What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-10-27 · 173 added, 199 removed, 112 unchanged (77% of the section changed)

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Impact of COVID-19 Pandemic

The continuing COVID-19 outbreak, which was declared a pandemic by the World Health Organization in March 2020, and the governmental efforts to mitigate the spread of the pandemic, has caused significant volatility and uncertainty in U.S.

and international markets and could materially and adversely affect our business and operating results.

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

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.

The FDA has also delayed certain key meetings or discussions with us related to one of our product candidates, which may adversely impact the progression of our clinical study for such product candidate.

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.

In response to these events, we are currently seeking alternative sources of supply of drug product or raw materials in an attempt to avoid future potential delays in supply of product, which may result in additional expenses.

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 certain data from our gene therapy product candidates was delayed as a result of the COVID-19 pandemic.

The FDA has also delayed certain key meetings or discussions with us related to one of our product candidates, which has impacted the progression of our clinical study for such product candidate.

The continuing outbreak has caused delays in delivery of ancillary clinical trial materials as 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.

Social distancing measures and travel limitations in response to the pandemic have also made it difficult for us to identify new patients for our commercialized products, which may result in loss of revenue.

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The magnitude and extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are very uncertain and cannot be predicted with confidence.

As a result, we cannot reliably estimate the extent to which the COVID-19 pandemic will impact our financial statements in the fourth quarter and beyond .

As a result, we cannot reliably estimate the extent to which the COVID-19 pandemic will impact our financial statements in 2021 and beyond .

"Risk Factors" for additional details.

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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, 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 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.

On October 5, 2020 Kyowa Kirin Co., Ltd., or KKC (formerly Kyowa Hakko Kirin Co., Ltd., or KHK) announced the European Commission (EC) approved Crysvita for the treatment of XLH in older adolescents and adults.

Crysvita was previously approved by the EC for the treatment of XLH with radiographic evidence of bone disease in children one year of age and older and adolescents with growing skeletons.

With this expanded approval, adolescents with radiographic evidence of bone disease, regardless of growth status, as well as adults with XLH are now also eligible for treatment with Crysvita in the European Union (EU).

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

See section entitled “Recent Program Updates” below for a description of recent updates to certain of our approved therapies and clinical-stage pipeline products.

Our biologic products include approved therapies Crysvita® (burosumab) and Mepsevii® (vestronidase alfa) and UX143 in clinical development:

Crysvita is an antibody administered via subcutaneous injection that targets fibroblast growth factor 23, or FGF23, developed for the treatment of XLH, a rare, hereditary, progressive and lifelong musculoskeletal disorder characterized by renal phosphate wasting caused by excess FGF23 production.

There are approximately 48,000 patients with XLH in the developed world, including approximately 36,000 adults and 12,000 children.

Crysvita is the only approved treatment that addresses the underlying cause of XLH.

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

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

In Brazil and Mexico, 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.

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

We are collaborating with KHK, and Kyowa Kirin, a wholly owned subsidiary of KKC, on the development and commercialization of Crysvita globally.

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.

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.

MPS VII is one of the rarest MPS disorders, affecting an estimated 200 patients in the

developed world.

Mepsevii is approved in the United States for the treatment of children and adults with MPS VII.

In the EU and the United Kingdom, Mepsevii is approved under exceptional circumstances for the treatment of non-neurological manifestations of MPS VII for patients of all ages.

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

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

UX143 (setrusumab), which is subject to our collaboration agreement with Mereo and the lead clinical asset in our bone endocrinology franchise, is a fully human monoclonal antibody that inhibits sclerostin, a protein that acts on a key bone-signaling pathway and inhibits the activity of bone-forming cells.

Setrusumab is being studied for the treatment of osteogenesis imperfecta (OI) and has received orphan drug designation from the FDA and European Medicines Agency ( EMA), rare pediatric disease designation from the FDA, and was accepted into the EMA’s Priority Medicines program (PRIME).

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

Initiation of a pediatric Phase 2/3 study is expected in the second half of 2021 and a separate pivotal study is currently being planned for adults with OI.

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

Dojolvi 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 and the product is commercially available in the United States.

Dojolvi is approved and commercially available in the United States and Canada as a source of calories and fatty acids for the treatment of pediatric and adult patients with molecularly confirmed LC-FAOD.

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

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

Discussions with EU regulatory authorities are ongoing.

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

DTX301 is an adeno-associated virus 8, or AAV8 gene therapy product candidate designed for the treatment of patients with ornithine transcarbamylase, or OTC, deficiency.

There are approximately 8,000 to 14,000 patients in the developed world with LC-FAOD.

Our clinical-stage gene therapy pipeline includes DTX401, DTX301, DTX201 and UX701:

DTX401 is an adeno-associated virus 8, or 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 genetically inherited 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 , Regenerative Medicine Advanced Therapy (RMAT) designation and Fast Track designation in the United States.

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.

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

Data from this cohort are expected by the end of 2020.

Phase 3 initiation is expected in 2021.

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 , 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 by the end of 2020.

A fourth cohort of three patients is ongoing at 6.0 x 10^12 GC/kg with a prophylactic steroid regimen.

Data from this cohort is not expected to impact the timing of a Phase 3 study, which is expected to initiate in the first half of 2021.

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

OTC deficiency is the most common urea cycle disorder, and 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 Fast Track Designation in the United States.

DTX201 is a Factor VIII gene therapy program for the treatment of hemophilia A that is being developed in collaboration with Bayer Healthcare LLC, or Bayer.

Hemophilia A is the most common form of hemophilia with approximately 144,000 patients in the developed world.

The first three cohorts with two patients each have been dosed using material from our proprietary HeLa manufacturing platform.

Enrollment of additional dose cohorts in the Phase 1/2 study is currently ongoing.

UX701 is an AAV type 9 gene therapy product candidate designed to deliver stable expression of a truncated version of the ATP7B copper transporter following a single intravenous infusion to patients with Wilson disease.

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

UX701 was granted Orphan Drug Designation in the United States and EU.

Our clinical-stage nucleic acid pipeline includes GTX-102 for the treatment of Angelman syndrome, and UX053 for the treatment of GSDIII:

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.

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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 (GeneTx).

With our partner GeneTx, we have reported positive interim data from the ongoing Phase 1/2 study indicating substantial improvements in all patients in at least two disease domains including communication, behavior, sleep, gross motor function, and fine motor function as measured by the Clinical Global Impression of Improvement Scale for Angelman Syndrome, or CGI-I-AS for Patients 1 through 4 at day 128, and Patient 5 at Day 86 .

At the highest doses , all five patients experienced a serious adverse event (SAE) of lower extremity weakness believed to be related to local inflammation due to GTX-102.

Following these events, the companies paused enrollment and dosing.

These SAEs were assessed as mild or moderate in severity and have generally improved over a period of a few weeks while disease domain improvements have been sustained for three months .

We and GeneTx plan to amend the study protocol to reduce the dose-level range and modify the administration process, which we expect to reduce further drug-related SAEs.

GTX-102 is being developed in collaboration with GeneTx Biotherapeutics LLC (GeneTx) in an ongoing Phase 1/2 clinical study.

The study is currently on clinical hold in the United States.

UX053 is an mRNA product candidate designed for the treatment of patients with GSDIII, a disease caused by a glycogen debranching enzyme (AGL) deficiency that results in glycogen accumulation in the liver and muscle.

GSDIII affects more than 10,000 patients in the developed world.

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

Recent Clinical Program Updates

Crysvita for the treatment of X-linked hypophosphatemia, or XLH

On October 5, 2020 KKC announced the European Commission (EC) approved Crysvita for the treatment of XLH in older adolescents and adults.

Crysvita was previously approved by the EC for the treatment of XLH with radiographic evidence of bone disease in children one year of age and older and adolescents with growing skeletons.

With this expanded approval, all adolescents with radiographic evidence of bone disease, regardless of growth status, as well as adults with XLH are now also eligible for treatment with Crysvita in the EU.

DTX301 for the treatment of ornithine transcarbamylase, or O TC, deficiency

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

Data from this cohort are expected by the end of 2020.

We are also continuing Phase 3 planning and discussions with the FDA, with the intent to start the Phase 3 study in 2021.

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

In October 2020, we announced that a fourth cohort of three patients is ongoing at 6.0 x 10^12 GC/kg, the same dose as cohorts two and three, with a prophylactic steroid regimen .

Data from this cohort is not expected to impact the timing of a potential Phase 3 study.

Additional data on Cohort 3, dosed at 6.0 x 10^12 GC/kg with an optimized reactive steroid regimen, are expected to be released in the fourth quarter of 2020.

Following meetings with the FDA and finalization of the study design, we plan to initiate the study in the first half of 2021.

Recent Program Updates

Dojolvi for the treatment of LC-FAOD

On February 17, 2021 we announced that Health Canada approved Dojolvi as a source of calories and fatty acids for the treatment of adult and pediatric patients with LC-FAOD.

On March 31, 2021, Dojolvi was made commercially available to patients with LC-FAOD in Canada.

DTX701 for the treatment of Wilson disease

In January 21, 2021, we announced that the FDA has cleared the Investigational New Drug (IND) application for UX701.

On February 11, 2021, we announced UX701 received Fast Track Designation from the FDA.

This allows for early and frequent communication throughout the entire drug development and review process and reflects the serious, unmet need for patients with Wilson disease.

We currently expect enrollment in a seamless single-protocol Phase 1/2/3 study to begin in the early part of the second half of 2021.

DTX401 for the treatment of GSDIa

We have completed the Scientific Advice process with the EMA and the End-of-Phase 2 meeting with the FDA to discuss the Phase 2 data, the Phase 3 design, and endpoints.

We have submitted the Phase 3 study design to the FDA and are currently finalizing the endpoints for the study with regulators.

The Phase 3 study is currently expected to initiate early in the second half of 2021.

DTX301 for the treatment of OTC deficiency

On April 22, 2021, we announced the successful completion of an End-of-Phase 2 meeting with the FDA.

The meeting focused on the discussion of the Phase 1/2 data and alignment on Phase 3 design and endpoints.

The Phase 3 study will include a 64-week primary efficacy analysis period and enroll approximately 50 patients 12 years of age and older, randomized 1:1 to DTX301 (1.7 x 10^13 GC/kg dose) or placebo.

The co-primary endpoints are change in 24-hour plasma ammonia levels and the percent of patients who achieve a response as measured by discontinuation or reduction in baseline disease management.

The Phase 3 study is currently expected to initiate in the second half of 2021.

GTX-102 for the treatment of Angelman Syndrome, partnered with GeneTx

In October 2020, we, along with our partner GeneTx, announced positive interim data from the ongoing Phase 1/2 study of GTX-102, an investigational antisense oligonucleotide for the treatment of Angelman Syndrome.

Preliminary results from the Phase 1/2 study indicate substantial improvements in all patients in at least two disease domains including communication, behavior, sleep, gross motor function, and fine motor function as measured by the CGI-I-AS for Patients 1 through 4 at day 128, and Patient 5 at Day 86.

At the highest doses, all five patients experienced a SAE of lower extremity weakness believed to be related to local inflammation due to GTX-102.

Following these events, the companies paused enrollment and dosing.

These SAEs were assessed as mild or moderate in severity and have generally improved over a period of a few weeks while disease domain improvements have been sustained for three months.

We and GeneTx plan to amend the study protocol to reduce the dose-level range and modify the administration process, which we expect to reduce further drug-related SAEs.

Other Developments

Corporate Update

In September 2020, we announced the hire of Ernie Meyer, Chief Human Resources Officer and Executive Vice President.

In this newly created role, Mr.

Meyer will lead all aspects of the Global Human Resources and Facilities operations.

He will report to Emil D.

Kakkis and will serve on the Executive Leadership Team.

In September 2020, we also announced the hire of Mardi C.

Dier, Chief Financial Officer (CFO) and Executive Vice President.

In this role, Ms.

Dier will be responsible for leading the corporate finance, strategy, investor relations, corporate communications, and information technology functions.

She will report to Emil D.

Kakkis and will serve on the Executive Leadership Team.

Business Development Update

In October 2020, we announced a strategic collaboration with Solid Biosciences, Inc.

(Solid) to develop and commercialize new gene therapies for Duchenne Muscular Dystrophy.

This collaboration combines Solid’s differentiated microdystrophin construct and our HeLa Producer Cell Line, or PCL, manufacturing platform for use with AAV8 and variants.

Under terms of the collaboration, Solid received a $40.0 million payment for our investment and may receive up to $255.0 million in cumulative milestone payments per product upon achievement of specified milestone events, and tiered royalties on worldwide net sales at low double-digit to mid-teens percentages.

Upon achievement of proof-of-concept, Solid has the right to opt-in to co-fund collaboration programs in return for participation in a profit share or increased royalty payments.

A pre-application meeting with a national regulatory agency in Europe was held in which we reviewed efficacy and safety data as well as our proposal for dosing and administration in the Phase 1/2 study.

Based on our discussion, the authority agreed in principle on the expansion of the trial to Europe using a proposed modified study design, dosing and administration strategy, pending review of the application.

The application to enroll clinical studies in this region was recently submitted.

In Canada, an amendment to the open clinical trial agreement was submitted and included the additional data and updated protocol and is pending review.

Discussions with the FDA are continuing and a request for a meeting has been granted and will take place in the second quarter 2021.

The meeting will review additional clinical data requested by the FDA regarding the previously treated patients that confirm that the serious adverse event in the previously treated patients has fully reversed as well as an amended dosing plan for the previously treated patients.

The Phase 1/2 study is currently expected to resume in 2021, with clinical data on some patients still available before the end of 2021.

UX053 for the treatment of GSDIII

On March 8, 2021, we announced that the FDA cleared the IND application for UX053, an investigational mRNA therapy being evaluated for the treatment of GSDIII.

Enrollment in a Phase 1/2 study is currently expected to begin in the second half of 2021.

Financial Operations Overview

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To date, we have invested substantially all of our efforts and financial resources in identifying, acquiring, and developing our products and product candidates, including conducting clinical studies and providing selling, general and administrative support for these operations.

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

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

We have incurred net losses in each year since inception.

Our net loss was $68.8 million and $162.6 million for the three and nine months ended September 30, 2020, respectively, and $113.0 million and $308.9 million for the three and nine months ended September 30, 2019, respectively.

Net loss for the three and nine months ended September 30, 2020 included a $11.5 million loss and a $91.3 million gain, respectively, resulting from changes in fair value of our investment in Arcturus equity securities.

Our net loss was $136.1 million and $119.0 million for the three months ended March 31, 2021 and 2020, respectively.

Net loss for the three months ended March 31, 2021 included a loss of $20.6 million resulting from changes in fair value of our investments in Arcturus Therapeutics Holdings Inc.

(Arcturus) and Solid Biosciences Inc.

(Solid) equity securities.

Net loss for the three months ended March 31, 2020 included a gain of $7.7 million resulting from changes in the fair value of our investment in Arcturus.

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.

For the three months ended September 3 0 , 2020, our total revenues increased to $ 81.5 million, compared to $ 25.8 million for the same period in 2019 and for the nine months ended September 30, 2020, increased to $ 179.5 million, compared to $ 68.1 million for the same period in 2019.

Revenue for the three and nine months ended September 30, 2020 included $ 32.9 million and $ 51.7 million , respectively, in revenue from our collaboration and license agreement with Daiichi Sankyo Co., Ltd.

For the three months ended March 31, 2021, our total revenues increased to $99.4 million, compared to $36.3 million for the same period in 2020.

Revenue for the three months ended March 31, 2021 and 2020 included $42.8 million and none, respectively, in revenue from our collaboration and license agreement with Daiichi Sankyo Co., Ltd.

(Daiichi Sankyo) which we executed in March 2020.

Th e 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 September 30, 2020, we had $765.5 million in available cash, cash equivalents and available-for-sale investments.

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

As of March 31, 2021, we had $1,047.0 million in available cash, cash equivalents, and marketable debt securities.

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.

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.

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 nine months ended September 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.

There have been no material changes in our critical accounting policies during the three months ended March 31, 2021 , 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 and nine months ended September 30, 2020 to the three and nine months ended September 30, 2019:

Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020:

Revenue (dollars in thousands)

Three Months Ended September 30,

Three Months Ended March 31,

Collaboration and license revenue:

Crysvita collaboration revenue in profit-share

Crysvita royalty revenue in European territory

Daiichi Sankyo

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* Not meaningful

Nine Months Ended September 30,

Collaboration and license revenue:

Crysvita collaboration revenue in profit-share

Crysvita royalty revenue in European territory

Daiichi Sankyo

Total collaboration and license revenue

Product sales:

Total product sales

Crysvita non-cash collaboration royalty revenue

Total revenues

For the three months and nine months ended September 30, 2020, the Company’s share of Crysvita collaboration revenue in the profit-share territory increased by $14.5 million and $42.4 million, respectively, as compared to the same periods in 2019.

For the three months ended March 31, 2021 , the Company’s share of Crysvita collaboration revenue in the profit-share territory increased by $9.0 million as compared to the same period in 2020.

The increase primarily reflects the continuing increase in demand for Crysvita due to an increase in the number of patients on therapy.

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

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

During the nine months ended September 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 an additional $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 nine months ended September 30, 2020, we recognized $32.9 million and $51.7 million, respectively, as collaboration and license revenue from this arrangement.

We expect to recognize a substantial majority of the $183.6 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 decreases 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 $7.0 million and $12.7 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019 were primarily due to the launch of Dojolvi in the United States in the third quarter of 2020, continuing increase in demand for our other products, and increase in sales of certain products under our named patient program in certain countries.

For the three months ended March 31, 2021 , we recognized $42.8 million as collaboration and license revenue from this arrangement.

We expect to recognize the remaining revenue allocated to the intellectual property and the transfer services as revenue by the end of 2021.

The increase in product sales of $10.0 million for the three months ended March 31, 2021, compared to the same period in 2020 was primarily due to the commercial launch of Dojolvi in the United States in the third quarter of 2020, continuing increase in demand for Crysvita and Mepsevii, and an increase in sales of Dojolvi under our named patient program in certain countries.

The increase in Crysvita non-cash collaboration royalty revenue of $1.3 million primarily reflects the launch progress by our collaboration partner in European countries and an increase in the number of patients on therapy.

Cost of Sales (dollars in thousands)

Three Months Ended September 30,

Cost of sales

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of sales

Cost of sales related to our approved products decreased by $0.3 million and $3.3 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019.

The cost of sales for the nine months ended September 30, 2020 includes a credit for the manufacturing of future inventory batches with an estimated value of $4.6 million, which was recorded during the first quarter of 2020, and 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 $1.9 million on these inventory batches during the three months ended September 30, 2019.

The decrease in cost of sales for the three months ended September 30, 2020 compared to the same period in 2019 was due to the reserve on these inventory batches recorded in 2019, offset by an increase in demand for our approved products and the launch of Dojolvi in the third quarter of 2020.

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 and nine months ended September 30 , 2020 would have been approximately $ 2.5 million and $ 5.6 million, respectively, and for the three and nine months ended September 30, 2019 would have been approximately $ 2.7 million and $ 4.4 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.

Cost of sales related to our approved products increased by $8.7 million for the three months ended March 31, 2021 compared to the same period in 2020.

The cost of sales for the three months ended March 31, 2021 included additional reserves of $1.7 million for excess inventory write downs.

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

The increase in cost of sales for the three months ended March 31, 2021 compared to the same period in 2020 was due to the manufacturing credit recorded in 2020, an increase in demand for our approved products, product costs related to sales of Dojolvi, which launched in the third quarter of 2020, and the reserves for excess inventory.

Prior to the approval of our 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 three months ended March 31, 2021 and 2020 .

If manufacturing and related costs were capitalized prior to the approval period and the $1.7 million in write downs for the three months

ended March 31, 2021 and the credit of $4.6 million for the three months ended March 31, 2020 as noted above were excluded , we estimate that cost of sales for the three months ended March 31, 2021 and 2020 would have been approximately $ 3.7 million and $ 1.3 million, respectively, for our commercial product sales.

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

Research and Development Expenses (dollars in thousands)

Three Months Ended September 30,

Translational research

Other research costs

Total research and development expenses

Nine Months Ended September 30,

Research and development expenses include internal and external costs incurred for research and development of our programs and program candidates and expenses related to certain technology that we acquire or license through business development transactions.

These expenses consist primarily of clinical studies performed by contract research organizations, manufacturing of drug substance and drug product performed by contract manufacturing organizations, materials and supplies, fees from collaborative and other arrangements including milestones, licenses and other fees, personnel costs including salaries, benefits and stock-based compensation, and overhead allocations consisting of various support and infrastructure costs.

Commercial programs include costs for disease monitoring programs and certain regulatory and medical affairs support activities for programs after commercial approval.

Clinical programs include study conduct and manufacturing costs related to clinical program candidates.

Translational research include costs for preclinical study work and costs related to preclinical programs prior to IND filing.

Upfront license and milestone fees include any significant expenses related to strategic licensing agreements.

Infrastructure costs include direct costs related to laboratory, IT, and equipment depreciation costs, and overhead allocations for human resources, IT and other allocable costs.

The following table provides a breakout of our research and development expenses by major program type and business activities:

Three Months Ended March 31,

Commercial programs

Clinical programs:

Gene therapy programs

Nucleic acid and other biologic

Small molecule programs

Translational research

Other research costs

Upfront license and milestone fees

Infrastructure

Stock-based compensation

Other research and development

Total research and development expenses

Research and development expenses decreased $12.8 million and increased $6.7 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019.

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

for Crysvita, a decrease of $2.5 million and $7.9 million for the three and nine months ended September 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 decrease of $0.9 million and $3.3 million for the three and nine months ended September 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 Dojolvi, a decrease of $2.9 million and $0.9 million for the three and nine months ended September 30, 2020, respectively, primarily related to the net impact of inventory capitalization of commercial manufacturing costs post-approval by the FDA in June 2020, NDA filing costs incurred in 2019, and the expense related to pre-approval manufacturing costs;

for DTX301, a decrease of $4.4 million and $6.8 million for the three and nine months ended September 30, 2020, respectively, primarily related to the timing of clinical drug substance manufacturing activities and drug product batch releases;

for DTX401, an increase of $2.6 million and a decrease of $3.8 million for the three and nine months ended September 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 second quarter of 2020 with one of our manufacturers due to certain batches that did not meet specified quality standards;

for GTX102, a de crease of $ 19.1 million and an increase of $ 6.9 million f or the three and nine months ended September 30, 2020 , respectively, primarily due to the $25.0 million option extension payment to GeneTx that occurred during the first quarter of 2020, offset by the $20.0 million upfront payment to GeneTx that occurred during the third quarter of 2019;

for translational research, an increase of $12.4 million and $34.6 million for the three and nine months ended September 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, an increase of $1.9 million and a decrease of $12.0 million for the three and nine months ended September 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 and reduced clinical trial expense for the wind-down of the UX007 Glut 1 program, net of increases in general operating, facilities, IT, and other overhead expenses in support of our clinical and research program pipeline.

Total research and development expenses increased $34.6 million for the three months ended March 31, 2021 compared to the same period in 2020.

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

for commercial programs, an increase of $7.8 million for the three months ended March 31, 2021 primarily related to the addition of expenses related to Dojolvi and the TIO indication for Crysvita following their respective FDA approvals in June 2020;

for gene therapy programs , an increase of $8.2 million for the three months ended March 31, 2021 primarily related to the addition of expenses related to UX701 following its IND approval in January 2021 ;

for nucleic acid and other biologic programs, an increase of $8.1 million for the three months ended March 31, 2021 primarily related to the addition of expenses related to UX053 following its IND approval in March 2021 and UX143 as we entered into a License and Collaboration Agreement with Mereo BioPharma 3 Limited, or Mereo, to collaborate on the development of UX143 effective January 2021;

partially offset by the classification of expenses for the TIO indication for Crysvita to commercial programs for the three months ended March 31, 2021;

for small molecule programs, a decrease of $7.4 million for the three months ended March 31, 2021 primarily related to the classification of expenses for Dojolvi to commercial programs for the three months ended March 31, 2021;

for translational research, a decrease of $3.7 million for the three months ended March 31, 2021 primarily related to the classification of expenses for UX053 to clinical programs as a result of its IND approval;

for upfront license and milestone fees, an increase of $18.0 million for the three months ended March 31, 2021 primarily due to the $50.0 million upfront payment to Mereo in January 2021, partially offset by the $25.0 million option extension payment to GeneTx and the $7.0 million upfront payment to REGENXBIO, Inc.

(REGENEX) pursuant to the license agreement for REGENX’s NAV AAV8 and AAV9 vectors, both of which occurred during the first quarter of 2020;

for infrastructure , a n in crease of $ 2.4 million f or the three months ended March 31, 2021 primarily related to increased expenses for support of our clinical and research program pipeline , expansion of laboratory space, implementation of COVID-related policies and safety protocols, depreciation of laboratory-related leasehold improvements and equipment, and IT-related expenses ;

for stock-based compensation, an increase of $2.6 million for the three months ended March 31, 2021 primarily related to an increase in employee headcount as well as the higher valuation of stock-based awards granted to employees;

for other research and development expenses, a decrease of $1.4 million for the three months ended March 31, 2021 primarily related to higher research and development efforts allocated to programs represented in the commercial, clinical, and translational science programs above.

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

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Selling, General and Administrative Expenses (dollars in thousands)

Three Months Ended September 30,

Selling, general and administrative

Nine Months Ended September 30,

Three Months Ended March 31,

Selling, general and administrative

Selling, general and administrative expenses increased $1.1 million and $12.2 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019.

Selling, general and administrative expenses increased $5.7 million for the three months ended March 31, 2021 compared to the same period in 2020.

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, partially offset by lower travel and related expenses due to travel restrictions in connection with the COVID-19 pandemic.

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Interest Income (dollars in thousands)

Three Months Ended September 30,

Interest income

Nine Months Ended September 30,

Three Months Ended March 31,

Interest income

Interest income decreased $2.0 million and $4.4 million for the three and nine months ended September 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 Investments in Equity Securities (dollars in thousands)

Three Months Ended September 30,

Change in fair value of investments in equity

Nine Months Ended September 30,

Change in fair value of investments in equity

The fair value of our investments in equity securities decreased by $13.7 million and increased by $79.4 million for the three and nine months ended September 30, 2020, respectively, 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.

"Risk Factors" for additional details.

Interest income decreased $2.3 million for the three months ended March 31, 2021 compared to the same period in 2020, primarily due to lower portfolio yields as a result of a decrease in interest rates, partially offset by higher balances in our marketable debt securities.

Change in Fair Value of Equity Investments (dollars in thousands)

Three Months Ended March 31,

Change in fair value of equity investments

The fair value of our equity investments decreased by $20.6 million during the three months ended March 31, 2021 due to decreases in the fair value of Arcturus and Solid common stock, resulting in unrealized losses on our investments in Arcturus and Solid common stock of $4.6 million and $16.0 million, respectively.

The fair value of our equity investments increased by $7.7 million during the three months ended March 31, 2020 due to an increase in fair value of Arcturus common stock.

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

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

Three Months Ended September 30,

Non-cash interest expense on liability related to the

sale of future royalties

Nine Months Ended September 30,

Three Months Ended March 31,

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 $8.6 million and $25.1 million for the three and nine months ended September 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.

The non-cash interest expense on liability related to the sale of future royalties increased by $0.3 million for the three months ended March 31, 2021 compared to the same period in 2020 due to the increase in the liability related to the sale of future royalties for

net sales of Crysvita in the European territory, partially offset by a decrease in the effective interest rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

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 Income (Expense) (dollars in thousands)

Three Months Ended September 30,

Other income (expense)

Nine Months Ended September 30,

Other income (expense)

Other income (expense) increased by $0.7 million and $1.2 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019.

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

Other Expense (dollars in thousands)

Three Months Ended March 31,

Other expense

Other expense increased by $0.3 million for the three months ended March 31, 2021 compared to the same period in 2020.

The increase was primarily due to fluctuations in foreign exchange rates.

Provision for Income Taxes (dollars in thousands)

Three Months Ended September 30,

Provision for income taxes

Nine Months Ended September 30,

Three Months Ended March 31,

Provision for income taxes

The provision for incomes taxes increased by a nominal amount and $0.4 million for the three and nine months ended September 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.

We have assessed and have determined there is no expected material impact from the Coronavirus Aid Relief and Economic Security (CARES) Act on our future income tax provisions.

The provision for incomes taxes decreased by a nominal amount for the three months ended March 31, 2021 compared to the same period in 2020.

Liquidity and Capital Resources

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

As of September 30, 2020, we had $765.5 million in available cash, cash equivalents, and available-for-sale investments.

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

As of March 31, 2021, we had $1,047.0 million in available cash, cash equivalents, and marketable debt securities.

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, asset-backed securities, and money market funds.

Our cash, cash equivalents, and marketable debt securities are held in a variety of deposit accounts, interest-bearing accounts, corporate bond securities, U.S government securities, asset-backed 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.

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 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 nine months ended September 30, 2020, the proceeds from our at-the-market, or ATM, offering were none and $20.4 million, respectively, after commissions and other offering costs.

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

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 from an upfront payment related to the Daiichi Sankyo License Agreement.

In November 2020, we completed an underwritten public offering in which we sold 5,111,110 shares of common stock and received net proceeds of $435.6 million.

In December 2020, we sold 800,000 shares of Arcturus common stock and received net proceeds of $79.8 million.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Cash used in operating activities

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Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash Used in Operating Activities

2 unchanged sentences

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 nine months ended September 30, 2020 was $69.8 million and reflected a net loss of $162.6 million, $91.3 million for an unrealized gain in equity securities from Arcturus, and $9.4 million for non-cash collaboration royalty revenues related to the sale of future royalties to Royalty Pharma , offset by non-cash charges of $62.9 million for stock-based compensation, $0.2 million for the amortization of the premium paid on purchased investments, $9.1 million for depreciation, $0.2 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 $25.1 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 $2.6 million decrease due to an increase in inventory for Mepsevii and Dojolvi, a $12.5 million decrease due to an increase in prepaid expenses and other current assets primarily due to an increase in prepaid manufacturing, and a $7.3 million decrease primarily due to the addition of the right-of-use assets net of amortization during the period, offset by $5.1 million increase due to a decrease in accounts receivable primarily related to change in the timing of billing to a collaboration partner, a $2.8 million increase in accounts payable, accrued liabilities, and other liabilities primarily due to completion of laboratory construction amounts that were accrued at the beginning of the year, net of a decrease in accrued bonus due to the payout of the 2019 annual bonus, an increase of $102.9 million in contract liabilities, net, related to the license agreements with Daiichi Sankyo, and a $7.6 million increase due to the addition of lease liabilities, net of amortization during the period.

Cash used in operating activities for the nine months ended September 30, 2019 was $273.3 million and reflected a net loss of $308.9 million, $4.9 million for the amortization of the discount paid on purchased investments, and $12.0 million for an unrealized gain in the Arcturus equity securities, offset by non-cash charges of $62.3 million for stock-based compensation, $6.4 million for depreciation and amortization of an intangible asset acquired, and $0.9 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 $10.4 million decrease due to an increase in accounts receivable due to the commercialization of our products, a $6.6 million decrease due to an increase in inventory as we build out our commercial inventory supplies as we commercialize Mepsevii, a decrease of $5.9 million due to an increase 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, and a $15.6 million decrease due to the addition of the right-of-use assets net of amortization during the period, offset by a $4.0 million increase in accounts payable, accrued liabilities, and other liabilities primarily due to increased commercial and research activities and the timing of the receipt of invoices, and $17.1 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, 2021 was $159.3 million and reflected a net loss of $136.1 million and $3.9 million for non-cash collaboration royalty revenues related to the sale of future royalties to RPI Finance Trust (RPI), an affiliate of Royalty Pharma , offset by non-cash charges of $24.3 million for stock-based compensation, $0.9 million for the amortization of the premium paid on purchased marketable debt securities, $3.4 million for depreciation , $20.6 million for a change in fair value of equity investments from Arcturus and Solid, and $8.4 million for non-cash interest incurred on the liability related to the sale of future royalties to RPI .

Cash used in operating activities also reflected a $2.0 million decrease due to an increase in accounts receivable primarily related to higher revenues, a $10.7 million decrease due to an increase in prepaid expenses and other current assets primarily due to an increase in prepaid manufacturing, insurance, and subscriptions, a $23.6 million decrease in accounts payable, accrued liabilities, and other liabilities primarily due to the payout of 2020 annual bonuses, and a decrease of $41.5 million in

contract liabilities, primarily related to the revenue recognized from the license agreements with Daiichi Sankyo, offset by a $ 0.5 million increase due to a decrease in inventory .

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 marketable debt securities, $7.7 million for a change in fair value of equity investments from Arcturus, and $2.6 million for non-cash collaboration royalty revenues related to the sale of future royalties to RPI , offset by non-cash charges of $20.2 million for stock-based compensation, $2.9 million for depreciation, and $8.1 million for non-cash interest incurred on the liability related to the sale of future royalties to RPI .

Cash used in operating activities also reflected a decrease of $15.1 million due to an increase 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 decrease of $125.6 million due to a receivable related to the license and technology access agreement with Daiichi Sankyo in March 2020, and a $5.4 million decrease in accounts payable, accrued, 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 to RPI beginning in January 1, 2020, a $0.1 million increase due to a decrease in inventory, and an increase of $145.3 million in contract liabilities related to the license and technology access agreement with Daiichi Sankyo.

Cash Used in Investing Activities

Cash used in investing activities for the nine months ended September 30, 2020 was $277.0 million and related to purchases of property and equipment of $22.0 million, purchases of investments of $648.5 million, the purchase of investments in equity securities of $10.2 million related to $9.6 million for the exercise of the option to purchase additional Arcturus shares and $0.6 million related to the DiaCarta warrant, purchase of a convertible notes receivable of $1.9 million from DiaCarta, and the payment of $2.3 million on the FDA approval of Dojolvi recorded as intangible assets, offset by proceeds from the sale of investments of $40.4 million and maturities of investments of $367.4 million.

Cash used in investing activities for the nine months ended September 30, 2019 was $80.3 million and related to purchases of investments of $610.3 million, purchases of property and equipment of $13.3 million, and purchases of equity securities from Arcturus of $14.3 million, offset by proceeds from maturities of investments of $522.5 million and the sale of investments of $35.1 million.

Cash used in investing activities for the three months ended March 31, 2021 was $182.4 million and related to purchases of property and equipment of $16.4 million and purchases of marketable debt securities of $405.2 million, offset by proceeds from the sale of marketable debt securities of $15.0 million and maturities of marketable debt securities of $224.2 million.

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 marketable debt securities of $285.2 million, offset by proceeds from the sale of marketable debt securities of $16.6 million and maturities of marketable debt securities of $187.6 million.

Cash Provided by Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2020 was $110.6 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 $35.1 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 nine months ended September 30, 2019 was $363.9 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 $8.6 million in net proceeds from the issuance of common stock pursuant to equity awards.

Cash provided by financing activities for the three months ended March 31, 2021 was $12.6 million and was primarily comprised of $12.8 million in net proceeds from the issuance of common stock pursuant to equity plan awards.

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.

Funding Requirements

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.

We will 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 construction of our 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, 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 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 construction 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 September 30, 2020 (in thousands):

The following table summarizes our significant binding contractual obligations at March 31, 2021 (in thousands):

Payments due by period

3 unchanged sentences

Manufacturing and service contracts

Building construction agreement

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.

3 unchanged sentences

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