What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-05 compared with 2022-11-08 · 101 added, 134 removed, 106 unchanged (69% of the section changed)

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

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2022.

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (“SEC”) on March 13, 2023.

In addition to historical financial information, the following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those described in or implied by these forward-looking statements because of many factors, including those set forth under the section titled “Risk Factors” in Part II, Item 1A.

Such factors may be amplified by the ongoing COVID-19 pandemic and its potential impact on our business and the global economy.

We are a biopharmaceutical company focused on drug discovery and development for epilepsies and rare CNS disorders in a manner that is scientifically driven, patient focused and is coupled with an integrated and disciplined approach to research, clinical development and business development.

Our team has significant experience and understanding of rare epilepsy and neurological conditions, and we continue to build insight into the way the different molecular mechanisms and pathways underlying these disorders impact the symptoms patients suffer.

Ovid has set out to be a leader in the field, and has developed a differentiated pipeline containing novel mechanisms of action to target different causes of epilepsies and seizures.

Our knowledge of epilepsy disease biology and pathology, which was acquired through our small molecule development programs, now contributes to our pursuit of additional relevant genetic targets and molecular pathways that are the cause of seizures.

Our actual results and the timing of selected events may differ materially from those described in or implied by these forward-looking statements as a result of many factors, including those set forth under the section titled “Risk Factors” in Part II, Item 1A.

You should carefully read the “Risk Factors” section of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

We are a biopharmaceutical company committed to developing medicines that transform the lives of people with epilepsies and seizure-related disorders in a manner that is scientifically driven, patient focused and is coupled with an integrated and disciplined approach to research, clinical development and business development.

Our team has significant experience and understanding of rare epilepsies and seizure-related neurological conditions, and we continue to build insight into the way the different molecular mechanisms and pathways underlying these disorders impact the symptoms patients suffer.

We have set out to be a leader in the field, and have developed a differentiated pipeline containing three novel mechanisms of action to target different causes of epilepsies and seizures.

Over time, we have built a scalable scientific platform and efficient development capabilities in epilepsies that focus on clear, clinical endpoints.

We are initially pursuing therapeutic assets for rare disorders as they can leverage accelerated development programs.

If successfully developed and marketed in rare conditions, we intend to explore these assets for broader neurologic indications.

Our cohesive focus in epilepsies and seizures reinforces our belief that we can develop and produce multiple novel medicines, scale our infrastructure, and thereby succeed in our mission.

If successfully developed and marketed in rare conditions, we intend to explore these assets for broader neurologic indications, as applicable.

Our cohesive focus in rare epilepsies and seizures reinforces our belief that we can develop and produce multiple novel medicines, scale our infrastructure, and thereby succeed in our mission.

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.

The following chart sets forth the status and mechanism of action of our drug candidates:

In July 2022, Takeda provided a corporate update in which it reiterated that the anticipated timeline for regulatory filing of the two pivotal Phase 3 trials evaluating soticlestat for Lennox-Gastaut and Dravet syndromes are expected in Takeda’s 2024 fiscal year.

In October 2022, the FDA cleared our IND for OV329, Ovid's GABA-aminotransferase inhibitor.

We intend to initiate a Phase 1 study in healthy volunteers during the fourth quarter of 2022.

We have historically funded our business primarily through the sale of capital stock.

Through September 30, 2022, we have raised net proceeds of $275.4 million from the sale of our convertible preferred stock and our common stock.

As of September 30, 2022, we had $137.9 million in cash, cash equivalents and marketable securities.

We have also, in previous periods, generated revenue through our license and collaboration agreements.

As of September 30, 2022, we had an accumulated deficit of $214.0 million.

We have historically funded our business primarily through the sale of our capital stock.

Through March 31, 2023, we have raised net proceeds of $275.4 million from the sale of our convertible preferred stock and our common stock.

We have also, in previous periods, generated revenue through license and collaboration agreements.

As of March 31, 2023, we had $117.7 million in cash, cash equivalents and marketable securities.

As of March 31, 2023, we had an accumulated deficit of $238.9 million.

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

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• implement operational, financial and management systems;

and attract, hire and retain additional administrative, clinical, regulatory, manufacturing, commercial and scientific personnel.

COVID-19 and Other Updates

We have implemented business continuity plans designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business.

We continue to operate normally with the exception of enabling all of our employees to work in a hybrid environment, productively at home or in the office.

Additionally, the recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows.

• attract, hire and retain additional administrative, clinical, regulatory, manufacturing, commercial and scientific personnel.

The following chart sets forth the status and mechanism of action of our drug candidates:

In the first quarter of 2023, Takeda provided a corporate update in which it reiterated that the anticipated timeline for regulatory filing of the two pivotal Phase 3 trials evaluating soticlestat for Lennox-Gastaut and Dravet syndromes are expected in Takeda’s 2024 fiscal year.

In the fourth quarter of 2022, the FDA cleared our investigational new drug application (“IND”) for OV329, a GABA-aminotransferase inhibitor, and we subsequently initiated a Phase 1 trial in healthy volunteers.

Significant Risks and Uncertainties

The global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with bank failures, public health crises and the ongoing war between Russia and Ukraine may have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The resulting high inflation rates may materially affect our business and corresponding financial position and cash flows.

Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results.

Rising interest and inflation rates also present a recent challenge impacting the U.S.

Rising interest rates also present a recent challenge impacting the U.S.

economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, and employee availability and wage increases, which may result in additional stress on the Company’s working capital resources.

Furthermore, economic conditions have produced downward pressure on share prices.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, the global geopolitical tension as a result of the ongoing war between Russia and Ukraine, worsening global macroeconomic conditions and employee availability and wage increases, which may result in additional stress on our working capital resources.

In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with:

identifying, acquiring or in-licensing products or product candidates;

obtaining regulatory approval of product candidates;

pharmaceutical product development and the inherent uncertainty of clinical success;

and the challenges of protecting and enhancing our intellectual property rights;

complying with applicable regulatory requirements.

Financial Operations Overview

We have generated revenue under various license and collaboration agreements.

We have generated revenue under various licensing and collaboration agreements.

We have not generated any revenue from commercial drug sales and we do not expect to generate any further revenue unless or until we obtain regulatory approval 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.

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.

Research and Development Expenses

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• costs associated with technology and intellectual property licenses;

• milestone payments and other costs under licensing agreements;

• milestone payments and other costs and payments under licensing agreements, research agreements and collaboration agreements;

• depreciation expense for assets used in research and development activities.

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Research and development activities are and will continue to be central to our business model.

We expect our research and development expenses to increase over the next several years as we advance our current and future drug candidates through preclinical studies and clinical trials.

The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is

costly and time-consuming.

We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials.

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

It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct.

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General and Administrative Expenses

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, and professional fees for auditing, tax and legal services.

Other (Expense) Income, Net

Other (expense) income primarily consists of unrealized gains (losses) on long-term equity investments and interest income earned on our cash and cash equivalents maintained in money market funds and marketable securities.

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

Other Income (Expense), net

Other income (expense), net primarily consists of unrealized gains (losses) on long-term equity investments and interest income and accretion of discount on investments in marketable securities.

Reclassifications

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Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

Comparison of the Three Months Ended March 31, 2023 and 2022

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

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Change

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Change $

(in thousands)

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Loss from operations (14,892) (16,267) 1,375

Other income, net 836 3 833

Other income (expense), net 1,536 159 1,377

Loss before provision for income taxes (13,356) (16,109) 2,753

(Benefit) provision for income taxes — (295) 295

Provision for income taxes — — —

Net loss $ (13,356) $ (16,109) $ 2,753

Nominal revenue was generated in the three months ended September 30, 2022, and no revenue was generated in the same period in 2021.

Royalty revenue of $66,160 was generated in the three months ended March 31, 2023, compared to revenue of $1.4 million that was recognized in the same period in 2022 relating to licensing agreements.

Research and Development Expenses

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Change

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Change $

(in thousands)

Preclinical and development expense $ 2,164 $ 1,418 $ 746

Preclinical and development expenses $ 2,983 $ 2,120 $ 863

Payroll and payroll-related expenses 2,854 4,936 (2,082)

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Total research and development $ 6,615 $ 7,832 $ (1,217)

During the three months ended September 30, 2022, total research and development expenses were $5.2 million compared to $4.9 million for the same period in 2021.

During the three months ended March 31, 2023, total research and development expenses were $6.6 million compared to $7.8 million for the same period in 2022.

The decrease of $1.2 million was primarily comprised of $2.0 million reduction in payroll and related expenses following an organizational restructuring in 2022, partially offset by a $0.6 million increase in preclinical and development expenses relating to the OV329 phase 1 clinical trial.

General and Administrative Expenses

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Change

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Change $

(in thousands)

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Total general and administrative $ 8,344 $ 9,880 $ (1,536)

General and administrative expenses were $7.6 million for the three months ended September 30, 2022 compared to $6.8 million for the same period in 2021.

The difference of $0.9 million was primarily due to increased stock compensation and bonus expense incurred.

Provision (Benefit) for Income Taxes

There was no tax provision recorded for the three months ended September 30, 2022.

The tax benefit recorded for the three months ended September 30, 2021 was $0.3 million, which related to truing up the provision resulting from licensing revenue recognized in the first quarter of 2021.

Other Income, net

Other income, net for the three months ended September 30, 2022 includes unrealized gain (loss) on long-term equity investments and interest earned on marketable securities, and included interest income and other nominal items for the three months ended September 30, 2021.

Comparison of the Nine Months Ended September 30, 2022 and 2021

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

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Change

(in thousands)

License and other revenue $ 1,456 $ 12,383 $ (10,926)

License revenue - related party — 196,000 (196,000)

Total revenue 1,456 208,383 (206,926)

Operating expenses:

Research and development 19,062 28,850 (9,788)

General and administrative 25,770 28,970 (3,201)

Total operating expenses 44,832 57,820 (12,988)

(Loss) income from operations (43,375) 150,563 (193,938)

Other (expense) income, net 711 (50) 761

(Loss) income before provision for income taxes (42,664) 150,513 (193,177)

General and administrative expenses were $8.3 million for the three months ended March 31, 2023 compared to $9.9 million for the same period in 2022.

The decrease of $1.5 million is primarily due to a reduction in legal and consulting fees and a decrease in general office expenses.

Provision for Income Taxes

Net (loss) income $ (42,664) $ 148,835 $ (191,499)

Total revenue was $1.5 million during the nine months ended September 30, 2022, recorded in connection with the Marinus and Healx License Agreements.

Total revenue was $208.4 million for the nine months ended September 30, 2021, recorded in connection with the Takeda and Angelini License Agreements

Research and Development Expenses

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Change

(in thousands)

Preclinical and development expense $ 6,947 $ 15,559 $ (8,612)

Payroll and payroll-related expenses 9,473 10,574 (1,101)

Other expenses 2,642 2,717 (75)

Total research and development $ 19,062 $ 28,850 $ (9,788)

During the nine months ended September 30, 2022, total research and development expenses were $19.1 million compared to $28.9 million for the same period in 2021.

The decrease of $9.8 million was primarily due to the decision to discontinue the clinical study of OV101 in Angelman syndrome and Fragile X syndrome and the termination of the Takeda collaboration agreement for OV935.

General and Administrative Expenses

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Change

(in thousands)

Payroll and payroll-related expenses $ 12,511 $ 10,647 $ 1,864

Legal and professional fees 7,478 13,862 (6,384)

General office expenses 5,780 4,461 1,319

Total general and administrative $ 25,770 $ 28,970 $ (3,201)

General and administrative expenses were $25.8 million for the nine months ended September 30, 2022 compared to $29.0 million for the same period in 2021.

The decrease of $3.2 million was due to reduced legal and professional fees relating to various agreements and potential business development activity in the prior period, offset by increase in stock-compensation, bonus and other payroll as well as increase in rent and other office expenses associated with the new headquarters space.

Provision (Benefit) for Income Taxes

There was no tax provision recorded for the nine months ended September 30, 2022.

The tax provision recorded for the nine months ended September 30, 2021 was $1.7 million, which related to licensing revenue recognized in the first quarter of 2021.

Other (Expense) Income, net

Other (expense) income, net for the nine months ended September 30, 2022 includes unrealized gain (loss) on long-term equity investments and interest earned on marketable securities, and included interest income and other nominal items for the nine months ended September 30, 2021.

There was no tax benefit or expense recorded for the three months ended March 31, 2023 and 2022.

Other Income (Expense), net

Other income (expense), net for the three months ended March 31, 2023 includes unrealized gain (loss) on long-term equity investments and interest earned on marketable securities, and included interest income and other nominal items for the three months ended March 31, 2022.

Liquidity and Capital Resources

As of September 30, 2022, we had total cash, cash equivalents and marketable securities of $137.9 million as compared to $187.8 million as of December 31, 2021.

The $49.9 million decrease was due to payments relating to licensing and other agreements and long-term equity investments of $8.5 million, and operating expenses totaling $44.8 million for the nine months ended September 30, 2022.

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

With the exception of the three months ended March 31, 2021, when we received the one-time upfront payment of $196.0 million as part of the Takeda License and Termination Agreement, we have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for the next several years.

We recorded net losses of approximately $12.0 million and $11.4 million for the three months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had an accumulated deficit of $214.0 million and working capital of $133.8 million.

As of March 31, 2023, we had total cash, cash equivalents and marketable securities of $117.7 million as compared to $129.0 million as of December 31, 2022.

We believe that our cash, cash equivalents and marketable securities as of March 31, 2023 will fund our projected operating expenses and capital expenditure requirements for at least 12 months from the issuance of this Quarterly Report on Form 10-Q.

Similar to other development-stage biotechnology companies, we have generated limited revenue, which has been through various license and collaboration agreements.

With the exception of the three months ended March 31, 2021, when we received a one-time upfront payment of $196.0 million as part of the RLT Agreement, we have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses and experience negative operating cash flows for at least the next several years.

We recorded net losses of approximately $13.4 million and $16.1 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $238.9 million and working capital of $112.8 million.

Future Funding Requirements

We believe that our cash, cash equivalents and marketable securities as of September 30, 2022 are sufficient to fund existing and planned cash requirements through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

We believe that our available cash, and cash equivalents and marketable securities are sufficient to fund existing and planned cash requirements for at least the next 12 months.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs.

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We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability.

As of September 30, 2022, we had no long-term debt and no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancellable, purchase order basis.

We cannot estimate whether we will receive or the timing of any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed certain intellectual property as contractual obligations or commitments, including agreements with AstraZeneca AB, H.

Lundbeck A/S, and Northwestern.

As of March 31, 2023, we had no long-term debt and no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancellable, purchase order basis.

We cannot estimate whether we will receive or the timing of any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable.

In addition, we cannot estimate the timing of any potential royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed certain intellectual property as contractual obligations or commitments, including agreements with AstraZeneca and Northwestern.

Pursuant to these license agreements, we have agreed to make milestone payments up to an aggregate of $279.3 million upon the achievement of certain development, regulatory and sales milestones.

These potential contingent payments have not been recognized in these financial statements, given that the timing, probability, and amount, if any, of such payments cannot be reasonably estimated at this time.

In September 2021, we entered into a 10-year lease agreement for our corporate headquarters with a term commencing March 10, 2022, for approximately 19,143 square feet of office space at Hudson Commons in New York, NY.

We excluded these contingent payments from the condensed consolidated financial statements, given that the timing, probability, and amount, if any, of such payments cannot be reasonably estimated at this time.

In September 2021, we entered into a 10-year lease agreement for our corporate headquarters with a term commencing March 10, 2022, for approximately 19,000 square feet of office space at Hudson Commons in New York, New York.

The lease provides for monthly rental payments over the lease term.

The base rent under the lease is currently $2.3 million per year.

Rent payments commence 10

months following the commencement date of the lease, or January 10, 2023, and continue for 10 years following the rent commencement date.

Rent also includes two months of free rent in the 6th and 7th months following the rent commencement date.

We issued a letter of credit in the amount of $1.9 million in association with the execution of the lease agreement, which is reflected as restricted cash on the balance sheet.

Payment obligations under the lease agreement include approximately $1.1 million in the 12 months subsequent to September 30, 2022 and approximately $23.5 million over the term of the agreement.

For additional information see Note 5 of our condensed consolidated financial statements under the heading "Leases."

We have no products approved for commercial sale and have not generated any product revenues from product sales to date.

Rent payments commenced January 10, 2023, and will continue for 10 years following the rent commencement date.

We issued a letter of credit in the amount of $1.9 million in association with the execution of the lease agreement, which is reflected as restricted cash on our condensed consolidated balance sheets.

Payment obligations under the lease agreement include approximately $1.9 million in the 12 months subsequent to March 31, 2023 and approximately $23.5 million over the term of the agreement.

For additional information see Note 5 to our condensed consolidated financial statements under the heading 'Leases.'

We have no products approved for commercial sale and have not generated any revenue from product sales to date.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings and additional funding from license and collaboration arrangements.

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

The ongoing COVID-19 pandemic (along with the effects of the war in Ukraine, inflation, rising interest rates, and other economic uncertainty have already resulted in a significant disruption of global financial markets.

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

Additionally, inflation rates have increased recently to levels not seen in decades, contributing to the ongoing economic slowdown.

Increased inflation may result in increased operating costs (including labor costs) and may affect our operating budgets.

In response to concerns about inflation, the U.S.

Federal Reserve has raised, and is expected to further raise, interest rates.

Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks.

If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our ability to pursue our business strategy.

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 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 capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.

See “Risk Factors” for additional risks associated with our capital requirements.

At-the-Market Offering Program

In November 2020, we filed a shelf registration statement on Form S-3 (Registration No.

333-250054) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities and/or warrants (the “S-3 Registration Statement”), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to an at-the-market (“ATM”) offering program.

As of September 30, 2022, we had $250.0 million available under our S-3 Registration Statement, including $75.0 million available pursuant to our ATM program.

333-250054) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities and/or warrants (“S-3 Registration Statement”), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to an at-the-market (“ATM”) offering program.

As of March 31, 2023, we had up to $250.0 million available under our S-3 Registration Statement, including up to $75.0 million available pursuant to our ATM offering program.

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

Nine Months Ended September 30,

2022 Nine Months Ended September 30,

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in thousands)

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Financing activities 67 33

Net (decrease) increase in cash and cash equivalents $ (129,541) $ 129,746

Net Cash (Used In) Provided By Operating Activities

Net cash used in operating activities was $46.1 million for the nine months ended September 30, 2022, which consisted of a net loss of $42.7 million and a decrease in accounts payable and accrued expenses of $8.1 million, partially offset by $4.8 million in stock-based compensation expense, $0.1 million, net of other noncash transactions and charges.

Net cash provided by operating activities was $130.6 million for the nine months ended September 30, 2021, which resulted from an upfront payment pursuant to the Takeda License and Termination Agreement, offset by operating expenses for the period.

Net Cash Used In Investing Activities

Net cash used in investing activities was $83.7 million for the nine months ended September 30, 2022, which was primarily due to the purchases of marketable securities during the period.

A nominal amount was used in investing activities for the nine months ended September 30, 2021.

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 18,184 $ (21,130)

Net Cash Used In Operating Activities

Net cash used in operating activities was $12.1 million for the three months ended March 31, 2023, which consisted of net loss of $13.4 million offset by a net of $1.2 million of non-cash charges and indirect cash charges,

primarily related to $1.9 million of stock-based compensation expense.

Net cash used in operating activities was $20.1 million for the three months ended March 31, 2022, which consisted of net loss of $16.1 million offset by a net of $2.8 million of non-cash charges and indirect cash changes, primarily related to $1.3 million of stock-based compensation expense, and decreases in accounts payable and accrued expenses of $4.6 million.

Net Cash Provided By (Used In) Investing Activities

Net cash provided by investing activities was $30.2 million for the three months ended March 31, 2023, which was due to sales/maturities of marketable securities during the period.

Net cash used in investing activities was $1.1 million for the three months ended March 31, 2022.

Net Cash Provided By Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2022 and 2021 was primarily due to proceeds from the exercise of options and purchases of shares under the 2017 employee stock purchase plan.

Emerging Growth Company Status and Smaller Reporting Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

We have taken advantage of reduced reporting requirements in this Quarterly Report on Form 10-Q and will continue to do so until December 31, 2022, the date on which we cease to be an emerging growth company.

In addition, we will continue to qualify as smaller reporting company as defined in the Exchange Act even after we are no longer an emerging growth company.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies, including:

• reduced disclosure about our executive compensation arrangements;

• to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years.

As of June 30, 2022, in addition to being classified as a “smaller reporting company,” we will be classified as an “accelerated filer” pursuant to SEC rules and will be required to provide, among other items, an auditor’s attestation of management’s assessment of internal control over financial reporting required under Sarbanes-Oxley Act Section 404(b) beginning with our annual report for the year ending December 31, 2022.

Net cash provided by financing activities during the three months ended March 31, 2023 and 2022 resulted from proceeds from the exercise of options under the 2017 equity incentive plan and purchases of shares under the 2017 employee stock purchase plan.

Smaller Reporting Company Status

We are a smaller reporting company as defined in the Exchange Act.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

As a smaller reporting company, we are permitted to comply with scaled-back disclosure obligations in our SEC filings compared to other issuers, including with respect to disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We have elected to adopt the accommodations available to smaller reporting companies, including but not limited to:

• reduced disclosure obligations regarding our executive compensation arrangements;

• being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure .

Critical Accounting Policies and Estimates

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

During the nine months ended September 30, 2022, there were no material changes to our critical accounting policies as reported for the year ended December 31, 2021 as part of our Annual Report on Form 10-K, which was filed with the SEC on March 15, 2022.

In addition, see Note 2 of our Condensed Financial Statements under the heading “Recent Accounting Pronouncements” for new accounting pronouncements or changes to the accounting pronouncements during the nine months ended September 30, 2022.

During the three months ended March 31, 2023, there were no material changes to our critical accounting policies as reported for the year ended December 31, 2022 as part of our Annual Report on Form 10-K, which was filed with the SEC on March 13, 2023.

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