Mirum Pharmaceuticals, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission (“SEC”) on March 12, 2020. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “Mirum,” “we,” “us” and “our” refer to Mirum Pharmaceuticals, Inc. and its consolidated subsidiary. Forward-Looking Statements In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements . Overview We are a biopharmaceutical company focused on the development and commercialization of a late-stage pipeline of novel therapies for debilitating liver diseases. We focus on diseases for which the unmet medical need is high and the biology for treatment is clear. Our pipeline consists of two clinical-stage product candidates with mechanisms of action that have potential utility across a wide range of orphan cholestatic liver diseases. We are initially developing maralixibat for the treatment of pediatric patients with Alagille syndrome (“ALGS”), progressive familial intrahepatic cholestasis (“PFIC”) and biliary atresia (“BA”). Based on improvements in pruritus, or itching, and other outcomes and disease markers observed in Phase 2 clinical trials, we initiated a rolling submission of a New Drug Application (“NDA”), for the treatment of cholestatic pruritus associated with ALGS in the third quarter of 2020. We expect to complete the rolling submission of our NDA in the first quarter of 2021 and we are planning for a potential launch in ALGS in the second half of 2021. We are also conducting the Phase 3 MARCH clinical trial in PFIC. Further, we have conducted an initial analysis of our long-term treatment data in PFIC against a natural history control group in conjunction with the NAtural course and Prognosis of PFIC and Effect of biliary Diversion Consortium and have shared these results with regulatory authorities. Based on feedback from regulatory authorities, we are preparing to submit a marketing authorization application for the treatment of PFIC2 to the European Medicines Agency (“EMA”) in the fourth quarter of 2020. We are developing volixibat for the treatment of adult patients with cholestatic liver diseases, including primary sclerosing cholangitis (“PSC”) and intrahepatic cholestasis of pregnancy (“ICP”). We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, maralixibat and volixibat, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development and preparing for commercialization of maralixibat. We have a limited operating history and incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. We have no products approved for commercial sale and have never generated any revenues from product sales. We have funded our operations to date primarily through equity financings. On July 22, 2019 , we completed our initial public offering (“IPO”) pursuant to which we sold an aggregate of 5,000,000 shares of our common stock at a price of $15.00 per share, resulting in net proceeds of $67.2 million after deducting underwriting discounts, commissions and offering expenses payable by us. Upon the closing of our IPO, all outstanding shares of our Series A convertible preferred stock automatically converted into 14,969,118 shares of our common stock. On January 13, 2020, we completed a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a price of $20.00 per share, resulting in net proceeds of $44.7 million after deducting underwriting discounts, commissions and offering expenses payable by us. 18 On August 1 0 , 2020, we filed a registration statement on Form S-3 (“Shelf Registration”) covering the sale of up to $300.0 million in corporate securities, which Shelf Registration was declared effective on August 12, 2020 . O n Aug ust 3, 2020, we entered into a sales agreement (“Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million un der the Shelf Registration through SVB Leerink acting as the sales agent and/or principal. During the three months ended September 30, 2020, we sold 98,708 shares of common stock in an at-the-market offering pursuant to the Sales Agreement at a weighted-av erage price of $24.13 per share, resulting in gross proceeds of $2.4 million. The net proceeds after deducting sales commissions to SVB Leerink and other issuance expenses were approximately $2.2 million . The remaining capacity under the Sales Agreement is approximately $72.6 million as of September 30, 2020. Our net loss was $21.5 million and $15.1 million for the three months ended September 30, 2020 and 2019, respectively, and $66.1 million and $34.6 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $136.0 million and cash, cash equivalents and investments of $133.7 million. We expect our expenses and operating losses will increase substantially as we conduct our planned clinical trials, continue our research and development activities, continue commercial preparation activities for maralixibat, and seek regulatory approvals for our product candidates, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and non-clinical studies and our expenditures on other research and development activities. We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which could take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves. The COVID-19 pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity. We are working diligently to ensure the advancement of all of our clinical development programs in the safest manner possible. Due to health and safety concerns for healthcare personnel and patients, we have experienced impacts to the enrollment and conduct of our clinical trials, including to the Phase 3 MARCH clinical trial. Although we did not see a significant financial impact to our business operations for the nine months ended September 30, 2020, there are potential impacts to our business in the future that are highly uncertain and difficult to predict such as temporary closures of our facilities or those of our third-party manufacturers or suppliers, disruptions or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing preclinical studies, clinical trials, third-party manufacturing supply and other operations, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the U.S. Food and Drug Administration (“FDA”) or other regulatory authorities, and our ability to raise capital and conduct business development activities. Assignment and License Agreement with Shire In November 2018, we entered into an assignment and license agreement (“Shire License Agreement”) with Shire International GmbH (“Shire”), in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, maralixibat and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen Pharmaceuticals, Inc. (“Satiogen” and altogether, the “Satiogen License”), Pfizer Inc. (“Pfizer”), and Sanofi-Aventis Deutschland GmbH (“Sanofi”). In partial consideration for the rights granted to us under the Shire License Agreement, we made an upfront payment to Shire of $7.5 million and issued Shire 1,859,151 shares of our common stock with an estimated fair value of $7.0 million. 19 In January 2019, we entered into a Transition Services Agreement with Shire (“TSA”), which covered services to be provided by Shire to trans fer certain research and development activities and the related know-how from Shire to us, including continuation of work on any existing trials and manufacturing activities until fully transferred to us. We completed the activities under the TSA and final ized amounts due to Shire for services and pass-through expenses on existing trials and manufacturing activities as of June 30 , 2019. In July 2019, we achieved a development milestone under the Shire License Agreement related to the initiation of the Phase 3 MARCH clinical trial, and made a $2.5 million payment to Shire and a $0.5 million payment to Satiogen accordingly. See Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. Components of Results of Operations Operating Expenses Research and Development Expenses Research and development expenses primarily relate to non-clinical and clinical development of our product candidates. Our research and development expenses include or could include: • salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions; • external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials; • expenses related to drug formulation development and the production of non-clinical and clinical trial supplies, including fees paid to contract manufacturers; • licensing milestone payments related to development, regulatory or commercialization events; • expenses related to non-clinical studies; • expenses related to compliance with drug development regulatory requirements; and • other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies. We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Because our product candidates are still in clinical and non-clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. Due to the early stage nature of our programs, we do not track costs on a project by project basis. As our programs become more advanced, we intend to track the external and internal cost of each program. General and Administrative Expense General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We expect that our general and administrative expenses will increase in the future as we expand our operating activities, including commercial preparation activities, increase headcount, as well as incur additional costs associated with operating as a publicly traded company, such as increased personnel expenses, legal fees, accounting fees and directors’ and officers’ liability insurance premiums and maintaining compliance with exchange listing and SEC requirements. Interest Income Interest income consists of interest earned on our cash equivalents and investments. 20 Other Income (Expense), Net Other income (expense), net consists of transactional currency exchange gain or loss. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America . The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. We believe that the assumptions and estimates associated with accrued research and development expenditures and stock-based compensation have the most significant impact on our unaudited condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. There have been no significant changes during the nine months ended September 30, 2020 in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. Recent Accounting Pronouncements A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statements. Results of Operations for the Three Months Ended September 30, 2020 and 2019 The following table sets forth our results of operations for the three months ended September 30, 2020 and 2019 (in thousands): Three Months Ended September 30, 2020 2019 Change Operating expenses: Research and development $ 15,984 $ 12,159 $ 3,825 General and administrative 5,732 3,708 2,024 Total operating expenses 21,716 15,867 5,849 Loss from operations (21,716 ) (15,867 ) (5,849 ) Other income (expense): — Interest income 237 785 (548 ) Other income (expense), net (30 ) (5 ) (25 ) Net loss before provision for income taxes (21,509 ) (15,087 ) (6,422 ) Provision for income taxes (3 ) — (3 ) Net loss $ (21,506 ) $ (15,087 ) $ (6,419 ) Research and Development Expenses Research and development expenses were $16.0 million for the three months ended September 30, 2020, an increase of $3.8 million compared to the three months ended September 30, 2019. The increase was primarily due to $2.5 million of personnel and other compensation related expenses reflecting an increase in the number of our development employees to support the increase in our clinical trials and development activities, including an increase in stock-based compensation of $0.5 million, $2.0 million for manufacturing activities supporting NDA registration activities, $0.7 million of consulting expenses associated with our increased clinical, manufacturing and regulatory activities and $0.2 million related to other general expenses. These increases were partially offset by a decrease of $1.0 million for clinical trial expenses related to natural history studies associated with PFIC and a decrease of $0.6 million of non-clinical expenses due to reduced non-clinical trials needed to support our NDA submission. 21 General and Administrative Expenses General and administrative expenses were $5.7 million for the three months ended September 30, 2020, an increase of $2.0 million compared to the three months ended September 30, 2019. The increase was primarily due to $1.7 million of personnel and other compensation related expenses reflecting an increase in our number of administrative employees to support increased requirements of operating as a public company, such as regulatory requirements and compliance, and commercial preparation activities for maralixibat, including an increase in stock-based compensation of $0.8 million, and $0.3 million of professional and consulting services primarily associated with commercial preparation activities for maralixibat. Interest Income Interest income was $0.2 million for the three months ended September 30, 2020, a decrease of $0.6 million compared to the three months ended September 30, 2019. The decrease was primarily due to lower interest earned on our cash equivalents and investment balances compared to the prior year largely a result of current economic conditions, as well as lower invested cash balance compared to the prior year. Results of Operations for the Nine Months Ended September 30, 2020 and 2019 The following table sets forth our results of operations for the nine months ended September 30, 2020 and 2019 (in thousands): Nine Months Ended September 30, 2020 2019 Change Operating expenses: Research and development $ 51,879 $ 28,611 $ 23,268 General and administrative 15,466 7,474 7,992 Total operating expenses 67,345 36,085 31,260 Loss from operations (67,345 ) (36,085 ) (31,260 ) Other income (expense): — Interest income 1,391 1,485 (94 ) Other income (expense), net (109 ) (1 ) (108 ) Net loss before provision for income taxes (66,063 ) (34,601 ) (31,462 ) Provision for income taxes 4 — 4 Net loss $ (66,067 ) $ (34,601 ) $ (31,466 ) Research and Development Expenses Research and development expenses were $51.9 million for the nine months ended September 30, 2020, an increase of $23.3 million compared to the nine months ended September 30, 2019. The increase was primarily due to $11.2 million for manufacturing activities supporting clinical trial supplies and NDA registration activities, $8.0 million of personnel and other compensation related expenses reflecting an increase in our number of development employees, including an increase in stock-based compensation of $2.1 million, $5.1 million for clinical trials expenses primarily associated with the maralixibat clinical trials in PFIC and ALGS as well as advancement of our volixibat clinical trials in PSC and ICP, $2.0 million of consulting expenses associated with our clinical, manufacturing and regulatory activities, $0.2 million of non-clinical expenses, and $0.1 million related to other general expenses. These increases were partially offset by a decrease of $3.0 million associated with development milestone expenses related to the initiation of the Phase 3 MARCH clinical trial incurred during the nine months ended September 30, 2019 and $0.3 million expenses related to transition services provided by Shire in the nine months ended September 30, 2019. General and Administrative Expenses General and administrative expenses were $15.4 million for the nine months ended September 30, 2020, an increase of $8.0 million compared to the nine months ended September 30, 2019. The increase was primarily due to $5.4 million of personnel and other compensation related expenses reflecting an increase in our number of administrative employees to support increased requirements of operating as a public company and commercial preparation activities for maralixibat, including an increase in stock-based compensation of $2.9 million, $2.0 million of expenses associated with operating as a public company primarily related to increased costs of director and officer related insurance and audit and tax fees, $0.4 million of professional and consulting services expenses associated with commercial preparation activities for maralixibat, and $0.2 million related to other general expenses. 22 Interest Income Interest income was $1.4 million for the nine months ended September 30, 2020, consistent with the nine months ended September 30, 2019. Liquidity and Capital Resources Overview We had $133.7 million of cash, cash equivalents and investments as of September 30, 2020. To date, we have incurred operating losses and negative cash flows from operations. As of September 30, 2020, we had an accumulated deficit of $136.0 million. On July 22, 2019, we completed our IPO, pursuant to which we sold an aggregate of 5,000,000 shares of our common stock at a price of $15.00 per share, resulting in net proceeds of $67.2 million after deducting underwriting discounts, commissions and offering expenses payable by us. On January 13, 2020, we completed a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a price of $20.00 per share, resulting in net proceeds of $44.7 million after deducting underwriting discounts, commissions and offering expenses payable by us. On August 10, 2020, we filed the Shelf Registration covering the sale of up to $300.0 million in corporate securities, which Shelf Registration was declared effective on August 12, 2020. On August 3, 2020, we entered into the Sales Agreement with SVB Leerink, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Leerink acting as the sales agent and/or principal. During the three months ended September 30, 2020, we sold 98,708 shares of common stock in an at-the-market offering pursuant to the Sales Agreement at a weighted-average price of $24.13 per share, resulting in gross proceeds of $2.4 million. The net proceeds after deducting sales commissions to SVB Leerink and other issuance expenses were approximately $2.2 million. The remaining capacity under the Sales Agreement is approximately $72.6 million as of September 30, 2020. Based on our current and anticipated level of operations, we believe our cash, cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months. Our cash, cash equivalents and investments include money market funds, government agency securities, corporate debt and commercial paper. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity. We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercial preparation activities for maralixibat, hire additional staff, including clinical, scientific, operational, financial and management personnel, and incur additional costs associated with being a public company. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Until such time, if ever, as we can generate substantial product revenue from sales of maralixibat, volixibat or any future product candidates, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. 23 Cash Flows The following table provides a summary of the net cash flow activity for the period indicated (in thousands): Nine Months Ended September 30, 2020 2019 Net cash used in operating activities $ (52,796 ) $ (25,664 ) Net cash provided by (used in) investing activities 42,820 (122,637 ) Net cash provided by financing activities 46,780 127,177 Effect of exchange rate on cash and cash equivalents 4 (25 ) Net increase (decrease) in cash and cash equivalents $ 36,808 $ (21,149 ) Net Cash Used in Operating Activities Net cash used in operating activities was $52.8 million for the nine months ended September 30, 2020, reflecting our net loss of $66.1 million partially offset by non-cash items of $9.5 million. Non-cash items consisted primarily of $9.0 million of stock-based compensation and $0.5 million of depreciation and amortization of our fixed assets and our operating lease right-of use assets. Additionally, cash used in operating activities reflected changes in net operating assets of $3.8 million, consisting primarily of a $5.7 million increase in accounts payable, accrued expenses and other liabilities due to clinical and manufacturing activities, offset by a $1.7 million increase to prepaid expenses primarily associated with clinical and manufacturing activities, a $0.2 million decrease in our operating lease liability, and a $0.1 million decrease in our right-of-use asset due to a change in the lease term. Net cash used in operating activities was $25.7 million for the nine months ended September 30, 2019, reflecting our net loss of $34.6 million partially offset by non-cash items of $4.0 million. Non-cash items consisted primarily of $4.0 million in stock-based compensation, $0.2 million in depreciation and amortization of our operating lease right-of-use assets and fixed assets and $0.2 million of premium amortization on our investments. Additionally, cash used in operating activities reflected changes in net operating assets of $4.9 million, consisting of an $8.1 million increase in accounts payable, accrued expenses and other liabilities primarily due to clinical and manufacturing activities, a $3.0 million increase in prepaid expenses and other current assets consisting primarily of $1.8 million in prepayments for directors and officers insurance, $0.5 million in interest receivable and $0.7 million in prepaid research and development expenses representing increased operating activities over 2018, and a $0.1 million increase in other assets. Net Cash Provided by (Used in) Investing Activities Net cash provided by investing activities was $42.8 million for the nine months ended September 30, 2020 primarily due to proceeds of $71.4 million from maturities of investments and proceeds of $23.6 million from paydowns of investments, partially offset by $52.0 million used in purchases of investments and $0.2 million used for purchases of property and equipment. Net cash used in investing activities was $122.6 million for the nine months ended September 30, 2019 primarily due to purchases of investments offset by maturities of investments. Net Cash Provided by Financing Activities Net cash provided by financing activities was $46.8 million for the nine months ended September 30, 2020, due to net proceeds of $44.7 million received from the completion of a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a price of $20.00 per share, net proceeds of $2.2 million from the sale of common stock under the Sales Agreement with SVB Leerink, pursuant to which we sold an aggregate of 98,708 shares of common stock at a weighted-average price of $24.13 per share, and proceeds of $0.1 million from the employee equity award exercises. These proceeds were offset by a use of cash for payment of deferred offering costs associated with the Shelf Registration of $0.2 million and are reflected as deferred offering costs on our balance sheet until such time as we complete sales of shares under the Shelf Registration. Net cash provided by financing activities was $127.2 million for the nine months ended September 30, 2019, primarily due to $67.2 million in net proceeds received from our IPO and $60.0 million in net proceeds from the issuance of 59,844,699 shares of Series A preferred stock. Contractual Obligations and Commitments There have been no material changes in the amount of our contractual obligations and commitments during the nine months ended September 30, 2020 from those disclosed in our Annual Report. 24 From time to time , we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims, including the Shire License Agreement, and certain real estate leases, supply purchase agreements, and agreements with directors and officers. The terms of such obligations vary by contract and in most instances a maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a spec ific claim is asserted, thus no liabilities have been recorded for these obligations on our consolidated balance sheet for the periods presented. We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, preclinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts. Contractual Arrangements Under the Shire License Agreement, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. In July 2019, we achieved the first development milestone under the Shire License Agreement and Satiogen License and made an aggregate payment of $3.0 million. As for the remaining milestones, as of September 30, 2020, we were unable to estimate the timing or likelihood of achieving future milestones or making future product sales and, therefore, any related payments are not included herein. For additional information regarding these license agreements, including our payment obligations thereunder, see Note 6 to our consolidated financial statements included elsewhere in this Quarterly Report. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. JOBS Act As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). We will remain an emerging growth company until the earliest of (i) December 31, 2024, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.