What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-13 compared with 2020-08-10 · 156 added, 94 removed, 218 unchanged (53% of the section changed)

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We have developed a robust pipeline of first-in-class and only-in-class clinical assets with an initial focus on neurodevelopmental disorders and developmental and epileptic encephalopathies, or DEE.

The following table sets forth the status and mechanism of action of our product candidates and key milestones expected within the next 12 months:

The following table sets forth the status and mechanism of action of our product candidates:

Our most advanced candidate is OV101 (gaboxadol).

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As previously announced, the STARS clinical trial achieved its primary endpoint of safety and tolerability and showed a statistically significant improvement in the once-daily OV101 dosing group on the pre-specified physician-rated Clinical Global Impressions-Improvement (“CGI-I”) exploratory endpoint as well as improvements in relevant symptoms such as sleep, motor function and behavior.

Following the STARS study we conducted a post hoc analysis of the STARS data which demonstrated that the study subjects in the once-daily dosing group of OV101 showed (i)

improvements on the CGI-I scale increasing over time for the once-daily dosing group versus placebo, and (ii) improvements on the CGI-I scale being mor e robust in younger patients for the once-daily dosing group.

Following the STARS study we conducted a post hoc analysis of the STARS data which demonstrated that the study subjects in the once-daily dosing group of OV101 showed (i) improvements on the CGI-I scale increasing over time for the once-daily dosing group versus placebo, and (ii) improvements on the CGI-I scale being more robust in younger patients for the once-daily dosing group.

Following discussion of the STARS clinical trial with the U.S.

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In March 2019, we announced that the first patient had been randomized in NEPTUNE.

Due to mandated closures of clinical sites in the U.S., Europe, Israel and Australia in response to the ongoing COVID-19 pandemic, we have experienced delays in the enrollment of the Phase 3 NEPTUNE trial.

Due to mandated closures of clinical sites in the U.S., Europe, Israel and Australia in response to the ongoing COVID-19 pandemic, we had experienced delays in the enrollment of the Phase 3 NEPTUNE trial.

In addition, after scientific advice from the European Committee for Medicinal Products for Human Use (CHMP), we have decided to expand the NEPTUNE trial sample size from 60 to 90 participants.

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These topline results support the continued development of OV101 for the treatment of Fragile X syndrome.

The SKYROCKET trial was a non-interventional study evaluating the appropriateness of multiple scales used in Fragile X syndrome and was conducted in parallel to the ROCKET study.

The study enrolled 13 males ages 8 to 29 years (mean age 17 years) with a confirmed diagnosis of Fragile X syndrome.

The primary objective was to evaluate the suitability and reliability of different scales for the assessment of behavior, sleep, and functioning and also to determine which tools would be the most appropriate for future interventional clinical efficacy trials of individuals with Fragile X syndrome .

The participating clinicians and caregivers were aware that the trial was non-interventional.

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In addition, we are in a license and collaboration with Takeda Pharmaceutical Company Limited (“Takeda”) to jointly develop and commercialize TAK-935, which we have licensed from Takeda and refer to as OV935 (soticlestat).

We are initially studying OV935 for those suffering from severe and often intractable forms of DEE, including Dravet syndrome, Lennox-Gastaut syndrome (“LGS”) and CDKL5 Deficiency Disorder and Duplication 15q, or Dup15q, syndrome.

We are initially studying OV935 for those suffering from severe and often intractable forms of DEE, including Dravet syndrome (“DS”), Lennox-Gastaut syndrome (“LGS”) and CDKL5 Deficiency Disorder, or CDD, and Duplication 15q, or Dup15q, syndrome.

Each of these disorders either has limited or no therapeutic options.

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Following this trial, we reported the initial data from the ENDYMION Phase 2 open-label extension study of OV935 in six study subjects who previously completed our 12-week Phase 1b/2a clinical trial of OV935 in adults with DEE.

The longer-term data from ENDYMION out to 48 weeks suggest increased seizure reduction with prolonged treatment of OV935 and is consistent with the

believed mechanism of action of OV935.

The longer-term data from ENDYMION out to 48 weeks suggest increased seizure reduction with prolonged treatment of OV935 and is consistent with the believed mechanism of action of OV935.

Median seizure frequency reductions were 84% following 25 to 36 weeks (n=6) and 90% following 37 to 48 weeks (n=4) of treatment.

In general, a greater reduction in seizure frequency was observed in those with higher baseline seizure frequency.

OV935 is currently in multiple Phase 2 clinical trials.

The FDA has granted orphan drug designation for OV935 for the treatment of Dravet syndrome and LGS.

Ovid and Takeda have two additional clinical trials:

a Phase 2 clinical trial in pediatric patients with Dravet syndrome or LGS (ELEKTRA) and a Phase 2 clinical trial in pediatric patients with CDKL5 deficiency disorder or Dup15q syndrome (ARCADE), both of which have completed enrollment.

Further, all study subjects who have completed the ARCADE and ELEKTRA trials have the opportunity to enroll in the ENDYMION trial.

As of June 30, 2020, all patients who have completed the Phase 2 ARCADE and ELEKTRA trials have rolled over into the ENDYMION open-label extension study.

We plan to report data from ENDYMION in the third quarter of 2020.

In March 2020, we announced initial data from its ongoing exploratory Phase 2 open-label ARCADE study of OV935 in patients with CDKL5 deficiency disorder and Dup15q syndrome.

The results from the first 11 patients demonstrated that OV935 was well-tolerated and showed a reduction in seizure frequency compared to baseline levels in a majority of the individual patients.

Full results from the Phase 2 ARCADE trial are expected in the third quarter of 2020.

Additionally, Takeda elected to initiate a placebo-controlled trial of TAK-935 to treat study subjects with chronic complex regional pain syndrome, or CRPS.

The FDA has granted orphan drug designation for OV935 for the treatment of DS and LGS.

We and Takeda have completed two additional clinical trials:

ELEKTRA and ARCADE.

ELEKTRA was an international, multi-center, randomized, double-blind, placebo-controlled study designed to evaluate treatment with soticlestat in pediatric patients, aged 2 to 17 years, with highly refractory epileptic seizures associated with DS (convulsive seizures) or LGS (drop seizures).

The study consisted of a four- to six-week screening period to establish baseline seizure frequency, followed by a 20-week double-blind treatment period, including an 8-week dose optimization period and a 12-week maintenance period.

During the 8-week dose optimization period, patients were titrated from 100mg twice daily (BID), to 200mg BID to 300mg BID (mg/kg dosing for <60 kg) of orally administered soticlestat.

A total of 141 patients were enrolled in ELEKTRA and 126 completed the study.

A modified intent-to-treat, or mITT, analysis of 139 patients was performed to evaluate the efficacy endpoints, which includes any patient who enrolled in the study and received at least one dose of study drug.

Patients in the study were allowed to be on one to four concomitant anti-epileptic drugs, or AEDs, with the majority of patients concomitantly treated with at least three AEDs.

The most common AEDs taken by the patients were valproate, clobazam, levetiracetam and topiramate.

Further, all patients who completed ELEKTRA enrolled in the ENDYMION open-label extension study.

On August 25, 2020, we and Takeda announced positive topline results from ELEKTRA and updated findings from ENDYMION.

The ELEKTRA study achieved its primary endpoint with high statistical significance, demonstrating a 27.8% median reduction from baseline in convulsive seizure (DS) and drop seizure (LGS) frequency compared to a 3.1% median increase in patients taking placebo during the 12-week maintenance period (median placebo-adjusted reduction=30.5%;

p=0.0007, based on the efficacy analysis set of 120 patients with seizure data in the maintenance period).

In addition, DS and LGS patients treated with soticlestat demonstrated a 29.8% median reduction in convulsive seizure (DS) and drop seizure (LGS) frequency compared to 0.0% change in median seizure frequency in patients taking placebo during the full 20-week treatment period (titration plus maintenance) of the ELEKTRA study (placebo-adjusted reduction=25.1%;

Soticlestat was generally well-tolerated in the ELEKTRA study and demonstrated a safety profile consistent with those of previous studies, with no new safety signals identified.

All patients who completed the ELEKTRA study elected to enroll into the ENDYMION open-label extension study and findings from ENDYMION were also reported on August 25, 2020.

All patients who completed the ELEKTRA trial elected to roll over into the ENDYMION open-label extension study, and data were supportive of results in the core study.

The data indicate maintenance of effect over six months in those patients originally randomized to soticlestat, and similarly reduced seizure frequency as compared to baseline in those patients previously assigned to the placebo arm.

No new safety signals were identified in ENDYMION.

ARCADE is a Phase 2 open-label, signal-finding pilot study designed to inform the potential for future development of soticlestat in CDD and Dup15q syndrome.

The study enrolled 20 patients, ages 2 to 55 years, wit h refractory epileptic seizures associated with CDD (n=12) or Dup15q (n=8) and consisted of a four- to six-week screening period to establish baseline seizure frequency, followed by a 20-week treatment period, including an eight-week titration/dose optimiz ation period and a 12-week maintenance period.

Patients in the study were allowed to be on one to six concomitant anti-epileptic drugs (AEDs), with the majority of patients concomitantly treated with at least four AEDs, representing a highly refractory pat ient population.

The primary objective of the ARCADE study was to determine percent change from baseline in motor seizure frequency during the 12-week maintenance period.

Further, all patients who completed ARCADE enrolled in the ENDYMION open-label exten sion study.

On September 30, 2020, we announced results from ARCADE and updated findings from ENDYMION.

Together, data from the ARCADE and ENDYMION studies showed seizure frequency reduction over time.

In CDD patients (n=12), median motor seizure frequency reduction was 24% during the 12-week maintenance period in the ARCADE study, increasing to a 50% reduction in the ENDYMION long-term extension study in the five CDD patients who reached nine months of continuous treatment.

In Dup15q patients (n=8), there was an increase in median motor seizure frequency in the ARCADE study during the 12-week maintenance period;

however, longer-term data from the four Dup15q patients who reached nine months of continuous treatment showed a 74% reduction in median motor seizure frequency.

Soticlestat was generally well tolerated in both studies and continues to demonstrate a favorable safety profile.

Additionally, Takeda elected to initiate a placebo-controlled trial of TAK-935 to treat study subjects with chronic complex regional pain syndrome (“CRPS”).

This trial will look at the efficacy, safety and tolerability of TAK-935 as an adjunctive therapy in participants with CRPS.

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We also have early research programs exploring OV329 in infantile spasm/rare epilepsies and OV881 as a potential microRNA gene therapy for the treatment of Angelman syndrome.

Since our inception in April 2014, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team, acquiring operating assets and raising capital.

We have not generated any revenue and have funded our business primarily through the sale of our capital stock.

Through June 30, 2020, we have raised net proceeds of $228.6 million from the sale of common stock and convertible preferred stock.

As of June 30, 2020, we had $41.3 million in cash and cash equivalents.

We recorded net losses of $42.6 million and $26.9 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we had an accumulated deficit of approximately $255.7 million.

We have generated limited revenue through our Collaboration and License Agreement, or the Angelini License Agreement, with Angelini Pharma Rare Diseases AG, or Angelini, and have funded our business primarily through the sale of our capital stock.

Through September 30, 2020, we have raised net proceeds of $275.4 million from the sale of common stock and convertible preferred stock.

As of September 30, 2020, we had $86.9 million in cash and cash equivalents.

We recorded net losses of $59.0 million and $43.5 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of approximately $272.2 million.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

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continue the ongoing and planned preclinical and clinical development of our drug candidates;

build a portfolio of drug candidates through the acquisition or in-license of drugs, drug candidates or technologies;

build a portfolio of drug candidates through the development, acquisition or in-license of drugs, drug candidates or technologies;

initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future;

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Collaboration and License Agreement with Angelini Pharma Rare Diseases AG

On July 9, 2020, we entered into a Collaboration and License Agreement, or the Angelini License Agreement, with Angelini Pharma Rare Diseases AG, or Angelini, pursuant to which we granted to Angelini exclusive rights to develop and commercialize OV101 in the European Economic Area as well as Switzerland, the United Kingdom, Russia and Turkey, or the European Territory.

On July 9, 2020, we entered into the Angelini License Agreement with Angelini, pursuant to which we granted to Angelini exclusive rights to develop and commercialize OV101 in the European Economic Area as well as Switzerland, the United Kingdom, Russia and Turkey, or the European Territory.

The licenses granted to Angelini include sublicenses under our existing license agreement with H.

Lundbeck A/S, or

Lundbeck, as well as licenses under o ur patents and know-how covering OV101.

Lundbeck A/S, or Lundbeck, as well as licenses under our patents and know-how covering OV101.

Angelini will be responsible for conducting any clinical trials necessary to obtain regulatory approval for OV101 for Angelman syndrome in the European Territory, and we will be responsible for bearing a portion of the costs for such trials.

We will also be responsible, at our expense, for the completion of certain ongoing clinical trials for OV101, to the extent applicable to obtaining regulatory approval for OV101 in the European Territory.

Angelini has the exclu sive right, at its election, to develop and commercialize OV101 for the treatment of Fragile X Syndrome in the European Territory.

We and Angelini may also mutually agree to pursue additional indications for OV101 in the European Territory, and in such ca se, Angelini would have the exclusive rights to commercialize in such additional indications.

Angelini has the exclusive right, at its election, to develop and commercialize OV101 for the treatment of Fragile X Syndrome in the European Territory.

We and Angelini may also mutually agree to pursue additional indications for OV101 in the European Territory, and in such case, Angelini would have the exclusive rights to commercialize in such additional indications.

Angelini is required to use commercially reasonable efforts to conduct development activities for OV101, and following regulatory approval, to commercialize OV101 in each approved indication.

In conjunction with the entry into the Angelini License Agreement, We and Angelini entered into a separate supply agreement, pursuant to which we will be responsible for supply of OV101 to Angelini for development and commercialization in the European Territory, through our existing supply relationship with Lundbeck.

The Angelini License Agreement also provides for a transfer, at Angelini’s expense, of the relevant manufacturing technology from us and Lundbeck to Angelini, in order to enable Angelini to assume responsibility for its own manufacture and supply of OV101 in the future.

Under the Angelini License Agreement, Angelini made an upfront payment to us of $20.0 million.

In conjunction with the entry into the Angelini License Agreement, We and Angelini entered into a separate supply agreement, pursuant to which we will be responsible for supply of OV101 to Angelini for development and commercialization in the European Territo ry, through our existing supply relationship with Lundbeck.

The Angelini License Agreement also provides for a transfer, at Angelini’s expense, of the relevant manufacturing technology from us and Lundbeck to Angelini, in order to enable Angelini to assum e responsibility for its own manufacture and supply of OV101 in the future.

Under the Angelini License Agreement, Angelini made an upfront payment to us of $20.0 million during the three months ended September 30, 2020.

In addition, Angelini will be required to make milestone payments to us upon the completion of the specified components of the technology transfer, and achievement of specified regulatory milestones for OV101 in Angelman syndrome of up to $60.0 million in the aggregate, as well as up to $162.5 million in sales milestone payments for achievement of specified levels of net sales in the European Territory.

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Our current plans to return to the office remain fluid as federal, state and local guidelines, rules and regulations continue to evolve .

We have seen limited impact on our fully enrolled Phase 2 ELEKTRA trial in Dravet syndrome and Lennox-Gastaut syndrome and remain on track to announce data in the third quarter of 2020.

We also continue to expect to report topline data from the pivotal Phase 3 NEPTUNE trial in the fourth quarter of 2020.

Financial Operations Overview

We have not generated any revenue from commercial drug sales and do not expect to generate any revenue unless or until we obtain regulatory approval of and commercialize one or more of our current or future drug candidates.

In the future, we may also seek

to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments including under the Angelini License Agreement.

We have generated limited revenue under the Angelini License Agreement and expect to recognize additional revenue as we satisfy our performance obligations .

We have not generated any revenue from commercial drug sales and do not expect to generate any further revenue unless or until we obtain regulatory approval of and commercialize one or more of our current or future drug candidates.

In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments including under the Angelini License Agreement.

Research and Development Expenses

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General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation expense, related to our executive, finance, business development and support functions.

Other general and

administrative expenses include costs associated with operating as a public company described below, travel expenses, conferences, professional fees for auditing, tax and legal services and facility-related costs.

Other general and administrative expenses include costs associated with operating as a public company described below, travel expenses, conferences, professional fees for auditing, tax and legal services and facility-related costs.

We expect that general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents maintained in money market funds and short-term investments that were maintained in U.S.

Other (Expense) Income, net

Other income consists of interest income earned on our cash and cash equivalents maintained in money market funds and short-term investments that were maintained in U.S.

treasury notes.

Other expense consists primarily of foreign exchange losses incurred in the ordinary course of business.

Results of Operations

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

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

The following table summarizes the results of our operations for the periods indicated:

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Three Months Ended

September 30,

(in thousands)

License revenue

Operating expenses:

Research and development

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Loss from operations

Interest income

Other (expense) income, net

Total revenue was $6.9 million for the three months ended September 30, 2020.

We did not generate any revenue during the three months ended September 30, 2019.

The increase in total revenue was due to $6.9 million of revenue recorded in connection with the Angelini License Agreement.

Research and Development Expenses

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Three Months Ended

September 30,

(in thousands)

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Total research and development

Research and development expenses were $16.0 million for the three months ended June 30, 2020 compared to $9.1 million for the three months ended June 30, 2019.

Research and development expenses were $15.9 million for the three months ended September 30, 2020 compared to $11.6 million for the three months ended September 30, 2019.

The increase of $4.3 million included an increase in preclinical and development expenses and payroll and payroll-related expenses for the clinical studies of OV101 and our Takeda collaboration expenses related to OV935.

During the three months ended June 30, 2020, total research and development expenses consisted of $11.5 million in preclinical and development expenses, including a credit of $0.8 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $3.7 million in payroll and payroll-related expenses, of which $0.5 million related to stock-based compensation, and $0.9 million in other expenses .

During the three months ended June 30, 2019, total research and development expenses consisted of $5.7 million in preclinical and development expenses, including a credit of $1.6 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $2.4 million in payroll and payroll-related expenses, of which $0.5 million related to stock-based compensation, and $0.9 million in other expenses.

During the three months ended September 30, 2020, total research and development expenses consisted of $10.7 million in preclinical and development expenses, including a credit of $0.2 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $4.1 million in payroll and payroll-related expenses, of which $1.1 million related to stock-based compensation, and $1.1 million in other expenses .

During the three months ended September 30, 2019, total research and development expenses consisted of $7.9 million in preclinical and development expenses, including a credit of $0.7 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $2.8 million in payroll and payroll-related expenses, of which $0.5 million related to stock-based compensation, and $0.9 million in other expenses.

General and Administrative Expenses

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Three Months Ended

September 30,

(in thousands)

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Total general and administrative

General and administrative expenses were $7.1 million for the three months ended June 30, 2020 compared to $4.2 million for the three months ended June 30, 2019.

The increase of $2.9 million was primarily due to an increase in legal fees, compliance and pre-commercialization expenses and professional fees of $2.0 million, an increase in payroll and payroll-related expenses $0.7 million, and an increase in general office expenses of $0.2 million.

Interest Income

Interest income was $0.6 million for the three months ended June 30, 2020 and $0.3 million for the three months ended June 30, 2019.

Comparison of the Six Months Ended June 30, 2020 and 2019

General and administrative expenses were $ 7.4 million for the three months ended September 30, 2020 compared to $ 5.2 million for the three months ended September 30, 2019.

The increase of $ 2.3 million was primarily due to an increase in legal fees , complian ce and pre-commercializ ation expenses and professional fees of $ 1.

1 millio n and an increase in payroll and payroll-related expenses of $ 1.3 million offset by a decrease in general office expe nses of $0.

Other (Expense) Income, net

Other expense was $0.02 million for the three months ended September 30, 2020.

Other income was $0.1 million for the three months ended September 30, 2019.

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

The following table summarizes the results of our operations for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

License revenue

Operating Expenses:

Research and development

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Loss from operations

Interest income

Other income, net

Total revenue was $6.9 million for the nine months ended September 30, 2020.

We did not generate any revenue during the nine months ended September 30, 2019.

The increase in total revenue was due to $6.9 million of revenue related to the Angelini License Agreement.

Research and Development Expenses

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Total research and development

Research and development expenses were $30.7 million for the six months ended June 30, 2020 compared to $18.5 million for the six months ended June 30, 2019.

Research and development expenses were $46.5 million for the nine months ended September 30, 2020 compared to $30.1 million for the nine months ended September 30, 2019.

The increase of $ 16.5 million included an increase in preclinical and development expenses and payroll and payroll-related expenses for the clinical studies of OV101 and our Takeda collaboration expenses related to OV935.

During the six months ended June 30, 2020, total research and development expenses consisted of $21.2 million in preclinical and development expenses, including a credit of $1.1 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $7.6 million in payroll and payroll-related expenses, of which $1.1 million related to stock-based compensation, and $1.8 million in other expenses .

During the six months ended June 30, 2019, total research and development expenses consisted of $10.7 million in preclinical and development expenses, including a credit of $2.9 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $5.8 million in payroll and payroll-related expenses, of which $1.3 million related to stock-based compensation, and $2.0 million in other expenses.

During the nine months ended September 30, 2020, total research and development expenses consisted of $32.0 million in preclinical and development expenses, including a credit of $1.3 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $11.7 million in payroll and payroll-related expenses, of which $2.2 million related to stock-based compensation, and $2.9 million in other expenses .

During the nine months ended September 30, 2019, total research and development expenses consisted of $18.6 million in preclinical and development expenses, including a credit of $3.6 million representing costs to be reimbursed to us from Takeda in respect of the Takeda collaboration, $8.6 million in payroll and payroll-related expenses, of which $1.9 million related to stock-based compensation, and $2.8 million in other expenses.

General and Administrative Expenses

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Total general and administrative

General and administrative expenses were $12.8 million for the six months ended June 30, 2020 compared to $8.9 million for the six months ended June 30, 2019.

General and administrative expenses were $20.2 million for the nine months ended September 30, 2020 compared to $14.1 million for the nine months ended September 30, 2019.

The increase of $6.1 million was primarily due to an increase in legal fees, compliance and pre-commercialization expenses and professional fees of $4.0 million, an increase in general office expenses of $0.4 million, and an increase in payroll and payroll-related expenses of $1.8 million.

Interest Income

Interest income was $0.9 million for the six months ended June 30, 2020 and $0.5 million for the six months ended June 30, 2019.

Other Income, net

Other income included interest income of $0.8 million for the nine months ended September 30, 2020 and $0.7 million for the nine months ended September 30, 2019.

Liquidity and Capital Resources

As of June 30, 2020, we had total cash and cash equivalents of $41.3 million as compared to $76.7 million of cash, cash equivalents and short-term investments as of December 31, 2019.

The $35.4 million decrease in total cash, cash equivalents and short-term investments was due primarily to the net loss of $42.6 million for the six months ended June 30, 2020.

As of September 30, 2020, we had total cash and cash equivalents of $86.9 million as compared to $76.7 million of cash, cash equivalents and short-term investments as of December 31, 2019.

The $10.2 million increase in total cash, cash equivalents and short-term investments was due primarily to proceeds of $46.7 million from the August 2020 Offering (as defined below) offset by the net loss of $59.0 million for the nine months ended September 30, 2020.

In August 2020, we sold 6,250,000 shares of our common stock at a public offering price of $8.00 per share, for net proceeds of $46.7 million, after deducting underwriting discounts and commissions and other offering expenses payable by us, or the August 2020 Offering.

On July 9, 2020, we entered into the Angelini License Agreement with Angelini, pursuant to which we granted to Angelini exclusive rights to develop and commercialize OV101 in the European Territory.

Under the Angelini License Agreement, Angelini made an upfront payment to the Company of $20.0 million.

Under the Angelini License Agreement, Angelini made an upfront payment to the Company of $20.0 million during the three months ended September 30, 2020.

Angelini also will be required to pay tiered royalties on net sales by Angelini, its affiliates or sublicensees at double-digit percentages above the teens, subject to certain standard reductions and offsets.

Similar to other development stage biotechnology companies, we have not generated any revenue since inception.

Similar to other development stage biotechnology companies, we have generated limited revenue, which has been through the Angelini License Agreement.

We have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the next several years.

We incurred net losses of approximately $42.6 million and $26.9 million for the six months ended June 30, 2020 and 2019, respectively.

We incurred net losses of approximately $59.0 million and $43.5 million for the nine months ended September 30, 2020 and 2019, respectively.

These losses are expected to continue for an extended period of time.

As of June 30, 2020, we had an accumulated deficit of approximately $255.7 million and working capital of $29.5 million.

As of September 30, 2020, we had an accumulated deficit of approximately $272.2 million and working capital of $72.4 million.

Management has identified certain conditions or events, which, considered in the aggregate, could raise substantial doubt about our ability to continue as a going concern including the risk that we will be unable to raise adequate additional capital to fund its operations through at least the next 12 months from the date of filing of the this Quarterly Report on Form 10-Q.

Management believes it has a number of mitigating actions it can pursue, including (i) implementing cost cutting measures;

(ii) managing our capital expenditures;

and (iii) additional cash received from collaboration and license agreements, in order to generate additional liquidity.

Management believes it can pursue implementing various cost cutting measures in order to generate additional liquidity.

The Company’s management believes that these actions alleviate the substantial doubt referred to above and therefore have concluded that the Company remains a going concern.

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We plan to finance our cash needs through either equity offerings, debt financings, collaborations, strategic alliances, or licensing agreements or a combination of any such transactions.

To the extent that we raise additional capital through future equity

offerings or debt financings, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.

Debt and equ ity financings, 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.

To the extent that we raise additional capital through future equity offerings or debt financings, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.

Debt and equity financings, 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.

There can be no assurance that such financings will be obtained on terms acceptable to us, if at all.

The ongoing COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets.

If the disruption persists and deepens, we c ould experience an inability to access additional capital, which could in the future negatively affect our operations.

If we raise additional funds through collaborations, strategic alliances or licensing agreements with third parties for one or more of ou r current or future drug candidates, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us.

Our failure to raise capi tal as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.

If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

If we raise additional funds through collaborations, strategic

alliances or licensing agreements with third parties for one or more of our current or future drug candidates, we may be required to relinquish valuable righ ts to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us.

Our failure to raise capital as and when needed would have a material adverse effect on our financial condit ion and our ability to pursue our business strategy.

The following table summarizes our cash flows for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

3 unchanged sentences

Financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Net Cash Used in Operating Activities

Net cash used in operating activities was $35.6 million for the six months ended June 30, 2020, which consisted of net losses of $42.6 million offset by a net of $7.0 million of non-cash charges and indirect cash changes, primarily related to the $2.9 million of stock-based compensation expense.

Net cash used in operating activities was $24.7 million for the six months ended June 30, 2019, which consisted of net losses of $26.9 million offset by $2.1 million of non-cash charges and indirect cash changes, primarily related to $2.9 million of stock-based compensation expense .

Net cash used in operating activities was $37.1 million for the nine months ended September 30, 2020, which consisted of a net loss of $59.0 million offset by a net of $22.0 million of non-cash charges and indirect cash changes, primarily related to $5.5 million of stock-based compensation expense and $13.1 million of deferred revenue.

Net cash used in operating activities was $34.2 million for the nine months ended September 30, 2019, which consisted of a net loss of $43.5 million offset by a net of $9.3 million of non-cash charges and indirect cash changes, primarily related to $4.1 million of stock-based compensation expense.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $34.8 million for the six months ended June 30, 2020, compared to $5.0 million of net cash provided by investing activities for the six months ended June 30, 2019.

The change in net cash provided by investing activities was primarily due to the maturities of short-term investments during the six months ended June 30, 2020 compared to maturities during the six months ended June 30, 2019.

Net cash provided by investing activities was $34.7 million for the nine months ended September 30, 2020, compared to $5.0 million of net cash provided by investing activities for the nine months ended September 30, 2019.

The change in net cash provided by investing activities was primarily due to the higher maturities of short-term investments during the nine months ended September 30, 2020 compared to maturities during the nine months ended September 30, 2019.

Net Cash Provided by Financing Activities

Net cash provided by financing activities of $0.2 million for the six months ended June 30, 2020 was primarily due to purchases of shares under the 2017 employee stock purchase plan and proceeds from the exercise of stock options, offset by expenses related to our ATM program .

Net cash provided by financing activities of $30.6 million for the six months ended June 30, 2019 was primarily due to the net proceeds from the February 2019 Offering.

Net cash provided by financing activities of $47.3 million for the nine months ended September 30, 2020 was primarily due to proceeds from August 2020 Offering.

Net cash provided by financing activities of $30.7 million for the nine months ended September 30, 2019 was primarily due to net proceeds from our public offering in February 2019.

Contractual Obligations and Commitments

As of June 30, 2020, we had no material contractual obligations or commitments.

As of September 30, 2020, we agreed to continue certain studies that were ongoing at the time of signing the Angelini License Agreement.

We had no other material contractual obligations or commitments.

We had no long-term debt or capital leases and no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis.

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

During the six months ended June 30, 2020, there were no material changes to our critical accounting policies as reported for the year ended December 31, 2019 as part of our Annual Report on Form 10-K, which was filed with the SEC on March 11, 2020.

In addition, see Note 2 of our Condensed Consolidated Financial Statements under the heading “Recent Accounting Pronouncements” for new accounting pronouncements or changes to the accounting pronouncements during the six months ended June 30, 2020.

During the nine months ended September 30, 2020, we recognized license revenue resulting in a change to our critical accounting policies as reported for the year ended December 31, 2019 as part of our Annual Report on Form 10-K, which was filed with the SEC on March 11, 2020.

We recognize license revenue under certain of our sublicense agreements that are within the scope of ASC 606.

The terms of these agreements may contain multiple performance obligations, which may include licenses and research and development activities.

We evaluate these agreements under ASC 606 to determine the distinct performance obligations.

Non-refundable, up-front fees that are not contingent on any future performance and require no consequential continuing involvement by us, are recognized as revenue when the license term commences and the licensed data, technology or product is delivered.

We defer recognition of non-refundable upfront license fees if the performance obligations are not satisfied.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint.

Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved.

Variable consideration may include upfront license fees, payments for research and development activities, reimbursement of certain third-party costs, payments based upon the achievement of specified milestones, and royalty payments based on product sales derived from collaboration.

If there are multiple distinct performance obligations, we allocate the transaction price to each distinct performance obligation based on its relative standalone selling price.

The transaction price was allocated based on the standalone selling price of the license and ongoing trials .

The portion of the upfront payment allocated to License Revenue was recognized in full as it was non-refundable and not contingent on any future performance and require no consequential continuing involvement by the Company.

Revenue related to ongoing trials is recognized by measuring the progress toward complete satisfaction of the performance obligations over time based on the portion of estimated total trial costs to be incurred.

Milestone payments are considered contingent variable consideration which are not accounted for until the contingency is met.

Quantitative and Qualitat ive Disclosures About Market Risk.

The primary objectives of our investment activities are to ensure liquidity and to preserve capital.

As of September 30, 2020, we had cash and cash equivalents of $86.9 million that were held in an interest-bearing money market account.

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.

interest rates.

Due to the short-term maturities of our cash equivalents and short-term investments and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments.

To minimize the risk in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in institutional market funds that are comprised of U.S.

Treasury and U.S.

Treasury-backed repurchase agreements as well as treasury notes and high quality short-term corporate bonds.

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