What changed in this filing

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Item 1A. Risk Factors

2020-07-30 compared with 2020-05-07 · 50 added, 49 removed, 981 unchanged (9% of the section changed)

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The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

We are just starting to generate revenue from product sales.

We have limited experience in revenue from product sales.

Our ability to generate significant revenue from product sales depends on our ability, alone or with strategic collaboration partners, to successfully commercialize our products and to complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates.

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Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other activities.

As of March 31, 2020, our available cash, cash equivalents, and investments were $705.0 million.

As of June 30 , 2020, our available cash, cash equivalents, and investments were $817.5 million.

We expect we will likely need additional capital to continue to commercialize our products, and to develop and obtain regulatory approval for, and to commercialize, all of our product candidates.

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Clinical study delays could also shorten any periods during which our products have commercial exclusivity and may allow our competitors to bring products to market before we do, which could negatively impact our ability to obtain orphan exclusivity and to successfully commercialize our product candidates and may harm our business and results of operations.

If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory, and other product development goals, which we sometimes refer to as milestones.

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Our product candidates are in development and the safety profile has not been established.

For example, in a completed Phase 2 study, LC-FAOD patients treated with UX007 experienced treatment-related adverse events, the most common of which were diarrhea, abdominal/gastrointestinal pain, nausea, and vomiting.

There was one treatment-related serious adverse event of moderate gastroenteritis with vomiting.

There were two deaths during the LC-FAOD extension study, both deemed to be related to disease progression and not due to treatment with UX007.

Further, as one of the goals of Phase 1 and/or 2 clinical trials is to identify the highest dose of treatment that can be safely provided to study participants, adverse side effects, including serious adverse effects, have occurred in certain studies as a result of changes to the dosing regimen during such studies.

Gene therapy product candidates using AAV vectors, like DTX301, have been associated with immunologic reaction to the capsid protein or gene at early time points after administration.

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In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical study participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.

Additionally, even though we received regulatory approval for Crysvita and Mepsevii and even if our product candidates receive marketing approval in the future, if we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

Additionally, even though we received regulatory approval for Crysvita, Mepsevii, and Dojolvi and even if our product candidates receive marketing approval in the future, if we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

regulatory authorities may withdraw approvals of such product;

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Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community.

For example, earlier gene therapy trials using other vectors led to several well- publicized adverse events, including cases of leukemia and death.

The risk of cancer remains a concern for gene therapy and we cannot assure you that it will not occur in any of our planned or future clinical studies.

In addition, there is the

potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

For example, certain gene therapy trials using AAV8 vectors (although at significantly higher doses than those used in our gene therapy product candidates) and other vectors led to several well-publicized adverse events, including cases of leukemia and death.

The risk of cancer or death remains a concern for gene therapy and we cannot assure you that it will not occur in any of our planned or future clinical studies.

In addition, there is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products, particularly AAV gene therapy products such as candidates based on the same capsid serotypes as our product candidates, or occurring during use of our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our gene therapy product candidates, stricter labeling requirements for those gene therapy product candidates that are approved and a decrease in demand for any such gene therapy product candidates, all of which would have an adverse effect on our business, financial condition, results of operations and prospects.

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Companion diagnostics are subject to regulation by FDA and similar regulatory authorities outside the United States as medical devices and require regulatory clearance or approval prior to commercialization.

In the United States, companion diagnostics are cleared or approved through FDA’s 510(k) premarket notification or premarket approval, or PMA, process.

In the United States, companion diagnostics are

cleared or approved through FDA’s 510(k) premarket notification or premarket approval, or PMA, process.

Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted 510(k) premarket notification, PMA or equivalent application types in jurisdictions outside the United States, may cause delays in the approval, clearance or rejection of an application.

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KKC may make decisions regarding market access and pricing in countries where it has the sole right to commercialize our product candidates which can negatively impact our commercialization efforts in countries where we have the right to commercialize our product candidates;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use, which could result in program delays;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our commercial use, which could result in lost revenue;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use (including as a result of the COVID-19 pandemic), which could result in program delays;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our commercial use (including as a result of the COVID-19 pandemic), which could result in lost revenue;

KKC may elect to develop and commercialize Crysvita indications with a larger market than XLH and at a lower price, thereby reducing the profit margin on sales of Crysvita for any orphan indications, including XLH;

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Any significant delay or discontinuity in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical study due to, among other things, the failure of a manufacturer to provide a drug substance or drug product of sufficient quantity or quality, or the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing, and potential regulatory approval of our product candidates, and could also impair named patient sale supply of our product candidates, which could harm our business and results of operations.

We have no experience as a company developing a manufacturing facility and may not be able to do so successfully if we determine to expand or develop our manufacturing capability and infrastructure.

We have no experience as a company developing a manufacturing facility and may experience unexpected costs or delays or ultimately be unsuccessful in developing a facility .

We expect our future manufacturing strategy to involve the use of one or more CMOs as well as our own capabilities and infrastructure, including at our Woburn, MA facility or new facilities we may develop.

We expect that development of our own process development facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins.

However, we have no experience as a company in developing a manufacturing facility and may never be successful in developing our own manufacturing facility or capability.

However, we have no experience as a company in developing a manufacturing facility and may experience unexpected costs or delays or ultimately be unsuccessful in developing our own manufacturing facility or capability.

Additionally, given that cGMP gene therapy manufacturing is a nascent industry, there are a small number of CMOs with the experience necessary to manufacture our gene therapy product candidates and we may have difficulty finding or maintaining relationships with such CMOs or hiring experts for internal manufacturing and accordingly, our production capacity may be limited.

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The drug substance and drug product for Mepsevii are manufactured by Rentschler under a commercial supply and services agreement, accompanying purchase orders, and other agreements.

The pharmaceutical-grade drug substance for UX007 is manufactured by IOI Oleo pursuant to our supply agreement with IOI Oleo, and the drug product for UX007 is prepared by Haupt Pharma AG and CPM pursuant to purchase orders.

The pharmaceutical-grade drug substance for Dojolvi is manufactured by IOI Oleo pursuant to our supply agreement with IOI Oleo, and the drug product for Dojolvi is prepared by Haupt Pharma AG and CPM pursuant to purchase orders.

Single source suppliers are also used for our gene therapy programs.

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Some of our current clinical programs may be most appropriate for patients with more severe forms of their disease.

For instance, our Phase 2 study of UX007 in LC-FAOD enrolled patients with more severe disease.

For instance, our Phase 2 study of Dojolvi in LC-FAOD enrolled patients with more severe disease.

In addition, while adults make up the majority of the XLH patients, they often have less severe disease that may reduce the penetration of Crysvita in the adult population relative to the pediatric population.

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Furthermore, KKC is our sole supplier of commercial quantities of Crysvita.

The supply price to us for commercial sales of Crysvita in the United States, Canada and in Latin America , which is 35% of net sales through December 31, 2022 and 30% thereafter , is higher than the typical cost of goods sold by companies focused on rare diseases.

The supply price to us for commercial sales of Crysvita in Latin America and the transfer price for commercial sales of the product in the United States and Canada is 35% of net sales through December 31, 2022 and 30% thereafter , which is higher than the typical cost of goods sold by companies focused on rare diseases.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

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For example, XLH is treated with oral phosphate and vitamin D therapy, which may compete with Crysvita;

LC-FAOD is managed with diet therapy and medium-chain triglyceride oil, which may compete with UX007;

LC-FAOD is managed with diet therapy and medium-chain triglyceride oil, which may compete with Dojolvi;

OTC deficiency is currently treated with nitrogen scavenging drugs and severe limitations in dietary protein, which may compete with DTX30;

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If we are unable to expand our existing commercial infrastructure or enter into agreements with third parties to market and sell our products and product candidates, as needed, we may be unable to generate significant revenue.

In order to successfully commercialize Crysvita and Mepsevii as well as any additional products that may result from our development programs, we are building a commercial infrastructure in North America, Europe and Latin America.

In order to successfully commercialize our products as well as any additional products that may result from our development programs, we are building a commercial infrastructure in North America, Europe and Latin America.

This infrastructure consists of both office based as well as field teams with technical expertise, and will be expanded as we approach the potential approval dates of additional products that result from our development programs.

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Our exclusive right to promote Crysvita in the United States and Canada expires in 2023.

Pursuant to the terms of our collaboration and license agreement with KKC, we have the sole right to promote Crysvita in the United States and Canada, or the profit-share territory, until the transition date of April 2023, which is the fifth anniversary of the commercial launch of the product in the United States.

Pursuant to the terms of our collaboration and license agreement with KKC, we have the sole right to promote Crysvita in the United States and Canada, or the profit-share territory, for a specified period of time, with KKC increasingly participating in the promotion of the product until the transition date of April 2023, which is the fifth anniversary of the commercial launch of the product in the United States.

After the transition date, KKC will have the right to promote the product, subject to a limited promotion right retained by us.

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House of Representatives with the goal of combating the increased costs of prescription drugs.

Although a number of these proposals and other measures, including the four executive orders announced by the U.S.

Presidential administration in July 2020 aimed to lower drug prices, may require additional authorization to become effective, Congress and the U.S.

Presidential administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

The downward pressure on healthcare costs in general, and with respect to prescription drugs, surgical procedures, and other treatments in particular, has become very intense.

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Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.

While patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available to extend the patent exclusivity term for Crysvita, Mepsevii, UX007, DTX301, and DTX401, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long.

While patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available to extend the patent exclusivity term for Crysvita, Mepsevii, Dojolvi , DTX301, and DTX401, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long.

Furthermore, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements.

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If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.

Additional competitors could enter the market with generic versions of our small-molecule product candidates, which may result in a material decline in sales of UX007 or future small-molecule product candidates.

Additional competitors could enter the market with generic versions of our small-molecule product candidates, which may result in a material decline in sales of Dojolvi or future small-molecule product candidates.

Under the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic copy of an approved innovator product.

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Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to enforce its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if UX007 is approved, competitors could file ANDAs for generic versions of UX007, or 505(b)(2) NDAs that reference UX007.

If there are patents listed for UX007 in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent.

Accordingly, competitors could file ANDAs for generic versions of Dojolvi, or 505(b)(2) NDAs that reference Dojolvi.

If there are patents listed for Dojolvi in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent.

We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

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Additionally, the milestone and other payments associated with these licenses will make it less profitable for us to develop our drug candidates.

See “Business—License and Collaboration Agreements” above for a description of our license agreements with KKC, Baylor Research Institute, Saint Louis University, Bayer, REGENXBIO, and the University of Pennsylvania, which include descriptions of the termination provisions of these agreements.

In certain cases, we control the prosecution of patents resulting from licensed technology.

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Risks Related to Our Business Operations

Public health epidemics or outbreaks, including the current COVID-19 pandemic, could materially and adversely impact our business and operating results.

Actual or threatened public health epidemics or outbreaks, including the current COVID-19 pandemic, could materially and adversely impact our business and operating results.

A public health epidemic or outbreak, and the public and governmental efforts to mitigate the spread of such disease, could materially and adversely impact the commercialization of our products, development and regulatory approval of our product candidates and our clinical trial operations and significantly disrupt our business operations as well as those of our third party suppliers, CRO and collaboration partners that we rely on.

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Our clinical trial activities, including the initiation and completion of such activities and the timing thereof, have been and are expected to continue to be significantly delayed or disrupted by COVID-19.

For instance, enrollment of patients in certain of our clinical trials for our gene therapy product candidates have been disrupted as shelter-in-place orders or quarantines have impeded patient movement.

For instance, enrollment of patients in certain of our clinical trials for our gene therapy product candidates have been disrupted and dosing in certain of our trials has been delayed as shelter-in-place orders or quarantines have impeded patient movement.

We may also experience difficulties in recruiting clinical site investigators and clinical site staff.

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Any of these events, including if we are required to initiate new or additional sites in response to such events, could require us to incur substantial increased expenses, delay the development and commercialization of our product candidates, delay the timing of anticipated data releases, and impact our operating results.

The COVID-19 pandemic may also impact review of our submissions and discussions with regulatory agencies, such as the FDA, with respect to our product candidates.

Although we do not currently anticipate delays in the FDA review of the sBLA for Crysvita for the treatment of TIO and the NDA for UX007 for the treatment of LC-FAOD, we cannot assure that timing of review and approval of the applications will not be delayed or adversely impacted by the effects of COVID-19.

The continuing spread of COVID-19 may impact the operations of key governmental agencies, such as the FDA, which could affect the timing of approvals from the agency.

Further, depending on the duration and extent of the pandemic, even if we receive FDA approval for these product candidates, we may be significantly limited in our commercialization efforts for such products.

The COVID-19 pandemic may also impact the timing of review of our submissions and discussions with regulatory agencies, such as the FDA, with respect to our product candidates.

The pandemic has also significantly impacted our commercialization efforts for our products, including the launch of our recently approved product, Dojolvi.

Social distancing measures and travel limitations have prevented our field sales and medical teams from meeting with health care professionals, customers and patients in person and it has become increasingly difficult to maintain consistent contact with our current patients or identify new patients for our commercialized products and product candidates.

Further, certain of our patients may experience interruptions in insurance coverage due to job loss or change in employment status due to the economic impact from the pandemic.

We may experience a loss in revenue and our operating results may be impacted as a result of such events and limitations on our ability to commercialize our products and product candidates.

Effects from government budgetary

constraints, either in the United States or internationally, due to the economic impact of the pandemic, such as changes to state coverage rules under Medicaid programs in the United States, could also impact continued insurance coverage and reimbursement for our products.

Any of these events could impact our ability to commercialize our products and adversely affect our operating results and revenue .

The continuing spread of the COVID-19 pandemic may also result in the inability of our suppliers to deliver drug product or raw materials on a timely basis, if at all, or result in increased costs or expenses.

Facility shutdowns or operational restrictions imposed by government-imposed mandates could result in supply disruptions that could impact the availability of drug product for our clinical trials as well as our commercialized products.

treatments or vaccinations for COVID-19, which may result in delays or shortages in supply of such product or materials to us.

For instance, 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, which may result in delays or shortages in supply of such product or materials to us.

Any of these events could adversely impact our clinical trial activities and our ability to meet commercial demand for our product and product candidates and result in loss of revenue.

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If we do not obtain orphan drug exclusivity for our drug products and biologic products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity, and our revenue will be reduced.

Even though we have orphan drug designation for UX007 for the treatment of fatty acid oxidation disorders in the United States and for various subtypes of LC-FAOD in Europe, as well as for Crysvita, Mepsevii, DTX301 and DTX401 in the United States and Europe, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.

Even though we have orphan drug designation for Dojolvi for the treatment of fatty acid oxidation disorders in the United States and for various subtypes of LC-FAOD in Europe, as well as for Crysvita, Mepsevii, DTX301 and DTX401 in the United States and Europe, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.

Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition or the same drug can be approved for a different indication unless there are other exclusivities such as new chemical entity exclusivity preventing such approval.

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(Dimension) in November 2017, we have recorded on our balance sheet intangible assets for in-process research and development (IPR&D) related to DTX301 and DTX401.

Following the FDA approval of Dojolvi, we have also recorded contract-based intangible assets related to our license from third parties for certain assets related to the product.

We test the intangible assets for impairment annually during the fourth quarter and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

If the associated research and development effort is abandoned, the related assets will be written-off and we will record a noncash impairment loss on our statement of operations.

We have not recorded any impairments related to our intangible assets through the end of March 31, 2020 .

We have not recorded any impairments related to our intangible assets through the end of June 30, 2020 .

We may not be successful in our efforts to identify, license, discover, develop, or commercialize additional product candidates.

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In addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our business.

The laws that may affect our ability to operate, including the EU General Data Protection Regulation, are described under “Business—Government Regulation” above.

The laws that may affect our ability to operate, including the EU General Data Protection Regulation, are described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Further, in the United States, California recently enacted the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020.

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Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures.

Improper or inadvertent employee behavior, including data privacy breaches by employees and others with permitted access to our systems, may also pose a risk that sensitive data may be exposed to unauthorized persons or to the public.

Risks of unauthorized access and cyber-attacks have increased as most of our personnel, and the personnel of many third-parties with which we do business, have adopted remote working arrangements as a result of the COVID-19 pandemic.

Improper or inadvertent employee behavior, including data privacy breaches by employees, contractors and others with permitted access to our systems, may also pose a risk that sensitive data may be exposed to unauthorized persons or to the public.

If a system failure or security breach occurs and interrupts our operations or the operations at one of our third-party vendors, it could result in intellectual property and other proprietary or confidential information being lost or stolen or a material disruption of our drug development programs.

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We may also be vulnerable to cyber-attacks by hackers or other malfeasance.

This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or reputation or result in legal proceedings.

This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or reputation or result in legal or regulatory proceedings.

We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

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For instance, in June 2019, we purchased 2.4 million shares of common stock of Arcturu s Therapeutics Holdings, Inc.

(Arcturus ) and received an option to purchase an additional 600,000 shares of Arcturus’ common stock, which may be exercised up to June 18, 2021, which is the two year anniversary of the effective date of our equity purchase agreement with Arcturus, with certain restrictions.

(Arcturus ) and in May 2020, we exercised our option to purchase an additional 600,000 shares of Arcturus’ common stock pursuant to the terms of our equity purchase agreement with Arcturus.

We have elected to apply the fair value option to account for our equity investments in Arcturus.

As a result, increases or decreases in the stock price of Arcturus common stock will result in accompanying changes in the fair value of our investments and impact our operating results for the reporting period.

For instance, the increase in fair value of the Arcturus investments for the three months ended March 31, 2020 was $7.7 million primarily due to the higher Arcturus stock price at March 31, 2020 compared to December 31, 2019.

Such gain in fair value of the investments decreased the amount of our net loss for th e quarter ended March 31, 2020.

If the Arcturus stock price had been lower at March 31, 2020 compared to December 31, 2019, our net loss for the q uarter would have been greater.

As the fair value of our investments in Arcturus is dependent on the stock price of Arcturus, which has recently seen wide fluctuations, the value of our investments and the impact on our operating results may similarly fluctuate significantly from quarter to quarter and year to year such that period-to-period comparisons may not be a good indication of the future value of the investments and our future operating results .

As a result, increases or decreases in the stock price of Arcturus common stock will result in accompanying changes in the fair value of our investments and impact , and cause substantial volatility in, our operating results for the reporting period.

For instance, the increases in fair value of the Arcturus investments recognized in the Condensed Consolidated Statements of Operations for the three and six months ended June 30 , 2020 were $ 95.2 million and $ 102.9 million, respectively, primarily due to the higher Arcturus stock price at June 30 , 2020 compared to December 31, 2019.

Such gain in fair value of the investment resulted in net income for the three months ended June 30, 2020 and decreased the amount of our net loss for th e six months ended June 30 , 2020.

If the Arcturus stock price had been lower at June 30 , 2020 compared to December 31, 2019, we may have reported a net loss for the quarter and an even greater net loss for the six months ended June 30, 2020.

As the fair value of our investment in Arcturus is dependent on the stock price of Arcturus, which has recently seen wide fluctuations, the value of our investments and the impact on our operating results may similarly fluctuate significantly from quarter to quarter and year to year such that period-to-period comparisons may not be a good indication of the future value of the investments and our future operating results .

Litigation may substantially increase our costs and harm our business.

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Pursuant to our 2014 Incentive Plan, or the 2014 Plan, our management is authorized to grant stock options and other equity-based awards to our employees, directors, and consultants.

At March 31, 2020, 3,424,900 shares were available for future grants under the 2014 Plan.

At June 30 , 2020, 3,304,531 shares were available for future grants under the 2014 Plan.

Through January 1, 2024, the number of shares available for future grant under the 2014 Plan will automatically increase on January 1 of each year by the lesser of 2,500,000 shares or 4% of all shares of our capital stock outstanding as of December 31 of the prior calendar year, subject to the ability of our compensation committee to take action to reduce the size of the increase in any given year.

Pursuant to our 2014 Employee Stock Purchase Plan, or 2014 ESPP, eligible employees can acquire shares of our common stock at a discount to the prevailing market price.

At March 31, 2020, 3,361,224 shares were available for issuance under the 2014 ESPP.

At June 30 , 2020, 3,287,825 shares were available for issuance under the 2014 ESPP.

Through January 1, 2024, the number of shares available for issuance under the 2014 ESPP will automatically increase on January 1 of each year by the lesser of 1,200,000 shares or 1% of all shares of our capital stock outstanding as of December 31 of the prior calendar year, subject to the ability of our compensation committee to take action to reduce the size of the increase in any given year.

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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 1A. Risk Factors