What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-08 · 112 added, 76 removed, 297 unchanged (39% of the section changed)

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On July 31, 2024, we entered into a series of sublicense agreements with Gemma Biotherapeutics, Inc., or Gemma, a newly formed genetic medicines company co-founded by Dr.

James Wilson, in connection with the outlicense of PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBKR03 for the treatment of Krabbe disease, and PBML04 for the treatment of metachromatic leukodystrophy, or MLD, collectively the Outlicensed Programs and such agreements, the Gemma Sublicenses.

Pursuant to the Gemma Sublicenses, we will receive (i) initial payments of $10 million for the purchase of clinical product supply;

James Wilson, who also serves as a consultant to the Company as a Scientific Advisor in connection with the outlicense of PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBKR03 for the treatment of Krabbe disease, and PBML04 for the treatment of metachromatic leukodystrophy, or MLD, collectively the Outlicensed Programs and such agreements, the Gemma Sublicenses.

Pursuant to the Gemma Sublicenses, we will receive (i) initial payments of an aggregate of $10.0 million for licenses and clinical product supply;

(ii) up to an additional $10.0 million contingent on the completion by Gemma of certain business milestones;

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and (iv) single digit royalties as a percentage of annual worldwide net sales in exchange for sublicenses to relevant intellectual property, transfer of regulatory dossiers and transfer of clinical trial materials and product supply related to the Outlicensed Programs.

Pursuant to the Gemma Sublicenses, Gemma will also be responsible for all payments due to Penn under the Penn Agreement related to the Outlicensed Programs.

We also entered into a transition services agreement with Gemma, or the Transition Services Agreement, pursuant to which, we will provide transitional

services at cost to Gemma for a period of up to six months from the effective date, and be entitled to reimbursement for transitional services performed retroactively from March 1, 2024, related to the transfer of the Outlicensed Programs.

Pursuant to the Gemma Sublicenses, Gemma will also be responsible for all payments due to the Trustees of the University of Pennsylvania, or Penn, under the Penn License Agreement, as further described below, related to the

Outlicensed Programs.

We also entered into a transition services agreement with Gemma, or the Transition Services Agreement, pursuant to which, we will provide transitional services at cost to Gemma for a period of up to six months from the effective date, and be entitled to reimbursement for transitional services performed retroactively from March 1, 2024, related to the transfer of the Outlicensed Programs.

We also entered into a research, collaboration and license agreement with Gemma, or the Gemma Collaboration Agreement, pursuant to which (i) Gemma will conduct certain preclinical and IND-enabling work for our active research program in Huntington’s disease and a currently paused research program in Temporal Lobe Epilepsy, or TLE, which were previously being conducted by Penn under the Penn Agreement and (ii) Gemma will grant us options to conduct new research programs in four new CNS indications.

We refer to the Gemma Sublicenses, the Transition Services Agreement, and the Gemma Collaboration Agreement, collectively, as the Outlicense Transaction Agreements.

As a result of the Outlicense Transaction Agreements, we and Penn also amended and restated the Penn Agreement, as of July 31, 2024 to (i) terminate our funding of discovery research;

As a result of the Outlicense Transaction Agreements, we also entered into an Amended and Restated Research, Collaboration and License Arrangement with Penn as of July 31, 2024, or the Penn License Agreement, to (i) terminate our funding of discovery research;

(ii) terminate the research and exploratory research programs being conducted by Penn;

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and (iv) terminate the transaction fee due to Penn as a result of certain corporate transactions.

Prior to the execution of the Outlicense Transaction Agreements, we had a research collaboration with the Trustees of the University of Pennsylvania’s, or Penn’s, Gene Therapy Program, or GTP, headed by Dr.

Prior to the execution of the Outlicense Transaction Agreements, we had a research collaboration with Penn’s, Gene Therapy Program, or GTP, headed by Dr.

Under this collaboration, we progressed four product candidates sourced from our research collaboration with GTP to the clinical stage of development and had one active preclinical program in Huntington’s disease.

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We are conducting 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 symptomatic FTD- GRN .

We reported biomarker data from three patients in Cohort 1 of our upliFT-D trial in December of 2023 and May 2024.

Dose 1 of PBFT02 resulted in consistent elevated levels of CSF PGRN with concentrations ranging from 10.7 to 17.3 ng/mL at 30 days post-treatment (n=3) and 21.7 to 27.3 ng/mL at 6 months post-treatment (n=2), higher than the range found in healthy adult controls of 3.3 to 8.2 ng/mL (mean=4.8 ng/mL;

We reported biomarker data from four patients in Cohort 1 of our upliFT-D trial in December of 2023, May 2024, and September 2024.

Dose 1 of PBFT02 resulted in consistent elevated levels of CSF PGRN with concentrations ranging from 10.7 to 17.3 ng/mL at 30 days post-treatment (n=5), and 21.7 to 27.3 ng/mL at 6 months post-treatment (n=2).

CSF PGRN remained elevated at 12 months (n=1), reaching a level of 34.2 ng/mL.

The rate of increase was 58% between one month and six months and slowed to 26% between six months and twelve months.

These ranges are higher than the range found in healthy adult controls of 3.3 to 8.2 ng/mL (mean=4.8 ng/mL;

In contrast, following PBFT02 treatment, plasma PGRN levels were unaltered, remaining similar to baseline concentrations and below levels found in healthy adult controls.

As of June 2024, Dose 1 of PBFT02 treatment was generally well-tolerated in study participants who received an enhanced immunosuppression regimen (n=4).

We have completed dosing of Cohort 1 (n=5) and have enrolled the first patient in Cohort 2 (n=3-5).

As of August 2024, Dose 1 of PBFT02 treatment was generally well-tolerated in study participants who received an enhanced immunosuppression regimen (n=4).

We have completed dosing of Cohort 1 (n=5) and have enrolled the first four patients in Cohort 2 (n=5).

Based on the robust PGRN expression observed in the initial patients in Cohort 1, we are continuing to study Dose 1 in Cohort 2 of the upliFT-D trial.

We expect to deliver on the following related to our upliFT-D trial for PBFT02 for the treatment of FTD- GRN :

● report updated safety and biomarker data from Cohort 1 patients in September 2024;

● report 12-month follow-up data from Cohort 1 patients and interim data from Cohort 2 patients in the first half of 2025;

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Active Research Programs

We have one unnamed preclinical research program through the Gemma Collaboration Agreement which was previously conducted by Penn under the Penn Agreement and is exploring multiple potential treatment targets for Huntington’s disease.

We have one unnamed preclinical research program through the Gemma Collaboration Agreement (which was previously conducted by Penn under the Penn Agreement) and are exploring multiple potential treatment targets for Huntington’s disease.

Beyond this program, as a result of the Gemma Collaboration Agreement, we also have the option to license programs for four additional new indications in CNS diseases from Gemma.

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In order to reduce operating expenses, we have paused development of this program.

We have terminated our research program in ALS due to C9orf72 mutations.

Business Overview

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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 $16.0 million and $23.9 million for the three months ended June 30, 2024 and 2023, respectively, and $32.7 million and $58.2 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $627.2 million.

Our net losses were $19.3 million and $27.1 million for the three months ended September 30, 2024 and 2023, respectively, and $52.0 million and $85.3 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of $646.5 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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We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product

manufacturing, marketing, sales and distribution.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant

commercialization expenses related to product manufacturing, marketing, sales and distribution.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

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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.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $91.8 million.

We expect our existing cash, cash equivalents and marketable securities, combined with the initial payments to be received from the Outlicense Transaction Agreements, will enable us to fund our operating expenses and capital expenditure requirements to the end of the second quarter of 2026.

As of September 30, 2024, we had cash, cash equivalents and marketable securities of $84.8 million.

We expect our existing cash, cash equivalents and marketable securities, combined with the remaining initial payments for the licenses and clinical product supply in connection with the Gemma Sublicenses, and expected payments in connection with the Gemma Transition Services Agreement, will enable us to fund our operating expenses and capital expenditure requirements to the end of the second quarter of 2026.

Financial Operations Overview

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Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product.

Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits percentage on annual worldwide net sales of such licensed product.

In addition, other than the Gemma Sublicenses, 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 License Agreement.

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Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

Gemma Biotherapeutics, Inc.

- Research, Collaboration and License Agreement

In connection with the transfer of the Outlicensed Programs, on July 31, 2024, we entered into the Gemma Collaboration Agreement.

Gemma - Research, Collaboration and License Agreement

In connection with the transfer of the Outlicensed Programs, on July 31, 2024, we entered into a research, collaboration and license agreement with Gemma, or the Gemma Collaboration Agreement.

Pursuant to the Gemma Collaboration Agreement, (i) Gemma will conduct certain preclinical and IND-enabling work for our active research program in Huntington’s disease and a currently paused research program in TLE, which were previously being conducted by Penn under the Penn Agreement and (ii) Gemma will grant us options to conduct mutually agreed research programs in four new CNS indications.

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If we were to exercise any of the four options, we would owe Gemma a non-refundable aggregate 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.

Gemma Biotherapeutics, Inc.

- Sub-License Agreements and Transition Services Agreement

In connection with the transfer of the Outlicensed Programs to Gemma, we have entered into the Gemma Sublicenses, pursuant to which, we will receive (i) initial payments of $10 million for the purchase of clinical product supply;

Gemma - Sublicense Agreements and Transition Services Agreement

In connection with the transfer of the Outlicensed Programs to Gemma, we have entered into the Gemma Sublicenses, pursuant to which, we will receive (i) initial payments of an aggregate of $10.0 million for licenses and clinical product supply;

(ii) up to an additional $10.0 million contingent on the completion by Gemma of certain business milestones;

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In addition, Gemma is responsible for all payments to Penn related to the Outlicensed Programs under the Penn License Agreement.

In addition, we entered into a transition services agreement with Gemma pursuant to which (i) we will provide transitional services at cost to Gemma for a period of up to six (6) months related to the transfer of the Outlicensed Programs and (ii) Gemma will reimburse us for certain costs related to conduct of the Outlicensed Programs incurred since March 1, 2024.

In addition, we entered into a transition services agreement with Gemma pursuant to which (i) we provide transitional services at cost to Gemma for a period of up to six months related to the transfer of the Outlicensed Programs and (ii) Gemma reimburses us for certain costs related to conduct of the Outlicensed Programs incurred since March 1, 2024.

Collaboration and Manufacturing and Supply Agreements

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In consideration of this, we had an obligation to make aggregate payments to Catalent of $6.0 million between June 30, 2023 and May 1, 2024.

As of June 30, 2024, we have made all payments related to this obligation under the Amended Catalent Agreements.

As of September 30, 2024, we have made all payments related to this obligation under the Amended Catalent Agreements.

The Amended Catalent Agreements extend the term of the Original Catalent Agreements until November 6, 2030, and establish a limited exclusive relationship between us and Catalent for the manufacture of bulk drug substance and drug product for our adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1.

The limited exclusive relationship under the Amended Catalent Agreements converts to a non-exclusive relationship (i) in the event Catalent fails to meet certain performance standards and (ii) following certain conditional events related to the divestiture by us of either FTD or GM1, in which case, if such events occur, we would pay Catalent certain fees.

In addition, in the event of certain transactions, we may terminate the Amended Catalent Agreements for convenience with respect to such products, in which case, we would pay to Catalent a certain termination fee.

The outlicense of GM1 to Gemma under the Outlicense Transaction Agreements, and subsequent business decisions implemented by Gemma under their sole discretion, could qualify as a divesture event under the Amended Catalent Agreements and require us to make payment of certain fees to Catalent, which fees are immaterial.

The outlicense of GM1 to Gemma under the Outlicense Transaction Agreements, and subsequent business decisions implemented by Gemma in their sole discretion, could be considered an event related to the divesture of GM1 under the Amended Catalent Agreements and require us to make payment of certain fees to Catalent, which fees are immaterial.

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 did not directly relate to the future advancement of our research and development programs.

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 did not directly relate to the future advancement of our research and development programs.

Components of Results of Operations

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These expenses include:

● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval, including payments to clinical research organizations, or CROs, and payments to GTP for preclinical research and development;

● personnel expenses, including salaries, benefits and share-based compensation expense for employees engaged in research and development functions;

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Impairment of long-lived assets consists of non-cash impairment charges recorded to our assets.

We review 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 six months ended June 30, 2024, we recognized impairment expense related to property and equipment for a construction in progress asset.

We review long-lived assets, such as the right of use assets, or ROU 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, 2024, we recognized impairment expenses related to a construction in progress asset, property and equipment, and ROU assets in connection with our leased laboratory space in Hopewell, New Jersey, or the Hopewell Laboratory Space.

The impairment expenses represent the proportional allocation of total impairments recognized for the asset groups subject to impairment testing in connection with the Hopewell Laboratory Space.

Other Income (Expense), Net

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

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

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, 2024 and 2023

The following table sets forth our results of operations for the three months ended June 30, 2024 and 2023:

Comparison of the three months ended September 30, 2024 and 2023

The following table sets forth our results of operations for the three months ended September 30, 2024 and 2023:

Three months ended

September 30,

(in thousands)

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Research and Development Expenses

Research and development expenses decreased by $6.9 million to $10.4 million for the three months ended June 30, 2024 from $17.3 million for the three months ended June 30, 2023.

Research and development expenses decreased by $6.4 million to $8.7 million for the three months ended September 30, 2024 from $15.1 million for the three months ended September 30, 2023.

The decrease was primarily due to the following:

● a decrease of $1.7 million in Penn expenses related to the pausing of certain programs in our preclinical portfolio and reduction of post-IND support for our clinical stage programs;

● a decrease of $1.4 million in wages and benefits related to reductions in headcount;

● a decrease of $1.8 million in wages and benefits related to severance costs incurred in the three months ended September 30, 2023;

● a decrease of $1.5 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, partially offset by increased activity for FTD;

● a decrease of $1.3 million in Penn expenses related to the termination of our discovery research obligation under the Penn Agreement;

● a decrease of $0.9 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.5 million in chemistry, manufacturing and control expenses primarily related to lower external manufacturing expenses, most significantly related to reduced external manufacturing activities for our GM1 program;

● a decrease of $0.6 million in facility and other expenses;

● a decrease of $0.3 million in professional fees;

● a decrease of $0.2 million in facility and other expenses.

These decreases were partially offset by:

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General and Administrative Expenses

General and administrative expenses decreased by $1.6 million to $6.5 million for the three months ended June 30, 2024 from $8.1 million for the three months ended June 30, 2023.

General and administrative expenses decreased by $0.9 million to $7.3 million for the three months ended September 30, 2024 from $8.2 million for the three months ended September 30, 2023.

The decrease was primarily due to the following:

● a decrease of $1.2 million in wages and benefits related to severance costs incurred in the three months ended September 30, 2023;

● a decrease of $0.6 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.9 million in wages and benefits related to reductions in headcount;

● a decrease of $0.1 million in facility and other expenses.

These decreases were partially offset by:

● an increase of $0.8 million in professional services and consulting.

● an increase of $1.0 million in accruals for litigation matters.

Impairment of Long-Lived Assets

During the three months ended June 30, 2024, we recorded $0.4 million of impairment expenses related to property and equipment for a construction in progress asset we no longer plan to deploy.

During the three months ended June 30, 2023, we did not record any impairment expense.

During the three months ended September 30, 2024, we recorded $4.8 million of impairment expense related to the Hopewell Laboratory Space.

The impairment charges consisted of $2.5 million and $2.3 million recorded to the ROU assets and property and equipment, net, respectively.

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 ROU assets and property and equipment, net, respectively.

Other Income (Expense), Net

Other income (expense), net decreased by $0.1 million to $1.4 million for the three months ended June 30, 2024 from $1.5 million for the three months ended June 30, 2023.

Other income (expense), net decreased by $0.2 million to $1.4 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023.

The decrease was primarily due to the following:

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● an increase of $0.3 million attributable to income from subleases.

Comparison of the six months ended June 30, 2024 and 2023

The following table sets forth our results of operations for the six months ended June 30, 2024 and 2023:

Six months ended

Comparison of the nine months ended September 30, 2024 and 2023

The following table sets forth our results of operations for the nine months ended September 30, 2024 and 2023:

Nine months ended

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(in thousands)

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Research and Development Expenses

Research and development expenses decreased by $12.2 million to $22.0 million for the six months ended June 30, 2024 from $34.2 million for the six months ended June 30, 2023.

Research and development expenses decreased by $18.7 million to $30.6 million for the nine months ended September 30, 2024 from $49.3 million for the nine months ended September 30, 2023.

The decrease was primarily due to the following:

● a decrease of $2.8 million in Penn expenses related to the pausing of certain programs in our preclinical portfolio and reduction of post-IND support for our clinical stage programs;

● a decrease of $4.4 million in wages and benefits related to reductions in headcount;

● a decrease of $4.1 million in Penn expenses related to the pausing of certain programs in our preclinical portfolio, reduction of post-IND support for our clinical stage programs, and termination of our discovery research obligation under the Penn Agreement;

● a decrease of $4.0 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, partially offset by increased activity for FTD;

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General and Administrative Expenses

General and administrative expenses decreased by $14.1 million to $13.0 million for the six months ended June 30, 2024 from $27.1 million for the six months ended June 30, 2023.

General and administrative expenses decreased by $15.0 million to $20.3 million for the nine months ended September 30, 2024 from $35.3 million for the nine months ended September 30, 2023.

The decrease was primarily due to the following:

● a decrease of $11.3 million related to expenses incurred in conjunction with the Amended Catalent Agreements during the six months ended June 30, 2023;

● a decrease of $11.3 million related to expenses incurred in conjunction with the Amended Catalent Agreements during the nine months ended September 30, 2023;

● a decrease of $2.8 million in wages and benefits related to reductions in headcount;

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These decreases were partially offset by:

● an increase of $1.0 million in accruals for litigation matters, and

● an increase of $0.7 million for professional services and consulting.

Impairment of Long-Lived Assets

During the six months ended June 30, 2024, we recorded $0.4 million of impairment expenses related to property and equipment for a construction in progress asset we no longer plan to deploy.

During the six months ended June 30, 2023, we did not record any impairment expense.

During the nine months ended September 30, 2024, we recorded $5.2 million of impairment expense primarily consisting of $2.5 million and $2.3 million recorded to the ROU assets and property and equipment, net, respectively, related to the Hopewell Laboratory Space.

In addition, we recorded $0.4 million of impairment expenses related to property and equipment for a construction in progress asset we no longer plan to deploy.

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 ROU assets and property and equipment, net, respectively.

Other Income (Expense), Net

Other income (expense), net decreased by $0.4 million to $2.7 million for the six months ended June 30, 2024 from $3.1 million for the six months ended June 30, 2023.

Other income (expense), net decreased by $0.5 million to $4.1 million for the nine months ended September 30, 2024 from $4.6 million for the nine months ended September 30, 2023.

The decrease was primarily due to the following:

● a decrease of $0.5 million attributable to the sale of certain tax credits during the six months ended June 30, 2023, and

● a decrease of $0.6 million attributable to interest income and the amortization of premium and discount on our marketable securities;

● a decrease of $0.5 million attributable to the sale of certain tax credits during the nine months ended September 30, 2023.

These decreases were partially offset by:

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Liquidity and Capital Resources

As of June 30, 2024, we had $91.8 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $627.2 million.

As of September 30, 2024, we had $84.8 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $646.5 million.

We expect our existing cash, cash equivalents and marketable securities, combined with the remaining initial payments for the licenses and clinical product supply in connection with the Gemma Sublicenses and expected payments in connection with the Transition Services Agreement, will enable us to fund our operating expenses and capital expenditure requirements to the end of the second quarter of 2026.

Funding Requirements

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We are limited to $50.0 million in our capacity to offer and sell shares of our common stock under this sales agreement pursuant to our shelf registration statement on Form S-3, filed on March 4, 2024.

As of June 30, 2024, $50 million of capacity remains available to be sold under the ATM Facility.

As of September 30, 2024, $50.0 million of capacity remains available to be sold under the ATM Facility.

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

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Net Cash Provided by (Used in) Operating Activities

During the six months ended June 30, 2024, we used $32.1 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $32.7 million and a net increase in our operating assets of $3.8 million, partially offset by non-cash charges of $4.4 million related to depreciation, amortization, share-based compensation, and amortization of premium and discount, net, and impairment of long-lived assets.

During the nine months ended September 30, 2024, we used $39.5 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $52.0 million, partially offset by a net decrease in our operating assets of $1.5 million, and net non-cash charges of $11.0 million related to depreciation, amortization, share-based compensation, amortization of premium and discount, net, and impairment of long-lived assets.

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, 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, amortization of premium and discount, net, and loss on disposal of property and equipment.

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.

Net Cash Provided by (Used in) Investing Activities

During the six months ended June 30, 2024 , we purchased $50.8 million in marketable securities, and had sales and maturities of $77.1 million in marketable securities.

We did not make any purchases of property and equipment for the six months ended June 30, 2024.

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 nine months ended September 30, 2024 , we purchased $72.6 million in marketable securities, and had sales and maturities of $113.9 million in marketable securities.

Purchases of property and equipment were de minimus for the nine months ended September 30, 2024.

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.

Net Cash Provided by (Used in) Financing Activities

During the six months ended June 30, 2024, we received $8.7 million in net proceeds from the issuance of common stock under the ATM Facility.

During the nine months ended September 30, 2024, we received $8.7 million in net proceeds from the issuance of common stock under the ATM Facility.

We received gross proceeds of $9.0 million, net of offering costs of $0.3 million.

We received $0.1 million in proceeds from the issuance of common stock under the ESPP and exercises of employee stock options.

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

Contractual Obligations and Other Commitments

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The aggregate estimated rent payments due over the initial term of the lease is approximately $40.3 million, with rent payments that began in 2021.

Our sublease agreement does not relieve us from our primary obligations under the Laboratory Lease Agreement, however, we do expect cash inflows from the agreement to partially offset our future obligations for the duration of the sublease agreement.

Under the exclusive relationship under the Amended Catalent Agreements, following certain conditional events related to the divestiture by us of either FTD or GM1, we would pay Catalent certain fees.

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

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Critical Accounting Policies and Estimates

During the six months ended June 30, 2024, 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 2023 Annual Report filed on Form 10-K.

During the nine months ended September 30, 2024, 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 2023 Annual Report filed on Form 10-K, except for those described below.

License and Other Revenue

We may enter into license agreements and transition services agreements under which we may license rights to research, develop, manufacture, and commercialize our product candidates to third parties, and provide transition services for such licenses.

Payments under these arrangements may include non-refundable, upfront fees, reimbursement of certain costs, payments upon the achievement of certain milestones, and royalties on product sales.

We apply ASC Topic 606, Revenue from Contracts with Customers , or ASC 606, when all of the following criteria are met, to determine a valid contract exists:

(i) the parties have approved the contract and are committed to perform their respective obligations;

(ii) we can identify each party’s rights regarding the goods or services to be transferred;

(iii) we can identify the payment terms for the goods or services to be transferred;

(iv) the contract has commercial substance;

and (v) we will collect substantially all of the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer.

Once it is determined that a valid contract exists, we perform the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including consideration of the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations on a relative stand-alone selling price basis;

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

As part of the accounting for these arrangements, we must use our judgment to determine the number of performance obligations, the transaction price, the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price, the contract term and pattern of satisfaction of the performance obligations.

We use judgment to determine whether milestones or other variable consideration, except for certain sales-based milestone payments and royalties, should be included in the transaction price as described further below.

At the inception of each arrangement that includes milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most

likely amount method set forth in ASC 606.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within our control or the licensee, such as those subject to regulatory approvals, are not considered probable of being achieved until those approvals are received.

We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis in the statements of operations in the period of adjustment.

For customer contracts in the scope of ASC 606, amounts due to us are recorded as accounts receivable on our balance sheet when our right to consideration is unconditional.

Amounts received prior to satisfying the related performance obligations are classified on our balance sheet as current deferred revenue if expected to be recognized as revenue within 12 months following the balance sheet date and as deferred revenue, net of current portion, if amounts are not expected to be recognized as revenue within the 12 months following the balance sheet date.

We do not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of promised items to the customer.

JOBS Act Accounting Election

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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