What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-05-07 · 169 added, 151 removed, 136 unchanged (70% of the section changed)

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As with so many other companies throughout the U.S.

and globally, our business operations have been affected by the COVID-19 pandemic.

We have experienced interruptions to our clinical trial activities, primarily due to delays or disruptions to patient enrollment as a result of shelter-in-place orders or quarantines, and we anticipate that certain data from our gene therapy product candidates may be delayed as a result of the COVID-19 pandemic.

and globally, our business operations have been and continue to be affected by the COVID-19 pandemic.

In addition to some impact on our preclinical manufacturing activities and certain regulatory interactions, we have experienced interruptions to our clinical trial activities, primarily due to delays or disruptions to patient enrollment and dosing as a result of shelter-in-place orders or quarantines, and we anticipate that certain data from our gene therapy product candidates may be delayed as a result of the COVID-19 pandemic.

For instance, dosing using prophylactic steroids for our fourth cohort of patients in our Phase 1/2 study for DTX301is currently on hold as a result of COVID-19.

Although we have not experienced significant supply interruptions to date, certain of our third-party manufacturers or suppliers have prioritized and allocated more resources and capacity to supply drug product or raw materials to other companies engaged in the study of potential treatments or vaccinations for COVID-19.

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Approved Therapies and Clinical Product Candidates

Our current approved therapies and clinical-stage pipeline consist of three product categories:

biologics, small molecules, and gene therapy product candidates.

Our current approved therapies and clinical-stage pipeline consist of four product categories:

biologics, small molecules, gene therapy, and nucleic acid product candidates.

Our biologic products include approved therapies Crysvita® (burosumab) and Mepsevii® (vestronidase alfa):

Crysvita is an antibody targeting fibroblast growth factor 23, or FGF23, developed for the treatment of X-linked hypophosphatemia, or XLH, a rare, hereditary, progressive and lifelong musculoskeletal disorder characterized by renal phosphate wasting caused by excess FGF23 production.

Crysvita is approved in the United States for the treatment of XLH in adult and pediatric patients six months of age and older, and in Canada for the treatment of XLH in adult and pediatric patients one year of age and older.

Crysvita is an antibody targeting fibroblast growth factor 23, or FGF23, developed for the treatment of X-linked hypophosphatemia, or XLH, and tumor-induced osteomalacia, or TIO, both of which are disorders characterized by renal phosphate wasting caused by excess FGF23 production.

Crysvita is approved in the United States for the treatment of XLH, a rare, hereditary, progressive and lifelong musculoskeletal disorder, in adult and pediatric patients six months of age and older, and in Canada for the treatment of XLH in adult and pediatric patients one year of age and older.

In the European Union, or the EU, and the United Kingdom, Crysvita is conditionally approved for the treatment of XLH with radiographic evidence of bone disease in children one year of age and older and adolescents with growing skeletons.

The European Medicine Agency, or EMA, has accepted the application submitted by our partner, Kyowa Kirin International, or Kyowa Kirin, to expand the label to include adults with XLH in the EU and the United Kingdom.

On July 24, 2020, the Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion to expand the use of Crysvita for the treatment of XLH in adolescents and adults.

This could lead to an expansion of the current market authorization for the treatment XLH in children 1 year of age and older and adolescents with growing skeletons.

A formal decision from the European Commission is expected in the second half of 2020.

In Brazil, Crysvita is approved for treatment of XLH in adult and pediatric patients one year of age and older.

We have submitted regulatory filings in various other Latin American countries.

Crysvita was approved by the U.S.

Food and Drug Administration (FDA) on June 18, 2020 for the treatment of FGF23-related hypophosphatemia in tumor-induced osteomalacia, or TIO, associated with phosphaturic mesenchymal tumors that

cannot be curatively resected or localized in adults and pediatric patients 2 years of age and older.

TIO can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness.

We are collaborating with Kyowa Kirin Co., Ltd., or KKC (formerly Kyowa Hakko Kirin Co., Ltd., or KHK), and Kyowa Kirin, a wholly owned subsidiary of KKC, on the development and commercialization of Crysvita globally.

Crysvita is also being developed for the treatment of tumor-induced osteomalacia, or TIO.

TIO results from typically benign tumors that produce excess levels of FGF23, which can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness.

Food and Drug Administration, or FDA, has accepted the supplemental Biologics License Application, or sBLA, and has assigned priority review designation with a Prescription Drug

User Fee Act, or PDUFA, target date of June 18, 2020.

The FDA has not indicated, up to this time, that any inspections would be required for completion of their review.

Mepsevii is an intravenous, or IV, enzyme replacement therapy, developed for the treatment of Mucopolysaccharidosis VII, also known as MPS VII or Sly syndrome, a rare lysosomal storage disease that often leads to multi-organ dysfunction, pervasive skeletal disease, and death.

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In Brazil, Mepsevii is approved for the treatment of MPS VII for patients of all ages.

Our small molecule pipeline includes UX007, which is in clinical development for the treatment of long-chain fatty acid oxidation disorders, or LC-FAOD:

UX007 is a synthetic triglyceride with a specifically designed chemical composition being studied for the treatment of LC-FAOD, which is a set of rare metabolic diseases that prevents the conversion of fat into energy and can cause low blood sugar, muscle rupture, and heart and liver disease.

The FDA has accepted our New Drug Application, or NDA for the treatment of LC-FAOD, and has assigned a Prescription Drug User Fee Act, or PDUFA, date of July 31, 2020.

Our small molecule products include the approved therapy Dojolvi™ (triheptanoin):

Dojolvi, formerly known as UX007, is a highly purified, synthetic, 7-carbon fatty acid triglyceride specifically designed to provide medium-chain, odd-carbon fatty acids as an energy source and metabolite replacement for people with long-chain fatty acid oxidation disorders, or LC-FAOD, which is a set of rare metabolic diseases that prevents the conversion of fat into energy and can cause low blood sugar, muscle rupture, and heart and liver disease.

The FDA approved Dojolvi as a source of calories and fatty acids for the treatment of pediatric and adult patients with molecularly confirmed LC-FAOD on June 30, 2020 and in July 2020, we announced that the product is commercially available in the United States.

We have submitted Dojolvi to the Brazilian Health Regulatory Agency (ANVISA) seeking marketing authorization.

In Canada, we have been granted priority review have filed a new drug submission.

We are also continuing discussions with EU regulatory authorities.

The anticipated clinical and manufacturing inspections for UX007 have been successfully completed and up to this time, the FDA has not indicated that any additional inspections would be required for completion of their review.

We are not currently aware of any changes in the FDA review process or timing of the review of UX007 because of the COVID-19 pandemic.

Our gene therapy pipeline includes DTX301 and DTX401 in clinical development for the treatment of two diseases:

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Patients with OTC deficiency suffer from acute hyperammonemic episodes that can lead to hospitalization, adverse cognitive and neurological effects, and death.

We have reported positive data from the three dose cohorts of the Phase 1/2 study, with up to six responders of the nine patients dosed in the study.

A fourth cohort of three patients at the 1.0 × 10^13 GC/kg dose is planned, using prophylactic steroids, and data is expected to be available in the second half of 2020, barring any potential delays related to the COVID-19 pandemic.

We estimate that there are approximately 10,000 patients in the developed world with OTC deficiency, of which we estimate approximately 80% are classified as late-onset, our target population.

DTX301 has received Orphan Drug Designation in both the United States and in the EU and the United Kingdom and Fast Track Designation in the United States.

We have reported positive data from the three dose cohorts of the Phase 1/2 study, with six responders of the nine patients dosed in the study and all three patients at the highest dose cohort.

A fourth cohort of three patients at the same cohort 3 dose of 1.0 × 10^13 GC/kg is planned using prophylactic steroids.

Dosing is delayed due to COVID-19 but we currently expect to release data by the end of 2020 .

DTX401 is an AAV8 gene therapy clinical candidate for the treatment of patients with glycogen storage disease type Ia, or GSDIa, a disease that arises from a defect in G6Pase, an essential enzyme in glycogen and glucose metabolism.

GSDIa is the most common glycogen storage disease.

We have reported positive data from the first and second dose cohorts of the Phase 1/2 study, with all patients showing a clinical response with improvements in glucose control and other metabolic parameters compared to baseline.

The confirmatory expansion cohort of three patients at the second cohort dose of 6.0 × 10^12 GC/kg dose is ongoing, and we expect certain data to be available from this cohort in the second quarter of 2020.

Additional data may not be available then due to COVID-19 pandemic related delays in patient site visits.

GSDIa is the most common glycogen storage disease , with an estimated 6,000 patients in the developed world affected by GSDIa.

DTX401 has been granted Orphan Drug Designation in both the United States and in the EU and the United Kingdom, Regenerative Medicine Advanced Therapy (RMAT) designation and Fast Track designation in the United States .

We have reported positive data from three cohorts at two dose levels of the Phase 1/2 study, with all patients showing a clinical response with improvements in glucose control and other metabolic parameters compared to baseline.

The confirmatory expansion cohort of three patients at the second cohort dose of 6.0 × 10^12 GC/kg dose is ongoing, and we expect longer-term data to be available from this cohort in the second half of 2020.

Our nucleic acid pipeline includes the option to acquire GTX-102 in clinical development for the treatment of Angelman syndrome:

GTX-102 is an antisense oligonucleotide, or ASO, that is being developed for the treatment of Angelman syndrome, a debilitating and rare neurogenetic disorder caused by loss-of-function of the maternally inherited allele of the UBE3A gene.

There are an estimated 60,000 patients in the developed world affected by Angelman syndrome.

GTX-102 was granted Fast Track designation, Orphan Drug Designation and Rare Pediatric Disease Designation from the FDA.

GTX-102 is being developed in collaboration with GeneTx Biotherapeutics LLC, or GeneTx.

GeneTx has enrolled the first patient in the Phase 1/2 study, and preliminary data from the first cohorts of the study are expected in the first half of 2021, provided the COVID-19 pandemic does not cause delays in additional site activation or delays in data collection.

The first two cohorts in the Phase 1/2 study have been fully enrolled with all patients having received multiple doses.

Safety and efficacy data from the first two dose escalating cohorts are currently being evaluated and enrollment and dosing at the next dose levels are expected to resume shortly.

Preliminary data from the first cohorts of the study are expected in the first half of 2021, provided the COVID-19 pandemic does not cause delays in additional site activation or delays in data collection.

The following table summarizes our approved products and clinical product candidate pipeline:

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Crysvita for the treatment of tumor-induced osteomalacia, or TIO

We are also developing Crysvita for the treatment of TIO.

TIO results from typically benign tumors that produce excess levels of FGF23, which can lead to severe hypophosphatemia, osteomalacia, bone fractures, fatigue, bone and muscle pain, and muscle weakness.

There are cases in which resection of the tumor is not feasible or recurrence of the tumor occurs after resection.

In patients for whom the tumor is inoperable, the current standard of care consists of oral phosphate and/or vitamin D replacement.

There are approximately 2,000 to 4,000 patients with TIO in the developed world.

In February 2020, we announced that the FDA accepted the sBLA for Crysvita for the treatment of TIO, and assigned priority review designation with a PDUFA target date of June 18, 2020.

The FDA has not indicated, up to this time, that any inspections would be required for completion of their review.

We are not currently aware of any changes in the FDA review process or timing of the review for the TIO indication because of the COVID-19 pandemic.

In June 2020 we and Kyowa Kirin announced the FDA approval of Crysvita for the treatment of fibroblast growth factor 23 (FGF23)-related hypophosphatemia in tumor-induced osteomalacia (TIO) associated with phosphaturic mesenchymal tumors that cannot be curatively resected or localized in adults and pediatric patients 2 years of age and older.

On July 24, 2020, the CHMP issued a positive opinion to expand the use of Crysvita for the treatment of XLH in adolescents and adults.

This could lead to an expansion of the current market authorization for the treatment XLH in children 1 year of age and older and adolescents with growing skeletons.

A formal decision from the European Commission is expected in the second half of 2020.

Dojolvi for the treatment of Long-Chain Fatty Acid Oxidation Disorders (LC-FAOD)

In June 2020 we announced the FDA approval of Dojolvi for the treatment of pediatric and adult patients for all forms of LC-FAOD with a molecularly-confirmed diagnosis.

Dojolvi is the first FDA-approved therapy for these lifelong and life-threatening genetic disorders.

Dojolvi has been submitted for approval with ANVISA in Brazil.

In Canada, a new drug submission was filed in July 2020 and Dojolvi has been granted priority review by Health Canada.

DTX301 for the treatment of ornithine transcarbamylase, or OTC, deficiency

DTX301 is an AAV8 gene therapy product candidate designed for the treatment of patients with ornithine transcarbamylase, or OTC, deficiency.

OTC is part of the urea cycle, an enzymatic pathway in the liver that converts excess nitrogen, in the form of ammonia, to urea for excretion.

OTC deficiency is the most common urea cycle disorder and leads to increased levels of ammonia.

Patients with OTC deficiency suffer from acute hyperammonemic episodes that can lead to hospitalization, adverse cognitive and neurological effects, and death.

We estimate that there are approximately 10,000 patients in the developed world with OTC deficiency, of which we estimate approximately 80% are classified as late-onset, our target population.

DTX301 has received Orphan Drug Designation in both the United States and in the EU and the United Kingdom and Fast Track Designation in the United States.

In January 2020, we announced data from the third dose cohort and longer-term data from the first two dose cohorts of the Phase 1/2 study of DTX301.

The data demonstrated that up to six of the nine patients demonstrated a response as of the data cutoff date of December 9, 2019.

In Cohort 3 (n=3 , dose of 1.0 × 10^13 GC/kg ), there were two confirmed female responders as well a third potential male responder who requires longer-term follow-up to confirm response status.

In Cohort 2 ( n=3 , dose of 6.0 × 10^12 GC/kg ), one female patient newly demonstrated a response starting at Week 52 which was confirmed at Week 78.

Two previously disclosed responders in Cohort 1 ( n=3 , dose of 2.0 × 10^12 GC/kg ) and Cohort 2 have remained clinically and metabolically stable at 104 and 78 weeks, respectively.

As of the data cutoff date, there have been no infusion-related adverse events and no treatment-related serious adverse events reported in the study.

All adverse events have been Grade 1 or 2.

All three patients in Cohort 3 had mild, clinically asymptomatic elevations in ALT levels, similar to what has been observed in other programs using AAV-based gene therapy.

All three patients have been responding to reactive tapering courses of steroids, and all patients remain clinically stable.

A fourth cohort of three patients at the 1.0 × 10^13 GC/kg dose is planned, using prophylactic steroids.

Patients will receive an 8-week tapering regimen of prophylactic steroids, starting at least 5 days prior to dosing with DTX301 at a starting steroid dose of 60 mg/day.

Dosing in this cohort is currently on hold, but data are still expected in the second half of 2020, barring significant further delays related to the COVID-19 pandemic.

We have also had discussions with the FDA regarding the potential Phase 3 study design.

Ammonia is expected to be a primary endpoint based on direct FDA feedback to date, with ureagenesis as a measure of biologic activity that supports the decision for patients to discontinue alternate pathway medications.

In June 2020, we announced updated positive data from the ongoing Phase 1/2 study at the American Society of Gene & Cell Therapy (ASGCT) annual meeting.

The updated data confirmed that all three patients in the third dose cohort (1.0 x 10^13 GC/kg) are responders to DTX301 as shown by sustained meaningful increases in the rate of ureagenesis or reductions in ammonia levels.

Six of nine patients across all three cohorts have now responded to the gene therapy, including three females and three males.

complete responders, those who have discontinued all ammonia scavengers and liberalized their diets, remain clinically and metabolically stable after longer-term follow-up , up to 130 weeks for the longest patient .

A fourth cohort of three patients at the same Cohort 3 dose is planned using prophylactic steroids.

Dosing is delayed due to COVID-19 but we currently expect to release data by the end of 2020.

We intend to hold an end-of-phase 2 meeting with the FDA based on the first three cohorts, with Phase 3 study initiation currently expected in the first half of 2021.

DTX401 for the treatment of glycogen storage disease type Ia, or GSDIa

In May 2020, we announced positive data from the confirmatory cohort in the ongoing Phase 1/2 study at the ASGCT annual meeting.

The data demonstrated increased time to hypoglycemia and substantial reductions in cornstarch usage.

Prolonged periods of hyperglycemia were observed in Cohort 3 with the implementation of continuous glucose monitoring (CGM), which is indicative of early transgene expression and glucose release from the liver.

The early transgene expression resulted in faster cornstarch reductions in Cohort 3, with a mean reduction of 57% at week 12 compared with 38% and 14% in the first and second cohorts, respectively.

Across all three cohorts in the study, 100 percent of patients have demonstrated meaningful and sustained cornstarch regimens over time and significant increases in time to hypoglycemia.

After longer-term follow- up, four of six patients in the first two cohorts have discontinued daytime cornstarch.

Additional data on Cohort 3 are expected to be released in the second half of 2020, barring delays related to COVID-19.

We also intend to hold an end-of-Phase 2 meeting with the FDA and potentially initiate a Phase 3 study in early 2021, depending on the restrictions and limitations due to COVID-19.

GTX-102 for the treatment of Angelman Syndrome

GTX-102, is an antisense oligonucleotide, or ASO, that is being developed for the treatment of Angelman syndrome, a debilitating and rare neurogenetic disorder, in collaboration with GeneTx Biotherapeutics LLC, or GeneTx.

In January 2020, we announced that GeneTx’s IND Application for GTX-102 was filed with the FDA and is now active.

In March 2020, we announced that the first patient in the Phase 1/2 study was dosed.

Preliminary data from the first cohorts in the study are expected in the first half of 2021, provided the COVID-19 pandemic does not cause delays in additional site activation or delays in data collection.

In May 2020, we announced that the FDA granted Fast Track designation to GTX-102 for the treatment of Angelman syndrome.

Preclinical Pipeline Updates

UX701 for the treatment of Wilson Disease

UX701 is in preclinical development for Wilson disease, a rare inherited disorder caused by mutations in the ATP7B gene, which results in deficient production of ATP7B, a protein that transports copper.

Loss of function of this copper-binding protein results in the accumulation of copper in the liver and other tissues, most notably the central nervous system.

Patients with Wilson disease experience hepatic, neurologic and/or psychiatric problems.

Those with liver disease can experience such symptoms as fatigue, lack of appetite, abdominal pain and jaundice, and can progress to fibrosis, cirrhosis, life-threatening liver failure and death.

Wilson disease can be treated by reducing copper absorption or removing excess copper from the body using life-long chelation therapy, but unmet needs exist because some treated patients experience clinical deterioration and severe side effects.

Wilson disease affects more than 50,000 individuals in the developed world.

An IND for UX701 is expected by the end of 2020, provided the COVID-19 pandemic does not cause the timeline to be delayed.

Other preclinical programs

We continue to work on other compounds in various preclinical stages of development.

Other Developments

Daiichi Sankyo Collaboration

In March 2020, we announced a strategic partnership and license and technology access agreement, granting Daiichi Sankyo a non-exclusive license to intellectual property, including know-how and patent applications, with respect to our HeLa PCL and HEK293 transient transfection manufacturing technology platforms for AAV-based gene therapy products.

We retain the exclusive right to use our manufacturing technology for our current target indications and additional indications identified now and in the future.

Daiichi Sankyo will be responsible for the manufacturing, development, and commercialization of products manufactured with our technology, except that we receive an option to co-develop and co-commercialize rare disease products at the IND stage.

We may also provide strategic consultation to Daiichi Sankyo on the development of both AAV-based gene therapy products and other products for rare diseases.

Under the terms of the agreements, Daiichi Sankyo made an upfront payment of $125.0 million and purchased $75.0 million of Ultragenyx common stock at a price of approximately $60 per share.

Daiichi Sankyo will pay an additional $25.0 million upon completion of the technology transfer of the HeLA PCL and HEK293 platforms, as well as single-digit royalties on net sales of products manufactured in either system.

Daiichi Sankyo will reimburse us for all costs associated with the transfer of the manufacturing technology.

Corporate Update

In March 2020, we announced that Shalini Sharp will voluntarily resign from her position as Chief Financial Officer and Executive Vice President by the earlier of the date her successor Chief Financial Officer commences employment with us or September 2, 2020.

After that date, Ms.

Sharp will continue as an employee for six months to aid with the transition.

Following her resignation, Ms.

Sharp plans to focus her time on her family and her role as an advisor and board member for various biotechnology companies.

We have initiated a search for her successor.

In May 2020, we exercised our option to purchase 600,000 shares of Arcturus’ common stock at $16.00 per share;

accordingly, after the exercise of the option, we owned 3,000,000 shares of Arcturus’ outstanding common stock.

The purchase was made pursuant to the equity purchase agreement between the parties entered into in June 2019 in connection with the amendment to the research collaboration and license agreement between the two companies focused on nucleic acid therapies for rare diseases that was initiated in 2015.

Financial Operations Overview

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We have incurred net losses in each year since inception.

Our net loss was $119.0 million and $96.8 million for the three months ended March 31, 2020 and 2019, respectively.

Our net income was $25.3 million for the three months ended June 30, 2020 and our net loss was $93.7 million for the six months ended June 30, 2020, and $99.2 million and $195.9 million for the three and six months ended June 30, 2019, respectively.

Net income for the three months ended June 30, 2020 and net loss for the six months ended June 30, 2020 included $95.2 million and $102.9 million, respectively, of changes in fair value of our investment in Arcturus equity securities.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations.

We record revenue from our collaboration and license agreements and from the sale of our two approved products – Crysvita and Mepsevii.

In addition, we also record sales of certain products on a “named patient” basis, which are allowed in certain countries prior to regulatory approval.

For the three months ended March 31, 2020 and 2019, we recorded $27.2 million and $14.0 million, respectively, in collaboration and license revenue for Crysvita sales in profit share territory and royalty revenue in European territory.

For the three months ended March 31, 2020 and 2019, we recorded none and $0.3 million, respectively, for providing certain research and development services under our collaboration and license arrangement with Bayer Healthcare LLC, or Bayer.

For the three months ended March 31, 2020 and 2019, we recorded $6.5 million and $3.9 million, respectively, in product sales from our approved products and named patient sales in certain countries.

For the three months ended March 31, 2020, we recorded $2.6 million in non-cash royalty revenue related to the sale of future royalties under our royalty purchase agreement with RPI Finance Trust (RPI), an affiliate of Royalty Pharma.

For the three months ended June 30, 2020, our total revenues increased to $61.7 million, compared to $24.1 million for the same period in 2019 and for the six months ended June 30, 2020, increased to $98.0 million, compared to $42.3 million for the same period in 2019.

Revenue for the three and six months ended June 30, 2020 included $18.9 million in revenue from our collaboration and license agreement with Daiichi Sankyo Co., Ltd.

(Daiichi Sankyo) which we executed in March 2020.

The remainder of the increase was driven by higher revenue from Crysvita collaboration revenue in the profit-share territory, increase in revenue for our approved products and an increase in collaboration royalty revenue.

As of June 30, 2020, we had $817.5 million in available cash, cash equivalents and available-for-sale investments.

Critical Accounting Policies and Significant Judgments and Estimates

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The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

carrying value of assets and liabilities that are not readily apparent from other sources.

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

There have been no material changes in our critical accounting policies during the three months ended March 31, 2020 , as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report.

There have been no material changes in our critical accounting policies during the six months ended June 30 , 2020 , as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report.

Results of Operations

Comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019:

Comparison of the three and six months ended June 30, 2020 to the three and six months ended June 30, 2019:

Revenue (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Collaboration and license revenue:

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Royalty revenue in European territory

Daiichi Sankyo

Total collaboration and license revenue

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Total revenues

Crysvita was approved in the EU and the United Kingdom in November 2017 and in the U.S.

in April 2018.

For the three months ended March 31, 2020, the Company’s share of Crysvita collaboration revenue in the profit-share territory increased by $15.3 million, as compared to the same period in 2019.

* not meaningful

Six Months Ended June 30,

Collaboration and license revenue:

Crysvita collaboration revenue in profit-share

Royalty revenue in European territory

Daiichi Sankyo

Total collaboration and license revenue

Product sales:

Total product sales

Non-cash collaboration royalty revenue

Total revenues

For the three months and six months ended June 30, 2020, the Company’s share of Crysvita collaboration revenue in the profit-share territory increased by $12.6 million and $27.8 million, respectively, as compared to the same periods in 2019.

The increase primarily reflects the continuing increase in demand for Crysvita.

In December 2019, we sold the rights to the royalty payments in the European territory, including the United Kingdom and Switzerland, to Royalty Pharma.

Beginning in 2020, we are recording the royalty revenue in the European territory as non-cash collaboration royalty revenues.

The decrease of $0.3 million in collaboration and license revenue from our research arrangement with Bayer for the three months ended March 31, 2020 compared to the same period in 2019, was due to the transition of the clinical development to Bayer as part of the research arrangement.

The increase in product sales of $2.5 million for the three months ended March 31, 2020 compared to the same period in 2019 was primarily due to the continuing increase in demand for our products and increase in sales of certain products under our named patient program in certain countries.

Beginning in 2020, we record the royalty revenue as non-cash royalty revenues.

During the three months ended June 30, 2020, there was a change in estimate of the revenue reserves related to sales made prior to January 1, 2020, as a result, we recorded $1.5 million as royalty revenue in European territory .

In March 2020, we executed a license agreement with Daiichi Sankyo, pursuant to which we granted Daiichi Sankyo a non-exclusive license to intellectual property, including know-how and patent applications, with respect to our HeLa PCL and HEK293 transient transfection manufacturing technology platforms for AAV-based gene therapy products.

We will also provide certain technical assistance and technology transfer services during the technology transfer period of three years to enable Daiichi Sankyo to use the technologies for its internal gene therapy programs.

For the three and six months ended June 30, 2020, we recognized $18.9 million as collaboration and license revenue from this arrangement.

We expect to recognize a substantial majority of the $183.8 million transaction price as revenue over the technology transfer service period, which is currently estimated to be substantially complete by the end of 2021.

The decrease s in collaboration and license revenue from our research arrangement with Bayer were due to the transition of the clinical development to Bayer as part of the research arrangement.

The increases in product sales of $3.2 million and $5.7 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019 were primarily due to the continuing increase in demand for our products and increase in sales of certain products under our named patient program in certain countries.

Cost of Sales (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Cost of sales

Cost of sales related to our approved products decreased by $4.0 million for the three months ended March 31, 2020, compared to the same period in 2019.

The cost of sales for the three months ended March 31, 2020 includes a credit for the manufacturing of future inventory batches with an estimated value of $4.6 million that was agreed to during the quarter with one of our manufacturers in exchange for certain inventory batches that did not meet specified quality standards.

The Company previously recorded a reserve of $5.7 million related to these inventory batches during the year ended December 31, 2019.

Six Months Ended June 30,

Cost of sales

Cost of sales related to our approved products increased by $1.0 million for the three months ended June 30, 2020 and decreased by $2.9 million for the six months ended June 30, 2020, compared to the same periods in 2019.

The increase in cost of sales reflect an increase in demand for our approved products.

The cost of sales for the six months ended June 30, 2020 included a credit for the manufacturing of future inventory batches with an estimated value of $4.6 million that was agreed to during the period with one of our manufacturers due to certain inventory batches that did not meet specified quality standards.

The Company previously recorded reserves of $5.7 million on these inventory batches during the second half of the year ended December 31, 2019, which did not impact cost of sales for the six months ended June 30, 2019.

Prior to the approval of our approved products, manufacturing and related costs were expensed;

accordingly, these costs were not capitalized and as a result are not fully reflected in the costs of sales during the current period.

If manufacturing and related costs were capitalized prior to the approval period and the credit of $4.6 million as noted above were excluded, we estimate that cost of sales for the three months ended March 31, 2020 and 2019 would have been approximately $1.3 million and $0.7 million, respectively, for our commercial product sales.

We expect our gross margin percentage to decrease as we produce Mepsevii at costs that reflect the full costs of manufacturing similar to other biologic products and as we deplete inventories that we had expensed prior to receiving FDA approval.

If manufacturing and related costs were capitalized prior to the approval period and the credit of $4.6 million as noted above were excluded, we estimate that cost of sales for the three and six months ended June 30, 2020 would have been approximately $1.9 million and $3.1 million, respectively, and for the three and six months ended June 30, 2019 would have been approximately $1.0 million and $1.7 million, respectively, for our commercial product sales.

We expect our gross margin percentage to decrease as we produce approved products at costs that reflect the full costs of manufacturing similar to other biologic products and as we deplete inventories that we had expensed prior to receiving FDA approval.

Research and Development Expenses (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Translational Research

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Total research and development expenses

Research and development expenses increased $34.9 million for the three months ended March 31, 2020, compared to the same period in 2019.

The increase in research and development expenses was primarily due to:

for Crysvita, a decrease of $2.6 million for the three months ended March 31, 2020, primarily related to reduced clinical trial activity with the progressive completion of our extension studies and reduced allocation of employees and contractors to R&D support activities, net of KKC reimbursement;

for Mepsevii , a decrease of $2.5 million for the three months ended March 31, 2020, primarily related to reduced clinical trial activity with the progressive completion of our extension studies and reduced allocation of employees and contractors to R&D support activities;

for UX007, a decrease of $2.4 million for the three months ended March 31, 2020, primarily related to reduced clinical trial expense for the wind-down of the Glut 1 program, net of increased manufacturing expense due to the timing of drug substance production for the FAOD program;

for DTX301, a decrease of $2.9 million for the three months ended March 31, 2020, primarily related to the timing of clinical drug substance manufacturing activities and drug product batch releases;

for DTX401, a decrease of $2.2 million for the three months ended March 31, 2020, primarily related to the timing of clinical drug substance manufacturing activities and drug product batch releases;

for DTX201, a decrease of $0.7 million for the three months ended March 31, 2020, primarily related to the completion of clinical manufacturing and regulatory support activities for our Bayer collaboration agreement;

for GTX102, an increase of $25.5 million for the three months ended March 31, 2020, primarily due to the $25.0 million option extension for GeneTx;

for translational research, an increase of $16.6 million for the three months ended March 31, 2020, related to research, process development, and manufacturing activities, including the progression of our UX701, UX053, and UX068 programs toward IND filings;

and the $7.0 million payment to REGNEXBIO for exclusive, worldwide rights to NAV AAV8 and AAV9 Vectors for the development and commercialization of gene therapy treatments for a rare metabolic disorder;

for other research and development costs, an increase of $6.1 million for the three months ended March 31, 2020, primarily related to increases in general operating and overhead expenses in support of our clinical and research program pipeline, net of reduced operating expense for terminated programs.

We expect our research and development expenses to continue to increase in the future as we advance our product candidates through clinical development.

Six Months Ended June 30,

Translational Research

Other research costs

Total research and development expenses

Research and development expenses de creased $ 15.3 million and increased $ 19.5 million f or the three and six months ended June 30 , 2020 and 2019, respectively , compared to the same period s in 2019 .

The changes in research and development expenses was primarily due to:

for Crysvita, a decrease of $2.8 million and $5.4 million for the three and six months ended June 30, 2020, respectively, primarily related to reduced clinical trial activity with the progressive completion of our extension studies and reduced allocation of employees and contractors to R&D support activities, net of KKC reimbursement;

for Mepsevii , a nominal increase and a decrease of $2.4 million for the three and six months ended June 30, 2020, respectively, primarily related to reduced clinical trial activity with the progressive completion of our extension studies and reduced allocation of employees and contractors to R&D support activities;

for UX007, a decrease of $0.9 million and $3.3 million for the three and six months ended June 30, 2020, respectively, primarily related to reduced clinical trial expense for the wind-down of the Glut 1 program, net of increased manufacturing expense due to the timing of drug substance production for the FAOD program;

for DTX301, an increase of $0.5 million and a decrease of $2.4 million for the three and six months ended June 30, 2020, respectively, primarily related to the timing of clinical drug substance manufacturing activities and drug product batch releases;

for DTX401, a decrease of $4.3 million and $6.5 million for the three and six months ended June 30, 2020, respectively, primarily related to the timing of clinical drug substance manufacturing activities and drug product batch releases, including a credit for the manufacturing of future batches with an estimated value of $2.9 million that was agreed to during the three months ended June 30, 2020 with one of our manufacturers due to certain batches that did not meet specified quality standards;

for GTX102, an increase of $0.6 million and $26.1 million for the three and six months ended June 30, 2020 , respectively, primarily due to the $25.0 million option extension payment to GeneTx that occurred during the first quarter of 2020;

for translational research, an increase of $5.5 million and $22.2 million for the three and six months ended June 30, 2020, respectively, related to research, process development, and manufacturing activities, including the progression of our UX701, UX053, and UX068 programs toward IND filings;

and during the first quarter of 2020, the $7.0 million payment to REGNEXBIO for exclusive, worldwide rights to NAV AAV8 and AAV9 vectors for the development and commercialization of gene therapy treatments for a rare metabolic disorder;

for other research and development costs, a decrease of $14.0 million and $8.6 million for the three and six months ended June 30, 2020, respectively, primarily related to the one-time in-process R&D expense of $15.6 million related to the Arcturus Equity Purchase Agreement and amendment to the Research Collaboration and License Agreement incurred in June 2019, net of increases in general operating, facilities, IT, and other overhead expenses in support of our clinical and research program pipeline.

We expect our annual research and development expenses to continue to increase in the future as we advance our product candidates through clinical development.

The timing and amount of expenses incurred will depend largely upon the outcomes of current or future clinical studies for our product candidates as well as the related regulatory requirements, manufacturing costs, and any costs associated with the advancement of our preclinical programs.

Selling, General and Administrative Expenses (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Selling, general and administrative

Selling, general and administrative expenses increased $8.7 million for the three months ended March 31, 2020, compared to the same period in 2019.

The increase in selling, general and administrative expenses was primarily due to increases in personnel costs resulting from an increase in the number of employees in support of our commercial activities, commercialization costs, and professional services costs.

Six Months Ended June 30,

Selling, general and administrative

Selling, general and administrative expenses increased $2.4 million and $11.1 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.

The increases in selling, general and administrative expenses were primarily due to increases in personnel costs resulting from an increase in the number of employees in support of our commercial activities, commercialization costs, and professional services costs.

We expect selling, general and administrative expenses to continue to increase in the future to support our organizational growth and for our expected staged build out of our commercial organization over the next several years related to our approved products and multiple clinical-stage product candidates.

Interest Income (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Interest income

Interest income decreased $0.2 million for the three months ended March 31, 2020, compared to the same period in 2019, primarily due to lower portfolio yields after federal reserve interest rates were reduced during the period.

Six Months Ended June 30,

Interest income

Interest income decreased $2.3 million and $2.4 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019, primarily due to lower portfolio yields as a result of federal reserve interest rate cuts that were made over the past year.

Change in Fair Value of Investment in Arcturus Equity Securities (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Change in fair value of investment in Arcturus

equity securities

The increase in the fair value of our investment in Arcturus equity securities of $7.7 million for the three months ended March 31, 2020 was due to the remeasurement to fair value of the Arcturus common stock and option to purchase additional Arcturus stock.

Six Months Ended June 30,

Change in fair value of investment in Arcturus

equity securities

The increases in the fair value of our investment in Arcturus equity securities of $85.4 million and $93.0 million for the three and six months ended June 30, 2020, respectively, were due to the remeasurement to fair value of the Arcturus common stock and the exercise of the option to purchase additional Arcturus stock.

Given the historic volatility of the publicly traded stock price of Arcturus, the fair value adjustments of our investments in Arcturus may be subject to wide fluctuations which may have a significant impact on our earnings in future periods.

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Non-cash Interest Expense on Liability Related to the Sale of Future Royalties (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Non-cash interest expense on liability related to the

sale of future royalties

The non-cash interest expense on liability related to the sale of future royalties of $8.1 million for the three months ended March 31, 2020 was due to the interest accreted on the liability related to the sale of future royalties for net sales of Crysvita in the European territory pursuant to the Royalty Purchase agreement entered with RPI in December 2019.

Six Months Ended June 30,

Non-cash interest expense on liability related to the

sale of future royalties

The non-cash interest expense on liability related to the sale of future royalties of $8.4 million and $16.5 million for the three and six months ended June 30, 2020, respectively, were due to the interest accreted on the liability related to the sale of future royalties for net sales of Crysvita in the European territory pursuant to the Royalty Purchase Agreement entered into with RPI in December 2019.

To the extent the royalty payments are greater or less than our initial estimates or the timing of such payments is materially different than our original estimates, we will prospectively adjust the effective interest rate.

Other Expense (dollars in thousands)

Three Months Ended March 31,

Other expense

Other expense increased by a nominal amount for the three months ended March 31, 2020, compared to the same period in 2019.

Other Income (Expense) (dollars in thousands)

Three Months Ended June 30,

Other income (expense)

Six Months Ended June 30,

Other income (expense)

Other income (expense) increased by $0.6 million and $0.5 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.

The fluctuations were primarily due to fluctuations in foreign exchange rates.

Provision for Income Taxes (dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Provision for income taxes

The provision for incomes taxes increased by $0.2 million for the three months ended March 31, 2020, compared to the same period in 2019.

Six Months Ended June 30,

Provision for income taxes

The provision for incomes taxes increased by $0.2 million and $0.4 million for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.

This was primarily due to the increase in commercialization activities in Europe and Latin America.

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To date, we have funded our operations primarily from the sale of equity securities and the sale of certain future royalties.

As of March 31, 2020, we had $705.0 million in available cash, cash equivalents, and available-for-sale investments.

As of June 30, 2020, we had $817.5 million in available cash, cash equivalents, and available-for-sale investments.

We believe that our existing capital resources will be sufficient to fund our projected operating requirements for at least the next twelve months.

Our cash, cash equivalents, and available-for-sale investments are held in a variety of deposit accounts, interest-bearing accounts, corporate bond securities, U.S government securities and money market funds.

Cash in excess of immediate requirements is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and credit risk.

As of March 31, 2020 , $20.7 million remained available under our ATM facility.

In February 2019, we completed an underwritten public offering in which we sold 5,833,333 shares of common stock and received net proceeds of approximately $330.4 million.

In December 2019, we received net proceeds of $314.2 million from the sale of future royalties to RPI.

In March 2020, we received $75.0 million in cash from the sale of 1,243,913 shares to Daiichi Sankyo and had $125.0 million in upfront payment related to the Daiichi Sankyo License Agreement which was received in April 2020.

In March 2020, we received $75.0 million in cash from the sale of 1,243,913 shares of our common stock to Daiichi Sankyo and in April 2020, we received $125.0 million in an upfront payment related to the Daiichi Sankyo License Agreement.

During the three and six months ended June 30, 2020, the proceeds from our at-the-market, or ATM, offering were $20.4 million, after commissions and other offering costs.

As of June 30, 2020 , we had completed the sale of all available amounts under our ATM facility.

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 30,

Six Months Ended June 30,

Cash used in operating activities

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Cash used to fund operating expenses is affected by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Cash used in operating activities for the three months ended March 31, 2020 was $95.2 million and reflected a net loss of $119.0 million, $0.3 million for the amortization of the discount paid on purchased investments, $7.7 million for an unrealized gain in the Arcturus equity securities, and $2.6 million for non-cash collaboration royalty revenues related to the sale of future royalties to Royalty Pharma , offset by non-cash charges of $20.2 million for stock-based compensation, $2.9 million for depreciation, $0.5 million of non-cash foreign currency remeasurement losses in connection with fluctuations of exchange rates related to intercompany transactions with foreign subsidiaries that are denominated in our reporting currency, and $8.1 million for non-cash interest incurred on the liability related to the sale of future royalties to Royalty Pharma .

Cash used in operating activities also reflected a decrease of $15.1 million due to an increase in prepaid expenses and other current assets primarily due to an increase in general receivables, amounts due from a collaboration partner, and amounts owed for a tenant improvement allowance, a decrease of $125.6 million due to a receivable related to the license and technology access agreement with Daiichi Sankyo in March 2020, a $5.5 million decrease due to the addition of the right-of-use assets net of amortization during the period, and a $5.4 million decrease in accounts payable, accrued liabilities, and other liabilities primarily due to a decrease in accrued bonus due to the payout of the 2019 annual bonus, offset by $3.5 million increase due to a decrease in accounts receivable as receivables related to the non-cash collaboration royalty revenues were recorded against the liability related to the sale of future royalties related to Royalty Pharma beginning in January 1, 2020, a $0.1 million increase due to a decrease in inventory, an increase of $145.3 million in contract liabilities related to the license and technology access agreement with Daiichi Sankyo, and a $5.5 million increase due to the addition of lease liabilities net of amortization during the period.

Cash used in operating activities for the three months ended March 31, 2019 was $95.8 million and reflected a net loss of $96.8 million and $0.8 million for the amortization of the discount paid on purchased investments, offset by non-cash charges of $20.2 million for stock-based compensation, $2.1 million for depreciation and amortization of intangible asset acquired, and $0.6 million of non-cash foreign currency remeasurement losses in connection with fluctuations of exchange rates related to intercompany transactions with foreign subsidiaries that are denominated in our reporting currency.

Cash used in operating activities also reflected a $2.9 million decrease due to an increase in accounts receivable due to the commercialization of Mepsevii and Crysvita, a $3.6 million decrease due to an increase in inventory as we build out our commercial inventory supplies as we commerci alize Mepsevii, a decrease of $1 .4 million due to an increase in prepaid expenses and other assets primarily due to an increase in amounts due from a collaboration partner, a $6.9 million decrease due to the addition of the right-of-use assets net of amortization during the period, and a $1 3.1 million decrease in accounts payable, accrued expenses , and other liabilities primarily due to a decrease in accrued bonus due to the payout of the 2018 annual bonus, the derecognition of deferred rent obligations for the new lease accounting guidance, and accrued expenses due to the timing of the receipt of invoices, offset by an increase of $6.8 million due to the addition of lease liabilities net of amortization during the period.

Cash used in operating activities for the six months ended June 30, 2020 was $7.8 million and reflected a net loss of $93.7 million, $0.1 million for the amortization of the discount paid on purchased investments, $102.9 million for an unrealized gain in the Arcturus equity securities, and $6.1 million for non-cash collaboration royalty revenues related to the sale of future royalties to Royalty Pharma , offset by non-cash charges of $42.6 million for stock-based compensation, $6.0 million for depreciation, and $16.5 million for non-cash interest incurred on the liability related to the sale of future royalties to Royalty Pharma .

Cash used in operating activities also reflected a decrease of $6.1 million due to an increase in prepaid expenses and other current assets primarily due to an increase in prepaid manufacturing, a decrease of $8.5 million primarily due to a receivable related to the license agreement with Daiichi Sankyo in June 2020, a $6.8 million decrease due to the addition of the right-of-use assets net of amortization during the period, and a $8.8 million decrease in accounts payable, accrued liabilities, and other liabilities primarily due to a decrease in accrued bonus due to the payout of the 2019 annual bonus, offset by $18.0 million increase due to a decrease in accounts receivable primarily related to change in the timing of billing to a collaboration partner, a $0.5 million increase due to a decrease in inventory, an increase of $134.9 million in contract liabilities related to the license agreements with Daiichi Sankyo, and a $6.7 million increase due to the addition of lease liabilities net of amortization during the period.

Cash used in operating activities for the six months ended June 30, 2019 was $ 184.8 million and reflected a net loss of $ 195.9 million , $ 3.0 million for the amortization of the discount paid on purchased investments , and $9.8 million for an unrealized gain in the Arcturus equity securities, offset by non-cash charges of $ 42.4 million for stock-based compensation , $ 4.2 million for depreciation and amortization of an intangible asset acquired, and $0.6 million of non-cash foreign currency remeasurement losses in connection with fluctuations of exchange rates related to intercompany transactions with foreign subsidiaries that are denominated in our reporting currency .

Cash used in operating activities also reflected a $8.2 million decrease due to an increase in accounts receivable due to the commercialization of Mepsevii and Crysvita, a $6.0 million decrease due to an increase in inventory as we build out our commercial inventory supplies as we commercialize Mepsevii, a decrease of $ 3.3 million due to an in crease in prepaid expenses and other assets primarily due to an increase in general receivables, amounts due from a collaboration partner, and amounts owed for a tenant improvement allowance, a $17.2 million decrease due to the addition of the right-of-use assets net of amortization during the period, a $ 7.1 million decrease in accounts payable , accrued expenses, and other liabilities primarily due to a decrease in accrued bonus due to the payout of the 2018 annual bonus, the derecognition of deferred rent obligations for the new lease accounting guidance, and accrued expenses due to the timing of the receipt of invoices, offset by a $18.5 million increase due to the addition of lease liabilities net of amortization during the period .

Cash Used in Investing Activities

Cash used in investing activities for the three months ended March 31, 2020 was $95.1 million and related to purchases of property and equipment of $14.1 million and purchases of investments of $285.2 million, offset by proceeds from the sale of investments of $16.6 million and maturities of investments of $187.6 million.

Cash used in investing activities for the three months ended March 31, 2019 was $101.2 million and related to purchases of property and equipment of $3.1 million and purchases of investments of $260.7 million, offset by proceeds from the sale of investments of $22.6 million and maturities of investments of $140.0 million.

Cash used in investing activities for the six months ended June 30, 2020 was $181.3 million and related to purchases of property and equipment of $18.2 million, purchases of investments of $456.3 million, and the exercise of the option to purchase additional Arcturus shares for $9.6 million, offset by proceeds from the sale of investments of $28.9 million and maturities of investments of $274.0 million.

Cash used in investing activities for the six months ended June 30, 2019 was $159.6 million and related to purchases of property and equipment of $8.3 million, purchases of investments of $461.1 million, and purchases of Arcturus equity securities of $14.3 million, offset by proceeds from the sale of investments of $22.6 million and maturities of investments of $301.5 million.

Cash Provided by Financing Activities

Cash provided by financing activities for the three months ended March 31, 2020 was $55.6 million and was comprised of $55.3 million from the sale of common stock in connection with the license and technology access agreement with Daiichi Sankyo in March 2020, and $0.4 million in net proceeds from the issuance of common stock pursuant to the exercise of warrants and equity plan awards.

Cash provided by financing activities for the three months ended March 31, 2019 was $353.6 million and was comprised of $330.4 million from the sale of common stock in our underwritten public offering, $19.3 million from the sale of common stock in our ATM offering, and $3.9 million in net proceeds from the issuance of common stock pursuant to equity awards.

Cash provided by financing activities for the six months ended June 30, 2020 was $91.4 million and was comprised of $55.3 million from the sale of common stock in connection with the license agreement with Daiichi Sankyo in March 2020, $20.4 million in net proceeds f rom the sale of common stock in our ATM offering, and $15.9 million in net proceeds from the issuance of common stock pursuant to the exercise of warrants and equity plan awards, offset by $0.1 million in principal repayments of finance leases.

Cash provided by financing activities for the six months ended June 30, 2019 was $363.0 million and was comprised of $330.4 million from the sale of common stock in our underwritten public offering in February 2019, $24.8 million from the sale of common stock in our ATM offering, and $7.7 million in net proceeds from the issuance of common stock pursuant to equity awards.

Funding Requirements

We anticipate, excluding non-recurring items, that we will continue to generate annual losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our product candidates, and continue with commercialization of approved products.

We will likely require additional capital to fund our operations, to complete our ongoing and planned clinical studies, to commercialize our products, and to continue investing in early-stage research capabilities to promote our pipeline growth and to further develop our general infrastructure, including building our own Good Manufacturing Practices, or GMP gene therapy manufacturing facility, and such funding may not be available to us on acceptable terms or at all.

We anticipate that, excluding non-recurring items, we will continue to generate annual losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our product candidates, and continue with commercialization of approved products.

We will likely require additional capital to fund our operations, to complete our ongoing and planned clinical studies, to commercialize our products, to continue investing in early-stage research capabilities to promote our pipeline growth, to continue to acquire or invest in businesses or products that complement or expand our business, and to further develop our general infrastructure, including building our own Good Manufacturing Practices, or GMP gene therapy manufacturing facility, and such funding may not be available to us on acceptable terms or at all.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay, limit, reduce the scope of, or terminate one or more of our clinical studies, research and development programs, future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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the scope, rate of progress, results and cost of our clinical studies, nonclinical testing, and other related activities;

the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products that we may develop, including the potential development of our own GMP gene therapy manufacturing plant;

the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates, products that we have begun to commercialize, and any products that we may develop in the future, including the potential development of our own GMP gene therapy manufacturing plant;

the number and characteristics of product candidates that we pursue;

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We have contractual obligations from our operating and finance leases, manufacturing and service contracts, licenses, royalties, development and collaboration arrangements, and other research and development activities.

The following table summarizes our significant binding contractual obligations at March 31, 2020 (in thousands):

The following table summarizes our significant binding contractual obligations at June 30, 2020 (in thousands):

Payments due by period

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Manufacturing and service contracts

* Includes additional lease payments under an amended lease entered into in April 2020

The terms of certain of our licenses, royalties, development and collaboration agreements, as well as other research and development activities, require us to pay potential future milestone payments based on product development success.

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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