What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-07 · 112 added, 75 removed, 252 unchanged (43% of the section changed)

27 unchanged sentences

Part 1 of the Imagine-1 Trial is a dose ranging phase of the study exploring different doses of PBGM01 across early infantile and late infantile GM1.

To date, we have completed dosing of the initial four cohorts.

We have completed dosing of the initial four cohorts.

This includes a total of eight patients, as follows:

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A key objective of the initial phase of the Imagine-1 trial is to determine the optimal dose for the confirmatory phase of the study.

Based on the favorable safety profile of PBGM01 observed to date, the observed dose-response in key biomarkers, such as CSF β-gal activity and GM1 ganglioside levels, and that our preclinical studies showed no safety signals at doses higher than currently being evaluated in the ongoing clinical trial, we have amended the protocol for Imagine-1 study to treat patients at a new higher dose of PBGM01, or dose 3.

Based on the favorable safety profile of PBGM01 observed to date, the observed dose-response in key biomarkers, such as CSF β-gal activity and GM1 ganglioside levels, and that our preclinical studies showed no safety signals at doses higher than currently being evaluated in the ongoing clinical trial, we amended the protocol for Imagine-1 study to treat patients at a new higher dose of PBGM01, or dose 3.

The Imagine-1 clinical trial protocol amendment will treat six patients at dose 3, which is two times higher than dose 2, with three late infantile GM1 gangliosidosis patients in Cohort 5 and three early infantile GM1 gangliosidosis patients in Cohort 6.

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FTD- GRN is an inheritable form of FTD in which patients have mutations in the GRN gene, causing a deficiency in PGRN.

PGRN is a complex and highly conserved protein thought to have multiple roles in cell homeostasis, neurodevelopment, and inflammation.

PGRN is a complex and highly conserved protein thought to have multiple roles in cell

homeostasis, neurodevelopment, and inflammation.

Emerging evidence suggests that PGRN deficiency in FTD and other neurodegenerative disorders may contribute to lysosomal dysfunction.

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ICM administration of AAV1 to NHPs resulted in supraphysiologic CSF levels of human PGRN compared to levels in healthy human subjects’ CSF, and in excess of levels achieved in NHPs with AAVhu68 or AAV5.

In a preclinical mouse model model of FTD, higher levels of CSF PGRN were associated with incremental improvements in some measures of downstream pathology.

In a preclinical mouse model of FTD, higher levels of CSF PGRN were associated with incremental improvements in some measures of downstream pathology.

We have an active IND from the FDA and approved CTAs in multiple countries for PBFT02, which allows us to proceed with our upliFT-D Trial, an international, multi-center, open-label, single-arm Phase 1/2 clinical trial of PBFT02 in patients with a diagnosis of early symptomatic FTD- GRN .

In August 2022, we dosed the first patient in our upliFT-D trial.

We expect to report initial safety and biomarker data from patients in Cohort 1 in the fourth quarter of 2023.

We expect to report initial safety and biomarker data from three patients in Cohort 1 in the fourth quarter of 2023.

The FDA has granted ODD and Fast Track Designation to PBFT02 for the treatment of FTD-GRN and the European Commission granted Orphan designation for PBFT02.

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When the ARSA enzyme is lacking, sulfatides accumulate in lysosomal storage deposits in microglia, oligodendrocytes, and Schwann cells, leading to widespread demyelination.

Our preclinical data in ARSA -/-

mice and in NHPs support the ability of PBML04 administration into CSF to result in dose-dependent increases in brain and CSF levels of functional human ARSA enzyme, leading to improved biochemical, histopathological, behavioral, survival endpoints, and with no safety or toxicity signs up to the highest tested dose in NHPs.

Our preclinical data in ARSA -/- mice and in NHPs support the ability of PBML04 administration into CSF to result in dose-dependent increases in brain and CSF levels of functional human ARSA enzyme, leading to improved biochemical, histopathological, behavioral, survival endpoints, and with no safety or toxicity signs up to the highest tested dose in NHPs.

Preclinical findings were presented by GTP in 2021.

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On May 20, 2022, the FDA cleared our IND application for PBML04, which supports PBML04-001, an international, multi-center, open-label, single-arm clinical trial of PBML04 in patients with a diagnosis of late onset infantile MLD.

In November 2022, we announced plans to stop further clinical development of PBML04 in order to reduce operating expenses, and are exploring strategic alternatives for this asset.

November 2022, we announced plans to stop further clinical development of PBML04 in order to reduce operating expenses, and are exploring strategic alternatives for this asset.

Research Programs

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Historically, we have funded our operations through the sale of convertible preferred stock and public offerings of common stock.

Our net losses were $23.9 million and $39.5 million for the three months ended June 30, 2023 and 2022, respectively, and $58.2 million and $82.4 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, we had an accumulated deficit of $550.6 million.

Our net losses were $27.1 million and $26.7 million for the three months ended September 30, 2023 and 2022, respectively, and $85.3 million and $109.1 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $577.7 million.

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.

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If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

In July 2023, we announced an organizational redesign intended to better align our resources with our previously announced focused research and development strategy and further extend our cash runway.

We will decrease operating

expenses through ongoing cash management initiatives and by reducing our workforce by approximately 26 percent, primarily in our CMC group.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $151.5 million.

In July 2023, we implemented an organizational restructuring to better align our resources with our previously announced focused research and development strategy and further extend our cash runway.

In connection with the organizational restructuring, we reduced our workforce by approximately 26 percent, primarily in our CMC group.

We will also have decreased operating expenses through ongoing cash management initiatives.

As of September 30, 2023, we had cash, cash equivalents and marketable securities of $132.8 million.

We expect our existing cash, cash equivalents and marketable securities, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025.

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University of Pennsylvania

We have a research, collaboration and licensing agreement, as amended, or the Penn Agreement, with Penn, for research and development collaborations and exclusive license rights to patents for certain products and technologies.

We have a research, collaboration and licensing agreement with Penn, as amended, or the Penn Agreement, for research and development collaborations and exclusive license rights to patents for certain products and technologies.

Under the Penn Agreement, we have the obligation to fund certain research relating to the preclinical development of selected products in research programs as well as exploratory research programs in non-rare and/or non-monogenic, or large CNS indications.

We also fund discovery research conducted by Penn through August 2026 and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery program for products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

Our discovery research funding commitment is $5.0 million a year for five years, with quarterly payments of $1.3 million through June 2026.

Under the Penn Agreement we have eight remaining options available to us to commence additional licensed programs for CNS indications until August 2026.

If we were to exercise any of these remaining options, we would owe Penn a non-refundable aggregate fee of $1.0 million, with $0.5 million per product indication paid immediately and another $0.5 million fee owed upon a further developmental milestone.

The Penn Agreement requires that we make payments of up to (i) $16.5 million per product candidate for rare, monogenic disorders in aggregate and (ii) $39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications.

In addition, we will fund discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery research for our products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

This funding commitment for the discovery research is $5.0 million annually, paid in quarterly increments of $1.3 million through June, 2026.

The Penn Agreement includes an exploratory research program focused on discovering targets and novel gene therapy candidates for certain large CNS indications and can be expanded to other large CNS diseases upon mutual agreement.

The initial term of the exploratory research program is until August 2024, which term can be extended by mutual agreement.

Under the exploratory research program, we will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets (and any future large CNS diseases that are mutually agreed upon) that may arise from the exploratory research programs on substantially the same terms of the current Penn Agreement.

Under the Penn Agreement, we have eight remaining options available to commence additional licensed programs for CNS indications and have until August 3, 2026, to exercise these options.

If we were to exercise any of these options, we would owe Penn a non-refundable upfront fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone.

We have the obligation to fund certain research relating to the preclinical development of each licensed program.

The Penn Agreement requires that we make payments of up to (i) $16.5 million per product candidate for rare, monogenic disorders in the aggregate and (ii) $39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications.

Each payment will be due upon the achievement of specific development milestone events by such licensed product for a first indication, reduced development milestone payments for the second and third indications and no development milestone payments for subsequent indications.

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In addition, we are obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement.

In addition, we will pay Penn a tiered transaction fee ranging from 1-2% of the net proceeds upon certain change of control events.

The Penn Agreement includes an exploratory research collaboration to identify targets and early product candidates in large CNS indications.

The exploratory research program is focused on discovering targets and novel gene therapy candidates for certain large CNS diseases and that can be expanded to other large CNS diseases upon mutual agreement.

The initial term of the exploratory research program is 3 years, or until August 2024, which term can be extended by mutual agreement.

Under the exploratory research program, we will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets (and any future large CNS indications that are mutually agreed upon) that arise from the exploratory research programs on substantially the same terms of the current Penn Agreement.

The agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the later of (i) the expiration of the last valid claim of the licensed patent rights that covers the exploitation of such licensed product in such country, and (ii) the expiration of the royalty period.

In addition, we will pay a tiered transaction fee of 1-2% of the net proceeds upon certain change of control events.

Collaboration and Manufacturing and Supply Agreements

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Immediately prior to the execution of the Letter Agreements, we had a $5.3 million prepaid asset related to upfront payments made to secure the Clean Room Suite.

In connection with the Letter Agreements, we no longer have exclusive access to the Clean Room Suite at Catalent and, as a result, we recognized an expense of $5.3 million related to the elimination of the prepaid asset during the six months ended June 30, 2023.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the six months ended June 30, 2023, as both amounts do not directly relate to the future advancement of our research and development programs.

As of June 30, 2023, we made payments of $1.0 million under the Letter Agreements.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the nine months ended September 30, 2023, as both amounts do not directly relate to the future advancement of our research and development programs.

As of September 30, 2023, we made payments of $2.0 million under the Letter Agreements.

The remaining $4.0 million of aggregate payments due to Catalent under the Letter Agreements are included in accrued expenses and other current liabilities.

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we expect that we would incur significantly increased expenses associated with building a commercial sales and marketing team.

Impairment of long-lived assets

Impairment of long-lived assets consists of non-cash impairment charges recorded to the Company’s assets.

The Company reviews long-lived assets, such as the right of use assets or property and equipment, for impairments when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

During the nine months ended September 30, 2023, we recognized impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

These impairment expenses represent the proportional allocation of total impairments recognized for the asset groups subject to impairment testing in connection with the Company’s sublease agreements.

Other income (expense), net

Other income (expense), net consists of interest earned on our cash equivalents and marketable securities, offset by amortization of premium and discount on our marketable securities.

Additionally, in the six months ended June 30, 2023, we recognized other income related to the sale of certain tax credits.

Other income (expense), net consists of interest earned on our cash equivalents and marketable securities, and amortization of premium and discount on our marketable securities.

Additionally, in the nine months ended September 30, 2023, we recognized other income related to the sale of certain tax credits.

Results of Operations

Comparison of the three months ended June 30, 2023 and 2022

The following table sets forth our results of operations for the three months ended June 30, 2023 and 2022:

Comparison of the three months ended September 30, 2023 and 2022

The following table sets forth our results of operations for the three months ended September 30, 2023 and 2022:

Three months ended

September 30,

(in thousands)

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General and administrative

Impairment of long-lived assets

Loss from operations

1 unchanged sentence

Research and Development Expenses

Research and development expenses decreased by $9.5 million to $17.3 million for the three months ended June 30, 2023 from $26.8 million for the three months ended June 30, 2022.

The decrease was primarily due to a decrease of $5.5 million in clinical manufacturing expenses, which were higher in 2022 to support clinical trial start up across the portfolio, and decreases of $0.9 million and $1.3 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount.

In addition, we had decreases of $1.0 million for clinical operations, $0.8 million in professional services and consulting, and $0.1 million related to a reduction in Penn expenses.

Research and development expenses decreased by $0.3 million to $15.1 million for the three months ended September 30, 2023 from $15.4 million for the three months ended September 30, 2022.

This was primarily due to decreases of $0.5 million in wages and benefits related to reductions in headcount, $0.3 million in clinical operations, $0.2 million in professional services and consulting, and $0.8 million related to a reduction in Penn expenses.

Expenses associated with the Penn Agreement will continue to vary from quarter to quarter based on our selection and prioritization of preclinical product candidates, the status of our preclinical pipeline, and timing of preclinical work performed.

These amounts were partially offset by an increase of $0.1 million in facilities and other expenses.

These amounts were offset by increases of $0.9 million in share-based compensation expense, $0.4 million for clinical manufacturing, and $0.2 million for facilities and other expenses.

We track outsourced development, outsourced personnel expenses and other external research and development costs of specific programs.

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Three months ended

September 30,

(in thousands)

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Personnel-related (including share-based compensation)

Acquired In-Process Research and Development Expenses

During the three months ended September 30, 2023, we did not make any payments for acquired in-process research and development.

During the three months ended September 30, 2022, we made payments under the Penn Agreement for acquired in-process research and development of $1.5 million related to the achievement of a development milestone.

General and Administrative Expenses

General and administrative expenses decreased by $4.9 million to $8.1 million for the three months ended June 30, 2023 from $13.0 million for the three months ended June 30, 2022.

The decrease was primarily due to a decrease of $2.5 million and $1.3 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount, and a $1.1 million decrease in our professional and consulting fees.

General and administrative expenses decreased by $2.5 million to $8.2 million for the three months ended September 30, 2023 from $10.7 million for the three months ended September 30, 2022.

The decrease was due to decreases of $2.2 million in facilities and other expenses, and $0.5 million and $0.9 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount.

These decreases were partially offset by an increase of $1.1 million in professional services and consulting fees.

Impairment of long-lived assets

During the three months ended September 30, 2023, we recorded $5.4 million of impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

The impairment charges consisted of $2.2 million and $3.2 million recorded to the right of use assets and property and equipment, net, respectively.

During the three months ended September 30, 2022, we did not record any impairment expense.

Other income (expense), net

Other income (expense), net was $1.5 million and $0.3 million for the three months ended June 30, 2023 and 2022, respectively.

Other income (expense), net for the three months ended June 30, 2023 consisted of $1.5 million attributable to interest income earned on cash, cash equivalents and marketable securities.

Acquired In-Process Research and Development Expenses

During the three months ended June 30, 2023 and 2022, we did not make any payments for acquired in-process research and development.

Comparison of the six months ended June 30, 2023

The following table sets forth our results of operations for the six months ended June 30, 2023 and 2022:

Six months ended

Other income (expense), net was $1.6 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively.

Other income (expense), net for the three months ended September 30, 2023 consisted of $0.8 million attributable to interest income earned on cash, cash equivalents and marketable securities and $0.8 million attributable to the amortization of premium and discount on our marketable securities.

Comparison of the nine months ended September 30, 2023

The following table sets forth our results of operations for the nine months ended September 30, 2023 and 2022:

Nine months ended

September 30,

(in thousands)

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General and administrative

Impairment of long-lived assets

Loss from operations

1 unchanged sentence

Research and Development Expenses

Research and development expenses decreased by $18.8 million to $34.2 million for the six months ended June 30, 2023 from $53.0 million for the six months ended June 30, 2022.

Research and development expenses decreased by $19.1 million to $49.3 million for the nine months ended September 30, 2023 from $68.4 million for the nine months ended September 30, 2022.

The decrease was primarily due to a decrease of $14.3 million in clinical manufacturing expenses, which were higher in 2022 to support clinical trial start up across the portfolio, a decrease of $1.6 million for clinical operations, a decrease of $0.7 million in professional fees, and decreases of $3.8 million and $1.7 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount.

These amounts were partially offset by a $3.5 million increase in Penn expenses.

These amounts were partially offset by a $0.3 million increase in facility and other expenses and a $2.7 million increase in Penn expenses.

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Research and development expenses are summarized by program in the table below:

Six months ended

Nine months ended

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(in thousands)

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Personnel-related (including share-based compensation)

Acquired In-Process Research and Development Expenses

During the nine months ended September 30, 2023, we did not make any payments for acquired in-process research and development.

During the nine months ended September 30, 2022, we made payments under the Penn Agreement for acquired in-process research and development of $3.0 million related to the achievement of development milestones.

General and Administrative Expenses

General and administrative expenses decreased by $1.0 million to $27.1 million for the six months ended June 30, 2023 from $28.1 million for the six months ended June 30, 2022.

The decrease was primarily due to a decrease of $6.4 million and $3.4 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount, and a $2.9 million decrease in our professional fees and other expenses.

These amounts were partially offset by an increase of $11.3 million related to the non-recurring expenses related to the Letter Agreements and an increase in expenses of $0.4 million for facilities and other.

Excluding the non-recurring expenses of $11.3 million related to the Letter Agreements, our general and administrative expenses decreased by $12.3 million.

General and administrative expenses decreased by $3.5 million to $35.3 million for the nine months ended September 30, 2023 from $38.8 million for the nine months ended September 30, 2022.

The decrease was due to decreases of $6.9 million and $4.4 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount, a $1.7 million decrease in our professional fees, and a $1.8 million decrease in facilities and other expenses.

These amounts were partially offset by the current year expense of $11.3 million related to the Letter Agreements.

Excluding the $11.3 million related to the Letter Agreements, our general and administrative expenses decreased by $14.8 million.

Impairment of long-lived assets

During the nine months ended September 30, 2023, we recorded $5.4 million of impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

The impairment charges consisted of $2.2 million and $3.2 million recorded to the right of use assets and property and equipment, net, respectively.

During the nine months ended September 30, 2022, we did not record any impairment expense.

Other income (expense), net

Other income (expense), net was $3.1 million and $0.3 million for the six months ended June 30, 2023 and 2022, respectively.

Other income (expense), net for the six months ended June 30, 2023 consisted of $2.6 million attributable to interest income earned on cash, cash equivalents and marketable securities, and $0.5 million related to the sale of certain tax credits.

Acquired In-Process Research and Development Expenses

During the six months ended June 30, 2023, we did not make any payments for acquired in-process research and development.

During the six months ended June 30, 2022, we made payments under the Penn Agreement for acquired in-process research and development of $1.5 million related to the achievement of a development milestone.

Other income (expense), net was $4.6 million and $1.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Other income (expense), net for the nine months ended September 30, 2023 consisted of $2.1 million attributable to interest income earned on cash, cash equivalents and marketable securities, $2.0 million attributable to the amortization of premium and discount on our marketable securities and $0.5 million related to the sale of certain tax credits.

Liquidity and Capital Resources

As of June 30, 2023, we had $151.5 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $550.6 million.

As of September 30, 2023, we had $132.8 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $577.7 million.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expense and capital expenditures into the fourth quarter of 2025.

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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt

securities, existing stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect existing stockholders’ rights as common stockholders.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect existing stockholders’ rights as common stockholders.

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 acquisitions or capital expenditures or declaring dividends.

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The following table shows a summary of our cash flows for the periods indicated:

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Nine months ended

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(in thousands)

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Net Cash Used in Operating Activities

During the six months ended June 30, 2023, we used $39.6 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $58.2 million, partially offset by a net decrease in our operating assets of $10.6 million and non-cash charges of $8.0 million related to share-based compensation, depreciation, amortization, and amortization of premium and discount, net.

During the nine months ended September 30, 2023, we used $58.7 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $85.3 million, partially offset by a net decrease in our operating assets of $9.6 million and net non-cash charges of $17.0 million primarily related to share-based compensation, depreciation, amortization, impairment of long-lived assets, and amortization of premium and discount, net.

The primary use of cash was to fund our operations related to the development of our product candidates.

During the six months ended June 30, 2022, we used $70.8 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $82.4 million and a net increase in our operating assets of $5.5 million, partially offset by non-cash charges of $17.1 million related to share-based compensation, depreciation, amortization of premium and discount, net, and acquired in-process research and development.

During the nine months ended September 30, 2022, we used $94.2 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $109.1 million and a net increase in our operating assets of $7.5 million, partially offset by $3.0 million of charges for acquired in-process research and development and non-cash charges of $19.4 million related to share-based compensation, depreciation, and the amortization of premium and discount, net.

The primary use of cash was to fund our operations related to the development of our product candidates.

Net Cash Provided by (Used) in Investing Activities

During the six months ended June 30, 2023 , we purchased $73.5 million in marketable securities, and had sales and maturities of $108.8 million in marketable securities.

Purchases of property and equipment were $0.1 million for the six months ended June 30, 2023.

During the six months ended June 30, 2022, we purchased $58.8 million in marketable securities, had sales and maturities of $95.3 million in marketable securities, had purchases of property and equipment of $1.6 million, and paid $1.5 million for technology licenses.

During the nine months ended September 30, 2023 , we purchased $101.6 million in marketable securities, and had sales and maturities of $159.4 million in marketable securities.

Purchases of property and equipment were $0.1 million for the nine months ended September 30, 2023.

During the nine months ended September 30, 2022, we purchased $116.3 million in marketable securities, had sales and maturities of $149.7 million in marketable securities, purchased $1.8 million of property and equipment, and paid $3.0 million for technology licenses.

Net Cash Provided by (Used in) Financing Activities

During the six months ended June 30, 2023, we received $0.1 million in proceeds from the issuance of common stock under the ESPP.

During the six months ended June 30, 2022, we received $49,000 from the exercise of stock options, received $0.2 million in proceeds from the issuance of common stock under the ESPP and paid $0.6 million for short-term insurance premium financing.

During the nine months ended September 30, 2023, we received $0.1 million in proceeds from the issuance of common stock under the ESPP.

During the nine months ended September 30, 2022, we received $0.1 million from the exercise of stock options, received $0.2 million in proceeds from the issuance of common stock under the ESPP and paid $1.1 million for short-term insurance premium financing.

Contractual Obligations and Other Commitments

We lease approximately 37,000 square feet of office space in Philadelphia, Pennsylvania.

We lease approximately 37,000 square feet of office space in Philadelphia, Pennsylvania, or the 2005 Market Street Lease Agreement.

The lease will expire in December 2031.

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The aggregate estimated rent payments due over the initial term of the lease is $11.8 million, with rent payments that began in 2022.

We lease approximately 62,000 square feet of laboratory space in Hopewell, NJ.

Sublease Agreement A and Sublease Agreement B do not relieve us from our primary obligations under the 2005 Market Street Lease Agreement, however, we do expect cash inflows from the agreements to partially offset our future obligations for the duration of the sublease agreements.

We lease approximately 62,000 square feet of laboratory space in Hopewell, NJ, or the Laboratory Lease Agreement.

The lease will expire in March 2036.

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As a result of the Letter Agreements, under both the Collaboration Agreement and the Manufacturing and Supply Agreement with Catalent, we no longer have an annual minimum commitment of $10.6 million per year owed to Catalent through November 2025.

As of June 30, 2023, the Company made payments of $1.0 million under the Letter Agreements.

In addition, the Company will make aggregate payments to Catalent of $5.0 million between July 1, 2023 and May 1, 2024.

As of September 30, 2023, the Company made payments of $2.0 million under the Letter Agreements.

In addition, the Company will make aggregate payments to Catalent of $4.0 million between October 1, 2023 and May 1, 2024.

Under the Penn Agreement, we agreed to fund discovery research conducted by Penn for five years, which began in May 2020.

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Critical Accounting Policies and Estimates

During the six months ended June 30, 2023, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2022 Annual Report filed on Form 10-K.

During the nine months ended September 30, 2023, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2022 Annual Report filed on Form 10-K, except for those described below.

Long-Lived Assets:

We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable.

We measure the recoverability of assets that we will continue to use in our operations by comparing the carrying value of the asset groups to our estimate of the related total future undiscounted net cash flows.

If an asset group’s carrying value is not recoverable through the related undiscounted cash flows, the asset group is considered to be impaired.

In the event the carrying value exceeds the future undiscounted net cash flows, we estimate the fair values using either the income approach, market approach, or a combination of the two.

The income approach is based on the present value of future cash flows of each asset group, while the market approach is based on industry and economic conditions, including estimates on prevailing prices and rates for similar assets.

The approaches are asset group specific and may incorporate a number of market participant assumptions in assessing fair value including future growth rates, discount rates, and market activity.

We measure the impairment by comparing the difference between the asset group’s carrying value and its fair value.

Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows.

During the three months ended September 30, 2023, we recorded impairments of long-lived assets (property and equipment and right of use assets) of $5.4 million based upon impairment testing in connection with Sublease Agreement A and Sublease Agreement B.

Actual future net cash flows are uncertain, subject to risks, and may change depending upon several factors, including industry or economic trends.

If our estimates of future net cash flows differ from actual future net cash flows, our estimates of fair value could materially change.

Additionally, future events or changes in circumstances could indicate that the carrying value of our long-lived assets may not be recoverable and lead to future impairments.

As of September 30, 2023, we had property and equipment, net of $16.1 million and right of use assets of $17.0 million recorded on our balance sheet.

JOBS Act Accounting Election

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Item 2. Management’s Discussion and Analysis