Facility (“Loan Facility”) with Hercules Capital, Inc (“Hercules”) in May 2022.

The committed capital strengthens our balance sheet, providing an additional source of funding both to support the expanded clinical program and ramp-up

for a potential launch of resmetirom in the U.S.

Under the terms of the loan agreement, $50 million was drawn at closing.

We may also draw up to an additional $125 million in two separate tranches upon achievement of resmetirom clinical and regulatory milestones.

The committed capital strengthens our balance sheet, providing an additional source of funding both to support the expanded clinical program and ramp-up for a potential launch of resmetirom in the U.S.

Under the terms of the Loan Facility, $50 million was drawn at closing.

We may also draw up to an additional $125 million in two separate tranches upon achievement of resmetirom clinical and regulatory milestones and conditions.

An additional $75 million may be drawn by us, subject to the approval of Hercules.

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The loan matures in May 2026 and may be extended an additional year upon the achievement of certain clinical and regulatory milestones.

Additional details of the Loan Facility were filed with the Securities and Exchange Commission (“SEC”) on a Current Report on Form 8-K

on May 9, 2022 and the Loan and Security Agreement associated with the Loan Facility is included as an exhibit to this Quarterly Report on Form 10-Q.

Basis of Presentation

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, additional drug manufacturing requirements, and later stage toxicology studies such as carcinogenicity studies.

Our research and development expenses have increased period over period in each of 2022 and 2021 and we expect that our research and development expenses will increase in the future, including as a result of our planned MAESTRO-NASH Outcomes study discussed in –“Key Developments” above.

Our research and development expenses have increased period over period in each of 2022 and 2021 and we expect that our research and development expenses will increase in the future, including as a result of our MAESTRO-NASH Outcomes study discussed in –“Key Developments” above.

The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming.

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As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with the development of our product candidates at this point in time.

We expect that we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of research, results of ongoing and future clinical trials, potential collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

We expect that we will make

determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of research, results of ongoing and future clinical trials, potential collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

General and Administrative Expenses

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

There have been no material changes in our critical accounting policies and significant judgments and estimates during the six months ended June 30, 2022, as compared to those disclosed in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2021 filed with the SEC on February 25, 2022.

There have been no material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2022, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 25, 2022.

Results of Operations

Three months Ended June 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the three months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Three months Ended September 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the three months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Increase / (Decrease)

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Interest Expense

We had no revenue for the three months ended June 30, 2022 and 2021.

We had no revenue for the three months ended September 30, 2022 and 2021.

Research and Development Expenses

Our research and development expenses were $58.5 million for the three months ended June 30, 2022, compared to $51.6 million in the corresponding period in 2021.

Our research and development expenses were $68.3 million for the three months ended September 30, 2022, compared to $54.9 million in the corresponding period in 2021.

Research and development expenses increased by $13.4 million in the 2022 period due primarily to the additional activities related to our Phase 3 clinical trials, an increase in head count, and an increase in stock compensation expense.

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General and Administrative Expenses

Our general and administrative expenses were $11.8 million for the three months ended June 30, 2022, compared to $10.1 million in the corresponding period in 2021.

Our general and administrative expenses were $12.1 million for the three months ended September 30, 2022, compared to $8.3 million in the corresponding period in 2021.

General and administrative expenses increased by $3.9 million in the 2022 period due primarily to increases in commercial preparation activities, including a corresponding increase in head count, and an increase in stock compensation expense.

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Interest Income

Our net interest income was $0.3 million for the three months ended June 30, 2022, compared to $0.1 million in the corresponding period in 2021.

Our net interest income was $0.7 million for the three months ended September 30, 2022, compared to $0.1 million in the corresponding period in 2021.

The increase in interest income was due primarily to higher interest rates in 2022.

Interest Expense

Our interest expense was $0.8 million for the three months ended June 30, 2022, compared to $0 million in the corresponding period in 2021.

Our interest expense was $1.5 million for the three months ended September 30, 2022, compared to $0 million in the corresponding period in 2021.

The increase in interest expense was as a result of the Loan Facility we entered into with Hercules during the second quarter of 2022.

Six months Ended June 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended June 30,

Nine months Ended September 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended September 30,

Increase / (Decrease)

Research and Development Expenses

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Other (income)

We had no revenue for the six months ended June 30, 2022 and 2021.

We had no revenue for the nine months ended September 30, 2022 and 2021.

Research and Development Expenses

Our research and development expenses were $106.4 million for the six months ended June 30, 2022, compared to $97.4 million in the corresponding period in 2021.

Our research and development expenses were $174.7 million for the nine months ended September 30, 2022, compared to $152.3 million in the corresponding period in 2021.

Research and development expenses increased by $22.4 million in the 2022 period due primarily to the additional activities related to our Phase 3 clinical trials, an increase in head count, and an increase in stock compensation expense.

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General and Administrative Expenses

Our general and administrative expenses were $21.4 million for the six months ended June 30, 2022, compared to $17.3 million in the corresponding period in 2021.

Our general and administrative expenses were $33.6 million for the nine months ended September 30, 2022, compared to $25.6 million in the corresponding period in 2021.

General and administrative expenses increased by $8.0 million in the 2022 period due primarily to increases in commercial preparation activities, including a corresponding increase in head count, and an increase in stock compensation expense.

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Interest Income

Our net interest income was $0.4 million for the six months ended June 30, 2022, compared to $0.3 million in the corresponding period in 2021.

Our net interest income was $1.1 million for the nine months ended September 30, 2022, compared to $0.3 million in the corresponding period in 2021.

The increase in interest income was due primarily to higher interest rates in 2022.

Interest Expense

Our interest expense was $0.8 million for the six months ended June 30, 2022, compared to $0 million in the corresponding period in 2021.

Our interest expense was $2.3 million for the nine months ended September 30, 2022, compared to $0 million in the corresponding period in 2021.

The increase in interest expense was as a result of the Loan Facility we entered into with Hercules during the second quarter of 2022.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of debt, the issuance of shares of our common stock and shares of our preferred stock, and the proceeds from our 2016 merger transaction.

Since inception, we have incurred significant net losses and we have funded our operations primarily through the issuance of capital stock and also from Loan Facility and the proceeds from our 2016 merger transaction.

Our most significant use of capital pertains to salaries and benefits for our employees, including clinical, scientific, operational, financial and management personnel, and external research and development expenses, such as clinical trials and preclinical activity related to our product candidates.

We also are required to make repayments of interest and principal on our Loan Facility with Hercules, as described below.

As of June 30, 2022, we had cash, cash equivalents and marketable securities totaling $211.8 million compared to $270.3 million as of December 31, 2021, with the decrease attributable to the funding of operations, partially offset by $50.0 million drawn at closing in May 2022 from the Loan Facility with Hercules.

As of September 30, 2022, we had cash, cash equivalents and marketable securities totaling $153.2 million compared to $270.3 million as of December 31, 2021, with this decrease attributable to the funding of operations, partially offset by $50.0 million drawn at closing in May 2022 from the Loan Facility with Hercules.

Our cash and investment balances are held in a variety of interest-bearing instruments, including obligations of U.S.

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Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.

The Company believes that its cash, cash equivalents, marketable securities at June 30, 2022 will be sufficient to fund operations over the next twelve months.

We anticipate continuing to incur operating losses for the foreseeable future.

While our rate of cash usage will likely increase in the future, in particular to support our product development and clinical trial efforts, we believe our available cash resources as of June 30, 2022 will be sufficient to fund our operations past one year from the issuance of the financial statements contained herein, and this outlook takes into account circumstances that are currently reasonably foreseeable in connection with the COVID-19

For a description of COVID-19

pandemic risks, including risks and uncertainties beyond our control, see Part I, Item 1A, “Risk Factors” of our Annual Report for the year ended December 31, 2021.

Subject to the considerations noted below, our rate of cash usage will likely increase in the future, in particular to support our product development and pre-commercialization efforts.

Our future long-term liquidity requirements will be substantial and will depend on many factors.

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We regularly consider fundraising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation.

This includes, but is not limited to, the use of a $200 million at-the-market

sales agreement entered into in June of 2021, with Cowen and Company, LLC (the “2021 Sales Agreement”), pursuant to which we may, from time to time, issue and sell shares of our common stock up to established limits.

We may also draw on additional tranches of debt under our $250 million Loan Facility with Hercules based upon achievement of resmetirom clinical and regulatory milestones.

Additional capital may not be available on terms acceptable to us, or at all.

We also have the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to develop our product candidates would be harmed.

Furthermore, any sales of additional equity securities may result in dilution to our stockholders, and any additional debt financing may include covenants that restrict our business.

This includes, but is not limited to, the use of a $200 million at-the-market sales agreement entered into in June of 2021, with Cowen and Company, LLC (the “2021 Sales Agreement”), pursuant to which we may, from time to time, issue and sell shares of our common stock up to established limits.

We may also draw on additional tranches of debt under our $250 million Loan Facility with Hercules based upon achievement of resmetirom clinical and regulatory milestones and conditions.

However, there is no assurance that additional capital and financing will be available on terms acceptable to us, or at all.

See “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2021 and in Part II, Item I.A of our quarterly report on Form 10-Q for the period ended March 31, 2022, which includes a description of the risks related to our liquidity requirements, financial position and need for capital.

In addition, if such capital or financing is available, any sales of additional equity securities may result in dilution to our stockholders, and any additional debt financing may include covenants that restrict our business.

Based upon our current operating plans, and the Company’s cash, cash equivalents and marketable securities totaling $153.2 million as of September 30, 2022, the Company expects, that such resources will not be sufficient to fund our operating expenses and capital requirements through the one year anniversary of the filing of this Quarterly Report on Form 10-Q.

These conditions raise substantial doubt about our ability to continue as a going concern under ASC 205-40.

While management currently believes this shortfall can be addressed by future financings and capital issuances, or by delaying certain clinical studies or pre-commercialization expenses if necessary, under the requirements of ASC 205-40, management may not consider in its assessment of the Company’s ability to meet its obligations for the next twelve months the potential for future capital raises through debt or equity financings, collaborations, partnerships or other strategic transactions, or management plans to reduce costs that are not considered probable under these accounting standards.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The inability of the Company to obtain sufficient funds on acceptable terms when needed:

could have a material adverse effect on the Company’s business, results of operations and financial condition;

could result in

the Company delaying, reducing or eliminating some or all of its research and development programs, clinical studies or pre-commercialization efforts;

could adversely affect the Company’s business prospects;

and could affect the Company’s ability to maintain compliance with covenants under the Loan Facility.

Although the Company has been successful in raising capital and financing in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.

Loan Facility

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Under the terms of the Loan Facility, the first $50.0 million tranche was drawn at closing.

The Company may also draw up to an additional $125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones.

The Company may also draw up to an additional $125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones and conditions.

A fourth tranche of $75.0 million may be drawn by the Company, subject to the approval of Hercules.

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The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain clinical and regulatory milestones.

As of June 30, 2022, the outstanding principal under the Loan Facility was $50.0 million.

The interest rate as of June 30, 2022 was 8.70%.

Please see “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q

for information on the Loan Facility.

As of September 30, 2022, the outstanding principal under the Loan Facility was $50.0 million.

The interest rate as of September 30, 2022 was 10.20%.

Please see “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information on the Loan Facility.

The following table provides a summary of our net cash flow activity (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Net increase (decrease) in cash and cash equivalents

Net cash used in operating activities was $107.3 million for the six months ended June 30, 2022, compared to $90.3 million for the corresponding period in 2021.

The use of cash in these periods resulted primarily from our losses from operations, as adjusted for non-cash

charges for stock-based compensation, and changes in our working capital accounts.

Net cash provided by investing activities was $75.2 million for the six months ended June 30, 2022, compared to $60.8 million used in for the corresponding period in 2021.

Net cash provided by investing activities for the six months ended June 30, 2022 consisted of $191.9 million from sales and maturities of marketable securities, partially offset by $116.5 million used in purchases of marketable securities for our investment portfolio.

Net cash used in operating activities was $166.3 million for the nine months ended September 30, 2022, compared to $135.9 million for the corresponding period in 2021.

The use of cash in these periods resulted primarily from our losses from operations, as adjusted for non-cash charges for stock-based compensation, and changes in our working capital accounts.

Net cash provided by investing activities was $140.3 million for the nine months ended September 30, 2022, compared to $20.7 million used in for the corresponding period in 2021.

Net cash provided by investing activities for the nine months ended September 30, 2022 consisted of $271.2 million from sales and maturities of marketable securities, partially offset by $130.7 million used in purchases of marketable securities for our investment portfolio.

Net cash used in for the corresponding period in 2021 consisted of $339.4 million of purchases of marketable securities for our investment portfolio, partially offset by $318.8 million from sales and maturities of marketable securities.

Net cash provided by financing activities was $49.1 million for the six months ended June 30, 2022, compared to $130.7 million for the corresponding period in 2021.

Financing activities for the six months ended June 30,2022 consisted of $50.0 million from issuance of the Loan Facility, partially offset by $0.9 million of loan issuance costs.

Net cash provided for the corresponding period in 2021 consisted of $130.2 million from net proceeds from issuances of common stock under an At The Market (ATM) sales agreement and $0.5 million from the exercise of stock options.

Net cash provided by financing activities was $49.1 million for the nine months ended September 30, 2022, compared to $151.7 million for the corresponding period in 2021.

Financing activities for the nine months ended September 30,2022 consisted of $50.0 million from issuance of the Loan Facility, partially offset by $0.9 million of loan issuance costs.

Net cash provided by for the corresponding period in 2021 consisted of $151.2 million from net proceeds from issuances of common stock under an At The Market (ATM) sales agreement and $0.5 million from the exercise of stock options.

Contractual Obligations and Commitments

no significant changes to contractual obligations and commitments occurred during the six months ended June 30, 2022, as compared to those disclosed in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2021 filed with the SEC on February 25, 2022.

Except for the future minimum payments due on the Loan Facility with Hercules set forth in “Note 6 – Long Term Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, no significant changes to contractual obligations and commitments occurred during the nine months ended September 30, 2022, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 25, 2022.

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