Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and the accompanying notes thereto and other disclosures included in this Quarterly Report on Form 10-Q, including the disclosures under Part II, Item 1A “Risk Factors,” and our audited financial information and the notes thereto included in our Annual Report . Our unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and unless otherwise indicated are presented in U.S. dollars.
Overview
We are a leader in the field of gene therapy and seek to deliver to patients suffering from rare and other devastating diseases single treatments with potentially curative results. We are advancing a pipeline of innovative gene therapies, including product candidates for the treatment of Huntington’s disease, hemophilia B, which effective May 6, 2021, we licensed to CSL Behring LLC (“CSL Behring”), temporal lobe epilepsy and Fabry disease. We believe our validated technology platform and manufacturing capabilities provide us distinct competitive advantages, including the potential to reduce development risk, cost, and time to market. We produce our Adeno-associated virus (“AAV”) -based gene therapies in our own facilities with a proprietary, commercial-scale, current good manufacturing practices (“cGMP”)-compliant, manufacturing process. We believe our Lexington, Massachusetts-based facility is one of the world’s most versatile gene therapy manufacturing facilities.
Business Developments
Below is a summary of our recent significant business developments:
Huntington’s disease program (AMT-130)
AMT-130 is our novel gene therapy candidate for the treatment of Huntington’s disease. AMT-130 utilizes our proprietary, gene-silencing miQURE platform and incorporates an AAV vector carrying a micro ribonucleic acid (“miRNA”) specifically designed to silence the huntingtin gene and the potentially highly toxic exon 1 protein fragment. We are currently conducting a Phase I/II clinical trial for AMT-130 in the United States (“U.S.”) and a Phase Ib/II study in the European Union (“EU”). Together, these studies are intended to establish safety, proof of concept, and the optimal dose of AMT-130 to take forward into Phase III development or into a confirmatory study should an accelerated registration pathway be feasible. AMT-130 has received Orphan Drug and Fast Track designations from the U.S. Food and Drug Administration (“FDA”) and Orphan Medicinal Product Designation from the European Medicines Agency (“EMA”).
On March 21, 2022, we announced that we have completed the enrollment of all 26 patients in the first two cohorts of our randomized, double-blinded, Phase I/II clinical trial of AMT-130 taking place in the U.S. In the study, patients are randomized to either treatment with AMT-130 or to an imitation surgical procedure. The treated patients have received a single administration of AMT-130 using MRI-guided, convection-enhanced stereotactic neurosurgical delivery directly into the striatum (caudate and putamen). The trial consists of a blinded 12-month period followed by unblinded long-term follow-up for five years. The low-dose cohort includes 10 patients, of which six patients received treatment with AMT-130 and four patients received imitation surgery. The higher-dose cohort includes 16 patients, of which 10 patients received treatment with AMT-130 and six patients received imitation surgery. In July 2022 we crossed over one of these six patients and treated the patient with the lower dose of AMT-130. A third cohort, which will include up to 18 additional randomized patients receiving the higher dose, will explore the use of alternative stereotactic navigation systems to simplify placement of catheters for infusions of AMT-130.
On June 23, 2022, we announced safety and biomarker data from the 10 patients enrolled in the low-dose cohort. At 12 months of follow-up on the patients in the low-dose cohort:
● AMT-130 was generally well-tolerated with no serious adverse events related to AMT-130 reported in the treated patients. There were two serious adverse events unrelated to AMT-130, including a deep-vein thrombosis in the elbow of one patient that was resolved with anticoagulants and transient post-operative delirium in a second patient that was resolved through supportive care.
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● In the four treated patients with evaluable data, mean levels of mutant Huntingtin protein in the cerebral spinal fluid (“CSF mHTT”) declined at all timepoints compared to baseline and decreased by 53.8% at 12 months of follow-up (range 44% decrease to 71% decrease). In the three control patients with evaluable data, mean levels of CSF mHTT showed an increase compared to baseline at one, three, six and nine months of follow-up, and decreased by 16.8% compared at 12 months of follow-up (range 35% increase to 47% decrease).
● In the six treated patients, measurements of neurofilament light chain in the cerebral spinal fluid (“CSF NfL”), a biomarker of neuronal damage, initially increased as expected following the AMT-130 surgical procedure and declined thereafter, nearing baseline at 12 months of follow-up. At 12 months, mean CSF NfL showed an 8% increase compared to baseline (range 46% increase to 14% decrease). Two of the six treated patients were at or below baseline at 12 months of follow-up, with an additional patient below baseline at 15 and 18 months of follow-up. In the four control patients, mean CSF NfL remained stable or slightly declined over 12 months (range 1% increase to 35% decrease).
Also on June 23, 2022, we announced that 10 patients in our European Phase Ib/II study had been treated with AMT-130. The open-label study will enroll a total of 15 patients in two dose cohorts.
In July 2022, we learned that three patients of the 14 patients that were treated with the higher dose of AMT-130 in our Phase Ib/II clinical trial had experienced certain serious adverse reactions that were potentially attributable to AMT-130. Two patients experienced localized inflammatory responses and related symptoms shortly after the procedure, while the third patient experienced severe headaches and other related symptoms. All three patients were treated and released from the hospital. The reactions in these three patients each have been classified as suspected unexpected serious adverse reactions (“SUSARs”) and reported to the appropriate regulatory agencies in the U.S. and Europe.
Following a review of these SUSARs by the independent Data Safety Monitoring Board for the clinical trial (the “DSMB”) in July 2022, the DSMB recommended postponement of further enrollment and dosing of high-dose patients and postponement of further site activation until the DSMB had conducted a comprehensive safety investigation.
We completed a comprehensive safety investigation in October 2022. The DSMB recommended resuming treatment at the higher dose of AMT-130 for the remaining five European patients and any patients in the U.S. trial who are eligible to cross over from the control arm to the treatment. All three patients have experienced full resolution of the reported SUSARSs.
We have added additional risk mitigation procedures including closer patient monitoring during the first two weeks after the administration of AMT-130 and a seven-day, post-surgical in-person visit. The DSMB recommended that the use of immunosuppression remain at the discretion of the treating physician. We plan to resume patient dosing in the open-label European study in the fourth quarter of 2022 and complete enrollment of the remaining five of the nine patient higher-dose cohort in the first half of 2023.
CSL Behring collaboration
On June 24, 2020, (the “Signing Date”), uniQure biopharma B.V., a wholly owned subsidiary of uniQure N.V., entered into a commercialization and license agreement (the “CSL Behring Agreement”) with CSL Behring pursuant to which CSL Behring received exclusive global rights to etranacogene dezaparvovec, the investigational gene therapy for patients with hemophilia B (the “Product”). The transaction became fully effective on May 6, 2021, one day after the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired (“Closing”).
In accordance with the CSL Behring agreement, CSL Behring is solely responsible for all regulatory activities, including any filings and agency interactions associated with etranacogene dezaparvovec and the companion diagnostic test for neutralizing antibodies to AAV5.
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In March and April 2022, CSL Behring submitted marketing applications for etranacogene dezaparvovec in the U.S. and European Union. On March 28, 2022, CSL Behring announced that EMA had accepted the Marketing Authorization Application (“MAA”). On May 24, 2022, we announced that the FDA had accepted for review the Biologics License Application (“BLA”). In March and April 2022, we received the $55.0 million owed to us by CSL Behring related to the global regulatory submissions.
In July 2022, CSL Behring was notified by the Committee for Advanced Therapies (“CAT”) in Europe that they will be unable to complete their review in accordance with the accelerated assessment timetable and will now switch to a standard review procedures. In the United States, the BLA remains under Priority Review at this time having Breakthrough Designation Status.
In July 2022, following a comprehensive multi-day facility inspection, the EMA notified us that Good Manufacturing Practice (“GMP”) certification can be issued for our Lexington manufacturing site to produce commercial supply of etranacogene dezaparvovec. In August 2022, we completed the FDA pre-license inspection of the Lexington facility.
In August 2022, the GMP certification for the Amsterdam facility was amended to include release testing of the Product in the European Union following inspection by the Inspectie Gezondheidszorg en Jeugd (“IGJ”).
On September 6, 2022 as discussed above, CSL Behring notified us of its intent to transfer manufacturing technology related to the Product to a third-party contract manufacturer designated by CSL Behring and to retain the Company as a source for manufacturing.
Preclinical programs
In May 2022, we presented certain preclinical findings on our gene therapy candidates for refractory temporal lobe epilepsy, Fabry disease, Parkinson’s disease, Amyotrophic lateral sclerosis, and Alzheimer’s disease at the American Society of Gene and Cell Therapy Hybrid Congress.
In July and August 2022, respectively, we initiated Investigational New Drug-enabling (“IND-enabling”), Good Laboratory Practice (“GLP”) toxicology studies in non-human primates for our gene therapy candidates in refractory temporal lobe epilepsy and Fabry disease.
Covid pandemic
The coronavirus disease (“Covid”) caused by the severe acute respiratory syndrome coronavirus 2 (“Sars-CoV 2 virus”) was characterized as a pandemic by the World Health Organization (“WHO”) on March 11, 2020. Since then, various variants of the Sars-CoV 2 virus causing Covid have been identified.
The broader implications of Covid, including the implications from the various variants, on our results of
operations and overall financial performance remain uncertain. We have experienced and continue to experience increased lead times in the delivery of equipment and disposables that we use to manufacture materials for our various programs. Currently, these have not materially impacted our development timelines and we continue to adapt to the current environment to minimize the effect to our business. However, we may experience more pronounced disruptions in our operations in the future.
Russian-Ukrainian war
Our business is not directly impacted by the war as we do not operate in either Russia or the Ukraine. However, the war might potentially amplify the disruptive impact of the Covid pandemic.
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Intellectual Property
On May 11, 2021, Pfizer, Inc. filed three petitions at the United States Patent & Trademark Office (“USPTO”) seeking Inter Partes Review of U.S. Patent Nos. 9,982,248 (the “‘248 Patent”) and 10,465,180 (the “‘180 Patent” and together with the ‘248 Patent, the “Patents”). The petitions collectively seek to invalidate all claims of the Patents. In August 2021, we filed our responses asking the USPTO to deny institution of the IPR proceedings. On November 17, 2021, the Patent Trials and Appeals Board (“PTAB”) issued decisions granting institution on all three IPR proceedings. The parties completed briefing of the substantive issues in July 2022 and a hearing was held before the PTAB in August 2022. We expect a decision from the PTAB on or about November 2022.
Financial Overview
Key components of our results of operations include the following:
Three months ended September 30,
Nine months ended September 30,
2022
2021
2022
2021
(in thousands)
(in thousands)
Total revenues
$
1,449
$
1,989
$
3,738
$
466,311
Cost of contract revenues
—
—
—
(23,178)
Cost of contract manufacturing
(861)
—
(1,693)
—
Research and development expenses
(48,068)
(36,432)
(139,263)
(101,209)
Selling, general and administrative expenses
(13,324)
(12,023)
(36,802)
(42,323)
Net (loss) / income
(47,857)
(36,531)
(133,596)
321,381
As of September 30, 2022 and December 31, 2021, we had cash and cash equivalents of $440.3 million and $556.3 million, respectively. We had a net loss of $47.9 million and $133.6 in the three and nine months ended September 30, 2022, respectively, compared to net loss of $36.5 million and net income of $321.4 million for the same periods in 2021. As of September 30, 2022 and December 31, 2021, we had accumulated deficits of $588.7 million and $455.1 million, respectively.
We anticipate that our expenses will increase for the foreseeable future and will include costs related to:
● advancing AMT-130 for our Huntington’s disease gene therapy program into phase III clinical study;
● advancing our gene therapy programs for temporal lobe epilepsy and Fabry into Phase I/II clinical studies;
● advancing preclinical research and development for gene therapy product candidates targeting other diseases;
● continuing to invest in expanding, developing and optimizing our manufacturing capabilities and other enabling technologies, such as next-generation viral vectors, promoters and re-dosing;
● potentially acquiring or in-licensing rights to new therapeutic targets, product candidates and technologies; and
● making potential future milestone payments related to the acquisition of Corlieve, if any.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.
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Critical Accounting Policies and Estimates
In preparing our consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules
and regulations promulgated by the SEC we make assumptions, judgments and estimates that can have a significant impact on our net loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. A summary of our critical accounting policies as well as a discussion of our critical accounting estimates are presented in our Annual Report . There were no material changes to our critical accounting policies during the nine months ended September 30, 2022 or reasonably possible changes of our critical accounting estimates as of September 30, 2022 that could have had a material impact on our results of operations for the three and nine-month period ended September 30, 2022.
Cost of contract revenues
We expense contract fulfillment costs associated with the sale of the exclusive global rights to the Product recognized under the CSL Behring Agreement as cost of contract revenues.
Cost of contract manufacturing
Since April 1, 2022, we expense cost to manufacture the Product under the CSL Behring June 2020 Development and Commercial Supply Agreement as cost of contract manufacturing. We capitalize the cost to manufacture the Product as inventory to the extent we expect to realize probable future benefits.
Research and development expenses
We expense research and development (“R&D”) expenses as incurred. Research and development expenses include costs which relate to our primary activities of biopharmaceutical research and development. Our R&D expenses generally consist of costs incurred for the development of our target candidates, which include:
● employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
● costs incurred for laboratory research, preclinical and nonclinical studies, clinical trials, statistical analysis and report writing, and regulatory compliance costs incurred with clinical research organizations and other third-party vendors;
● costs incurred to conduct characterization, consistency and comparability studies;
● costs incurred for the development and improvement of our manufacturing processes and methods;
● costs incurred for the supply of materials for our target candidates;
● costs associated with research activities for enabling technology platforms, such as next-generation vectors, promoters and re-administration of gene therapies;
● costs associated with the rendering of collaboration services as well as the continued development of the Product between the Signing Date and Closing;
● facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies; and
● changes in the fair value of liabilities recorded in relation to our acquisition of Corlieve.
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Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including manufacturing campaigns, regulatory submissions and enrollment of patients in clinical trials. The successful development of our product candidates is highly uncertain. Estimating the nature, timing or cost of the development of any of our product candidates involves considerable judgement due to numerous risks and uncertainties associated with developing gene therapies, including the uncertainty of:
● the scope, rate of progress and expense of our research and development activities;
● our ability to successfully manufacture and scale-up production;
● clinical trial protocols, speed of enrollment and resulting data;
● the effectiveness and safety of our product candidates;
● the timing of regulatory approvals; and
● our ability to agree to ongoing development budgets with collaborators who share the costs of our development programs.
A change in the outcome of any of these variables with respect to our product candidates that we may develop, including as a result of the Covid pandemic, could mean a significant change in the expenses and timing associated with the development of such product candidate.
Selling, general and administrative expenses
Our general and administrative expenses consist principally of employee, office, consulting, legal and other
professional and administrative expenses. We incurred expenses associated with operating as a public company, including expenses for personnel, legal, accounting and audit fees, board of directors’ costs, directors' and officers' liability insurance premiums, Nasdaq listing fees, expenses related to investor relations and fees related to business development and maintaining our patent and license portfolio. Our selling costs in the prior year included employee expenses as well as professional fees related to the preparation of a commercial launch of etranacogene dezaparvovec and advisory fees related to obtaining the CSL Behring Agreement.
Other items, net
Our other income primarily consists of payments received to subsidize our research and development efforts and income from the subleasing of our Amsterdam facility. For the three and nine months ended September 30, 2021, other income consisted of an employee retention credit under the U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and for the nine months ended September 30, 2021, it also included the recognition of the equity stake received in VectorY B.V.
Our other expense primarily consists of expenses we incur in relation to our subleasing income.
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Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
The following table presents a comparison of our results of operations for the three months ended September 30, 2022 and 2021.
Three months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Total revenues
$
1,449
$
1,989
$
(540)
Operating expenses:
Cost of contract manufacturing
(861)
—
(861)
Research and development expenses
(48,068)
(36,432)
(11,636)
Selling, general and administrative expenses
(13,324)
(12,023)
(1,301)
Total operating expenses
(62,253)
(48,455)
(13,798)
Other income
1,485
1,680
(195)
Other expense
(199)
(214)
15
Loss from operations
(59,518)
(45,000)
(14,518)
Other non-operating items, net
11,332
8,558
2,774
Net loss before income tax expense
$
(48,186)
$
(36,442)
$
(11,744)
Income tax benefit / (expense)
329
(89)
418
Net loss
$
(47,857)
$
(36,531)
$
(11,326)
Revenue
Our revenue for the three months ended September 30, 2022 and 2021 was as follows:
Three months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Collaboration revenue
1,449
1,989
(540)
Total revenues
$
1,449
$
1,989
$
(540)
CSL Behring
We recogniz ed $0.7 million collaboration revenue in the three months ended September 30, 2022, compared to $0.5 million for the same period in 2021 from the CSL Behring Agreement. Since May 6, 2021, we recognize collaboration revenue related to services we provide in accordance with the CSL Behring Agreement.
BMS
We recognized $0.8 million collaboration revenue in the three months ended September 30, 2022 compared to $1.5 million for the three months ended September 30, 2021.
Cost of contract manufacturing
We incurred $0.9 million of cost of contract manufacturing related to the manufacture of the Product in the three months ended September 30, 2022, which we did not capitalize as inventory in accordance with our accounting policies, compared to nil cost of contract manufacturing in the three months ended September 30, 2021.
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Research and development expenses
Research and development expenses for the three months ended September 30, 2022 were $48.1 million, compared to $36.4 million for the same period in 2021. Other research and development expenses are separately classified in the table below. These other expenses are not allocated as they are deployed across multiple projects under development.
Three months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Huntington's disease (AMT-130)
4,330
2,720
1,610
Temporal lobe epilepsy (AMT-260)
2,499
92
2,407
Fabry disease (AMT-190)
549
114
435
Etranacogene dezaparvovec (AMT-060/061)
277
2,086
(1,809)
Other programs in preclinical development and platform related expenses
886
2,244
(1,358)
Total direct research and development expenses
$
8,541
$
7,256
$
1,285
Employee and contractor-related expenses
15,553
14,623
930
Facility expenses
6,482
4,813
1,669
Disposables
6,012
4,795
1,217
Fair value changes related to contingent consideration
5,503
416
5,087
Share-based compensation expense
3,730
3,248
482
Other expenses
2,247
1,281
966
Total other research and development expenses
$
39,527
$
29,176
$
10,351
Total research and development expenses
$
48,068
$
36,432
$
11,636
Direct research and development expenses
Huntington disease (AMT-130)
In the three months ended September 30, 2022, our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the United States and in Europe. In the three months ended September 30, 2021, our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the United States.
Temporal lobe epilepsy (AMT-260)
In the three months ended September 30, 2022 and September 30, 2021, we incurred $2.5 million and $0.1 million, respectively, for the preclinical development of temporal lobe epilepsy, which we acquired from Corlieve Therapeutics SAS (“Corlieve”) on July 30, 2021.
Fabry disease (AMT-190)
In the three months ended September 30, 2022 and September 30, 2021, we incurred $0.5 million and $0.1 million of costs, respectively, primarily related to our preclinical activities for the treatment of Fabry disease (AMT-190).
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Hemophilia B (AMT-060/061)
In the three months ended September 30, 2022 and September 30, 2021, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial and Manufacturing Development. Up to the Closing of the CSL Behring Agreement in May 2021, we also incurred costs related to the preparation of the global regulatory submissions and to prepare for the commercialization of the Product. After the Closing, CSL Behring is responsible for the clinical and regulatory activities and commercialization of the Product, with the Company managing the existing trials on behalf of CSL Behring. Direct research and development expenses related to clinical development incurred in the three months ended September 30, 2022 and September 30, 2021 are presented net of reimbursements due from CSL Behring.
I n the same periods in 2022 and 2021, we also incurred costs related to the long-term follow-up of patients in our Phase I/II clinical trial of AMT-060 and our Phase IIb clinical trial of etranacogene dezaparvovec. Our Phase IIb dose-confirmation study was initiated in January 2018 and dosing occurred in July and August 2018. Patients were dosed as part of our Phase I/II clinical trial of AMT-060 in 2015 and 2016. These costs are presented net of reimbursements due from CSL Behring.
Preclinical programs & platform development
In the three months ended September 30, 2022, we incurred $0.9 million of costs primarily related to our preclinical activities associated with product candidates for the treatment of various other research programs and technology innovation projects.
In the three months ended September 30, 2021, we incurred $2.2 million of costs primarily related to our preclinical activities associated with product candidates for the treatment of SCA3 (AMT-150), as well as various other research programs and technology innovation projects.
Other research & development expenses
● We incurred $15.6 million in personnel and contractor related expenses in the three months ended September 30, 2022, compared to $14.6 million for the same period in 2021. The increase was primarily a result of the recruitment of personnel to support the development of our product candidates;
● We incurred $6.5 million in operating expenses and depreciation expenses related to our rented facilities in the three months ended September 30, 2022, compared to $4.8 million in the same period in 2021 as a result of investments we made to expand our facilities;
● We incurred $6.0 million in disposable costs compared to $4.8 million for the same period in 2021 as we continue to expand our activities to support the development of our product candidates;
● We incurred $5.5 million of expenses in the three months ended September 30, 2022 related to an increase in the fair value of contingent consideration associated with the acquisition of Corlieve Therapeutics SAS (“Corlieve”), compared to $0.4 million in the same period in 2021;
● We incurred $3.7 million in share-based compensation expenses in the three months ended September 30, 2022, compared to $3.2 million for the same period in 2021. The increase was primarily a result of an increase in awards granted, including those to newly recruited personnel; and
● We incurred $2.2 million of other expenses for the three months ended September 30, 2022, compared to $1.3 million for the same period in 2021.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended September 30, 2022 were $13.3 million, compared to $12.0 million for the same period in 2021.
● We incurred $5.2 million in personnel and contractor related expenses in the three months ended September 30, 2022, compared to $3.8 million in the same period in 2021;
● We incurred $3.8 million in share-based compensation expenses in the three months ended September 30, 2022, compared to $2.7 million in the same period in 2021; and
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● We incurred $1.6 million in professional fees in the three months ended September 30, 2022, compared to $1.5 million in the same period in 2021. We regularly incur accounting, audit and legal fees associated with operating as a public company .
Other items, net
We recognized nil in other income related to the employee retention credit under the U.S. CARES Act in the three months ended September 30, 2022, compared to $1.3 million for the same period in 2021.
We recognized $1.3 million in other income from payments received from European authorities to subsidize our research and development efforts in the Netherlands in the three months ended September 30, 2022, compared to $0.0 million for the same period in 2021.
Other income also includes income from subleasing of a portion of our Amsterdam facility. We present expenses related to such income as other expense.
Other non-operating items, net
Our other non-operating items, net, for the three months ended September 30, 2022 and 2021 were as follows:
Three months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Interest income
$
39
$
46
$
(7)
Interest expense - Hercules long-term debt
(3,069)
(1,924)
(1,145)
Foreign currency gains, net
14,362
10,436
3,926
Total other non-operating income, net
$
11,332
$
8,558
$
2,774
We recognize interest income associated with our cash and cash equivalents.
We hold monetary items and enter into transactions in foreign currencies, predominantly in euros and U.S. dollars. We recognize foreign exchange results related to changes in these foreign currencies.
We recognized a net foreign currency gain, related to our borrowings from Hercules and our cash and cash equivalents as well as loans between entities within the uniQure group, of $14.4 million during the three months ended September 30, 2022, compared to a net gain of $10.4 million during the same period in 2021.
Income tax benefit / (expense)
We recognized $0.3 million of deferred tax benefit in the three months ended September 30, 2022, and $0.1 million of deferred tax expense for the same period in 2021.
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Comparison of the nine months ended September 30, 2022 and 2021
The following table presents a comparison of our results of operations for the nine months ended September 30, 2022 and 2021.
Nine months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Total revenues
$
3,738
$
466,311
$
(462,573)
Operating expenses:
Cost of contract revenues
—
(23,178)
23,178
Cost of contract manufacturing
(1,693)
—
(1,693)
Research and development expenses
(139,263)
(101,209)
(38,054)
Selling, general and administrative expenses
(36,802)
(42,323)
5,521
Total operating expenses
(177,758)
(166,710)
(11,048)
Other income
4,981
9,622
(4,641)
Other expense
(621)
(673)
52
(Loss) / income from operations
(169,660)
308,550
(478,210)
Non-operating items, net
34,801
16,391
18,410
(Loss) / income before income tax benefit / (expense)
$
(134,859)
$
324,941
(459,800)
Income tax benefit / (expense)
1,263
(3,560)
4,823
Net (loss) / income
$
(133,596)
$
321,381
$
(454,977)
Revenue
Our revenue for the nine months ended September 30, 2022 and 2021 was as follows:
Nine months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
License revenue
$
—
$
462,400
$
(462,400)
Collaboration revenue
3,738
3,911
(173)
Total revenues
$
3,738
$
466,311
$
(462,573)
CSL Behring
We did not recognize any license revenue related to the CSL Behring Agreement in the nine months ended September 30, 2022. In the nine months ended September 30, 2021, we recognized $462.4 million in license revenue related to the sale of the exclusive global rights to the Product (“License Sale”) on Closing of the CSL Behring Agreement in May 2021.
We recognized $2.1 million collaboration revenue in the nine months ended September 30, 2022, compared to $0.9 million for the same period in 2021. Since May 6, 2021, we recognize collaboration revenue related to services we provide in accordance with the CSL Behring Agreement.
BMS
We recognized $1.6 million collaboration revenue in the nine months ended September 30, 2022 compared to $3.0 million for the nine months ended September 30, 2021.
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Cost of contract revenues
We did not recognize any cost of contract revenues for the nine months ended September 30, 2022 compared to $23.2 million for the nine months ended September 30, 2021. The cost recorded in 2021 included $16.7 million of expenses related to payments owed to our licensors on Closing as well as $6.5 million of other external expenses incurred to fulfill the License Sale to CSL Behring.
Cost of contract manufacturing
We incurred $1.7 million of cost of contract manufacturing related to the manufacture of the Product in the nine months ended September 30, 2022, which we did not capitalize as inventory in accordance with our accounting policies, compared to nil cost of contract manufacturing in the nine months ended September 30, 2021.
Research and development expenses
Research and development expenses for the nine months ended September 30, 2022 were $139.3 million, compared to $101.2 million for the same period in 2021. Other research and development expenses are separately classified in the table below. These other expenses are not allocated as they are deployed across multiple projects under development.
Nine months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Huntington's disease (AMT-130)
$
15,721
$
7,161
$
8,560
Temporal lobe epilepsy (AMT-260)
11,394
92
11,302
Fabry disease (AMT-190)
1,664
252
1,412
Etranacogene dezaparvovec (AMT-060/061)
1,008
8,350
(7,342)
Other programs in preclinical development and platform related expenses
3,919
6,175
(2,256)
Total direct research and development expenses
$
33,706
$
22,030
$
11,676
Employee and contractor-related expenses
46,786
39,294
7,492
Facility expenses
17,150
13,836
3,314
Disposables
15,077
11,884
3,193
Share-based compensation expense
12,090
9,210
2,880
Fair value changes related to contingent consideration
7,510
416
7,094
Other expenses
6,944
4,539
2,405
Total other research and development expenses
$
105,557
$
79,179
$
26,378
Total research and development expenses
$
139,263
$
101,209
$
38,054
Direct research and development expenses
Huntington disease (AMT-130)
In the nine months ended September 30, 2022, our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the United States and in Europe. In the nine months ended September 30, 2021, our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the United States.
Temporal lobe epilepsy (AMT-260)
In the nine months ended September 30, 2022 and September 30, 2021, we incurred $11.4 million and $0.1 million, respectively, for the preclinical development of temporal lobe epilepsy, which we acquired from Corlieve on July 30, 2021.
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Fabry disease (AMT-190)
In the nine months ended September 30, 2022 and September 30, 2021, we incurred $1.7 million and $0.3 million of costs, respectively, primarily related to our preclinical activities for the treatment of Fabry disease (AMT-190).
Hemophilia B (AMT-060/061)
In the nine months ended September 30, 2022 and September 30, 2021, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial and Manufacturing Development. Up to the Closing of the CSL Behring Agreement in May 2021, we also incurred costs related to the preparation of the global regulatory submissions and to prepare for the commercialization of the Product. After the Closing, CSL Behring is responsible for the clinical and regulatory activities and commercialization of the Product, with the Company managing the existing trials on behalf of CSL Behring. Direct research and development expenses related to clinical development incurred in the nine months ended September 30, 2022 and September 30, 2021 are presented net of reimbursements due from CSL Behring.
In the same periods in 2022 and 2021, we also incurred costs related to the long-term follow-up of patients in our Phase I/II clinical trial of AMT-060 and our Phase IIb clinical trial of etranacogene dezaparvovec. Our Phase IIb dose-confirmation study was initiated in January 2018 and dosing occurred in July and August 2018. Patients were dosed as part of our Phase I/II clinical trial of AMT-060 in 2015 and 2016. These costs are presented net of reimbursements due from CSL Behring.
Preclinical programs & platform development
In the nine months ended September 30, 2022, we incurred $3.9 million of costs primarily related to our preclinical activities associated with product candidates for various other research programs and technology innovation projects.
In the nine months ended September 30, 2021, we incurred $6.2 million of costs primarily related to our preclinical activities associated with product candidates for the treatment of SCA3 (AMT-150), as well as various other research programs and technology innovation projects.
Other research & development expenses
● We incurred $46.8 million in personnel and contractor related expenses in the nine months ended September 30, 2022, compared to $39.3 million for the same period in 2021. The increase was primarily a result of the recruitment of personnel to support the development of our product candidates;
● We incurred $17.2 million in operating expenses and depreciation expenses related to our rented facilities in the nine months ended September 30, 2022, compared to $13.8 million in the same period in 2021 as a result of investments we made to expand our facilities;
● We incurred $15.1 million in disposable costs compared to $11.9 million for the same period in 2021 as we continue to expand our activities to support the development of our product candidates;
● We incurred $12.1 million in share-based compensation expenses in the nine months ended September 30, 2022, compared to $9.2 million for the same period in 2021. The increase was primarily a result of an increase in awards granted, including those to newly recruited personnel;
● We incurred $7.5 million of expenses in the nine months ended September 30, 2022 related to an increase in the fair value of contingent consideration associated with the acquisition of Corlieve Therapeutics SAS (“Corlieve”), compared to $0.4 million for the same period in 2021; and
● We incurred $6.9 million of other expenses for the nine months ended September 30, 2022, compared to $4.5 million for the same period in 2021.
Selling, general and administrative expenses
Selling, general and administrative expenses for the nine months ended September 30, 2022 were $36.8 million, compared to $42.3 million for the same period in 2021.
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● We incurred $14.8 million in personnel and contractor related expenses in the nine months ended September 30, 2022, compared to $11.8 million in the same period in 2021. The increase in the nine months ended September 30, 2022, relates to the recruitment of personnel;
● We incurred $9.9 million in share-based compensation expenses in the nine months ended September 30, 2022, compared to $9.5 million in the same period in 2021;
● We incurred $4.3 million in professional fees in the nine months ended September 30, 2022, compared to $6.5 million in the same period in 2021. We regularly incur accounting, audit and legal fees associated with operating as a public company. The decrease from the prior period is primarily related to a decrease in professional fees related to the licensing transaction with CSL Behring; and
● We incurred nil financial advisory fees in relation to our licensing transaction with CSL Behring in the nine months ended September 30, 2022, compared to $4.5 million in the same period in 2021.
Other items, net
In the nine months ended September 30, 2022, we recognized $0.3 million in other income in relation to the equity stake received in VectorY B.V. in conjunction with a settlement agreement entered into in April 2021 compared to $3.0 million such income for the same period in 2021.
We recognized nil in other income related to the employee retention credit under the U.S. CARES Act in the nine months ended September 30, 2022, compared to $2.6 million in other income for the same period in 2021.
We recognized $3.9 million in other income from payments received from European authorities to subsidize our research and development efforts in the Netherlands in the nine months ended September 30, 2022, compared to $3.0 million for the same period in 2021.
Other income also includes income from subleasing of a portion of our Amsterdam facility. We present expenses related to such income as other expense.
Other non-operating items, net
Our other non-operating items, net, for the nine months ended September 30, 2022 and 2021 were as follows:
Nine months ended September 30,
2022
2021
2022 vs 2021
(in thousands)
Interest income
$
117
$
123
$
(6)
Interest expense
(8,279)
(5,377)
(2,902)
Foreign currency gains, net
42,328
21,645
20,683
Other non-operating gains
635
—
635
Total non-operating income, net
$
34,801
$
16,391
$
18,410
We recognize interest income associated with our cash and cash equivalents.
We hold monetary items and enter into transactions in foreign currencies, predominantly in euros and U.S. dollars. We recognize foreign exchange results related to changes in these foreign currencies.
We recognized a net foreign currency gain, related to our borrowings from Hercules and our cash and cash equivalents as well as loans between entities within the uniQure group, of $42.3 million during the nine months ended September 30, 2022, compared to a net gain of $21.6 million during the same period in 2021.
We recognize fair value changes related to the derivative financial liability related to a contingent payment due to BMS upon the consummation of a change of control transaction (“CoC-payment”) as described elsewhere in this Quarterly Report on Form 10-Q.
Income tax benefit / (expense)
We recognized $1.3 million of deferred tax benefit in the nine months ended September 30, 2022, and $3.6 million of deferred tax expense for the same period in 2021.
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Financial Position, Liquidity and Capital Resources
As of September 30, 2022, we had cash, cash equivalents and restricted cash of $443.4 million. U ntil such time, if ever, as we can generate substantial cash flows from successfully commercializing our proprietary product candida tes, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution, and licensing arrangements. We believe that our cash and cash equivalents will fund our operations into the first half of 2025 assuming the achievement of $100.0 million of first commercial sale milestone in the United States and $75.0 million of first commercial sale milestone in any of the five contractually defined European countries as of or prior to July 1, 2023 under the CSL Behring Agreement. Our material cash requirements include the following contractual and other obligations:
Debt
As of September 30, 2022, we had an outstanding loan amount owed to Hercules Capital, Inc. (“Hercules”) for an aggregate principal amount of $100.0 million. We are contractually required to repay the $100.0 million in equal installments between December 2024 and December 2025, or in full in December 2025 if, prior to June 30, 2024, either (a) the Biologics License Application (“BLA”) for AMT-061 is approved by the FDA, or (b) AMT-130 is advanced into a pivotal trial. Future interest payments and financing fees associated with the loan total $38.0 million, with $13.6 million payable within 12 months.
Leases
We entered into lease arrangements for facilities, including corporate, manufacturing and office space. As of September 30, 2022, we had fixed lease payment obligations of $58.6 million, with $8.0 million payable within 12 months.
Commitments related to Corlieve acquisition (nominal amounts)
In relation to the Corlieve acquisition, we entered into commitments to make payments to the former shareholders upon the achievement of certain contractual milestones. The commitments include payments related to post-acquisition services that we agreed to as part of the Stock Purchase Agreement between the Company and Corlieve (“SPA”). As of September 30, 2022, our commitment amounts include up to $40.4 million in potential milestone payments through Phase I/II development and $156.8 million in potential milestone payments associated with Phase III development and the approvals of AMT-260 in the United States and European Union. The timing of achieving these milestones and consequently the timing of payments, as well as whether the milestone will be achieved at all, is generally uncertain. These payments are owed in Euro and have been translated at the foreign exchange rate as of September 30, 2022, of $0.98/€1.00. As of September 30, 2022, we expect these obligations will become payable between 2023 and 2031. If and when due, up to 25% of the milestone payments can be settled with our ordinary shares.
Commitments related to licensors and financial advisors
We have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing of a BLA, approval by the FDA or product launch) or as a result of collecting payments related to our License Sale to CSL Behring. We also owe payments to a financial advisor related to any payments we will collect under the CSL Behring Agreement.
The table below summarizes our consolidated cash flow data for the nine months ended:
Nine months ended September 30,
2022
2021
(in thousands)
Cash, cash equivalents and restricted cash at the beginning of the period
$
559,353
$
247,680
Net cash (used in) / generated from operating activities
(90,380)
335,049
Net cash used in investing activities
(14,522)
(63,834)
Net cash generated from financing activities
844
64,964
Foreign exchange impact
(11,876)
(2,589)
Cash, cash equivalents and restricted cash at the end of period
$
443,419
$
581,270
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We had previously incurred losses and cumulative negative cash flows from operations since our business was founded by our predecessor entity AMT Therapeutics (“AMT”) Holding N.V. in 1998, with the exception of generating income in 2021 after receiving the upfront payment upon Closing of the CSL Behring Agreement. We continue to incur losses in the current period. We recorded a net loss of $47.9 million and $133.6 million in the three and nine months ended September 30, 2022, compared to a net loss of $36.5 million and net income of $321.4 million during the same periods in 2021. As of September 30, 2022, we had an accumulated deficit of $588.7 million.
Sources of liquidity
From our first institutional venture capital financing in 2006 through May 2021, we funded our operations primarily through private and public placements of equity securities and convertible and other debt securities as well as payments from our collaboration partners. In May 2021, we received a $462.4 million cash payment due from CSL Behring upon Closing. We have collected $55.0 million related to CSL Behring’s global regulatory submissions for etranacogene dezaparvovec in March and April 2022 and are eligible to receive additional milestone payments, as well as royalties on net sales from CSL Behring.
On March 1, 2021, we entered into a Sales Agreement with SVB Leerink LLC (“SVB Leerink”) with respect to an at the market (“ATM”) offering program, under which we may, from time to time in our sole discretion, offer and sell through SVB Leerink, acting as agent, our ordinary shares, up to an aggregate offering price of $200.0 million. We will pay SVB Leerink a commission equal to 3% of the gross proceeds of the sales price of all ordinary shares sold through it as a sales agent under the Sales Agreement. In the year ended December 30, 2021, we received net proceeds of $29.6 million from the issuance of 921,730 ordinary shares that took place during March and April 2021.
On January 29, 2021, we drew down $35 million under our 2021 amendment (“2021 Amended Facility”) with Hercules. We drew down a further $30 million under our December 2021 amendment (“2021 Restated Facility”) with Hercules in December 2021.
We are subject to certain covenants under our 2021 Restated Facility and may become subject to covenants under any future indebtedness that could limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, which could adversely impact our ability to conduct our business. In addition, our pledge of assets as collateral to secure our obligations under the 2021 Restated Facility may limit our ability to obtain debt financing. The 2021 Restated Facility permits us to issue up to $500.0 million of convertible debt as well as to enter into a transaction to sell the royalties under the CSL Behring agreement subject to certain conditions .
To the extent we need to finance our cash needs through equity offerings or debt financings, such financing may be subject to unfavorable terms including without limitation, the negotiation and execution of definitive documentation, as well as credit and debt market conditions, and we may not be able to obtain such financing on terms acceptable to us or at all. If financing is not available when needed, including through debt or equity financings, or is available only on unfavorable terms, we may be unable to meet our cash needs. If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
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Net Cash used in operating activities
Net cash used in operating activities was $90.4 million for the nine months ended September 30, 2022 and consisted of net loss of $133.6 million adjusted for non-cash items, including depreciation and amortization expense of $6.2 million, share-based compensation expense of $22.3 million, changes in the fair value of contingent consideration and the derivative financial liability of $6.9 million, unrealized foreign exchange gains of $36.4 million and a change in deferred taxes of $1.3 million. Net cash generated from operating activities also included favorable changes in operating assets and liabilities of $46.1 million. There was a net decrease in accounts receivable and contract asset, prepaid expenses, and other current assets and receivables of $42.0 million, primarily related to the collection of $55.0 million of the contract asset related to CSL milestones of $55.0 million in March 2022 and April 2022. There was an increase in inventories of $4.1 million related to the production of etranacogene dezaparvovec under the CSL Behring Agreement. These changes also relate to a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $8.2 million, primarily related to an increase in accounts payable.
Net cash generated from operating activities was $335.0 million for the nine months ended September 30, 2021 and consisted of a net income of $321.4 million adjusted for non-cash items, including depreciation and amortization expense of $5.4 million, share-based compensation expense of $18.7 million, a change in fair value of contingent consideration of $0.4 million, unrealized foreign exchange gains, net of $23.2 million, deferred tax expense of $3.6 million and other non-cash items of $2.9 million. Net cash generated from operating activities also included favorable changes in operating assets and liabilities of $11.6 million. These changes primarily related to a net increase in accounts receivable, prepaid expenses, and other current assets and receivables of $2.0 million primarily related to various prepayments and a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $13.6 million primarily related to an increase in amounts to be paid to licensors upon the CSL Behring Closing and an increase in various other accruals for services provided by vendors and personnel accruals. Net income primarily consisted of $462.4 million license revenue recognized on Closing.
Net cash used in investing activities
In the nine months ended September 30, 2022, we used $14.5 million in our investing activities compared to $63.8 million for the same period in 2021.
Nine months ended September 30,
2022
2021
(in thousands)
Build out of Amsterdam site
$
(8,265)
(9,853)
Build out of Lexington site
(4,357)
(4,032)
Acquisition of Corlieve, net of cash acquired
(1,900)
(49,949)
Total investments
$
(14,522)
$
(63,834)
The build out of the Amsterdam site and Lexington site consumed $8.3 million and $4.4 million cash respectively during the nine months ended September 30, 2022, compared to $9.9 million and $4.0 million for the same period in 2021.
We paid EUR 42.1 million ($49.9 million), net of EUR 2.8 million ($3.4 million) of cash acquired, during the nine months ended September 30, 2021 to acquire 97.7% of the outstanding shares of Corlieve on July 30, 2021.
We paid EUR 1.8 million ($1.9 million) to acquire the remaining outstanding shares of Corlieve in February, July and September 2022.
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Net cash generated from financing activities
In the nine months ended September 30, 2022, we generated $0.8 million in our financing activities compared to $65.0 million for the same period in 2021.
Nine months ended September 30,
2022
2021
(in thousands)
Cash flows from financing activities
Proceeds from issuance of shares related to employee stock option and purchase plans
$
844
$
1,971
Proceeds from loan increment, net of debt issuance costs
-
34,603
Proceeds from issuance of ordinary shares, net of issuance costs
-
29,565
Repayment of debt assumed through Corlieve Transaction
-
(1,175)
Net cash generated from financing activities
$
844
$
64,964
During the nine months ended September 30, 2022, we received $0.8 million from the exercise of options to purchase ordinary shares in relation to our share incentive plans compared to $2.0 million for the same period in 2021.
In January 2021, we received $34.6 million net proceeds from the Hercules 2021 Amended Facility (nil for same period in 2022).
We received net proceeds of $29.6 million associated with our ATM offering in March and April 2021 (nil for same period in 2022).
Funding requirements
Our future capital requirements will depend on many factors, including but not limited to:
● contractual milestone payments and royalties we might be owed in accordance with the CSL Behring Agreement, which are subject to CSL Behring obtaining required regulatory approvals, including MAA approval from the EMA, BLA approval from the FDA, and approval of a diagnostic test for neutralizing antibodies from the FDA;
● earnout payments we might owe the former shareholders of Corlieve, which are subject to the achievement of specific development and regulatory milestones;
● repayments of the principal amount of our venture debt loan with Hercules, which following the December 15, 2021 amendment will be due in equal installments between December 2024 and December 2025 or in full in December 2025 if, prior to June 30, 2024, either (a) the BLA for AMT-061 is approved by the FDA or (b) AMT-130 is advanced into a pivotal trial;
● the scope, timing, results, and costs of our current and planned clinical trials, including those for AMT-130 in Huntington’s disease;
● the extent to which we acquire or in-license other businesses, products, product candidates or technologies;
● the amount and timing of revenue, if any, we receive from commercial sales of any product candidates for which we, or our collaboration partner, receives marketing approval in the future;
● the amount and timing of revenue, if any, we receive from manufacturing products for CSL Behring;
● the scope, timing, results and costs of preclinical development and laboratory testing of our additional product candidates;
● the need for additional resources and related recruitment costs to support the preclinical and clinical development of our product candidates;
● the need for any additional tests, studies, or trials beyond those originally anticipated to confirm the safety or efficacy of our product candidates and technologies;
● the cost, timing and outcome of regulatory reviews associated with our product candidates;
● our ability to enter into collaboration arrangements in the future;
● the costs and timing of preparing, filing, expanding, acquiring, licensing, maintaining, enforcing, and prosecuting patents and patent applications, as well as defending any intellectual property-related claims;
● the costs associated with maintaining quality compliance and optimizing our manufacturing processes, including the operating costs associated with our Lexington, Massachusetts manufacturing facility; and
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● the costs associated with increasing the scale and capacity of our manufacturing capabilities.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.