REGENXBIO Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the SEC on February 27, 2024. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our investigational gene therapies are designed to deliver functional genes to address genetic defects in cells, enabling the production of therapeutic proteins or antibodies that are intended to impact disease. Through a single administration, gene therapy could potentially alter the course of disease significantly and deliver improved patient outcomes with long-lasting effects. Overview of Product Candidates We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) as a one-time treatment to address an array of diseases. Our lead programs and product candidates are described below: • ABBV-RGX-314: We are developing ABBV-RGX-314 in collaboration with AbbVie as a potential one-time treatment for chronic retinal conditions which cause total or partial vision loss, including wet age-related macular degeneration (wet AMD), diabetic retinopathy (DR) and diabetic macular edema (DME). ABBV-RGX-314 is currently being evaluated in multiple ongoing clinical trials, including two pivotal trials (ATMOSPHERE and ASCENT), one Phase II bridging study, one Long-term Follow-up study, and a Fellow Eye Treatment study in patients with wet AMD, all utilizing subretinal delivery. Additionally, two Phase II clinical trials in patients with wet AMD (AAVIATE) and DR and DME (ALTITUDE) are also ongoing along with two corresponding Long-term Follow-up studies, all utilizing in-office suprachoroidal delivery. ABBV-RGX-314 uses the NAV ® AAV8 vector to deliver a gene encoding a therapeutic antibody fragment to inhibit vascular endothelial growth factor (VEGF). We have licensed certain exclusive rights to the SCS Microinjector ® from Clearside Biomedical, Inc. (Clearside) to deliver gene therapy treatments to the suprachoroidal space of the eye. Subretinal Delivery for Treatment of Wet AMD Enrollment continues to be on track in the ATMOSPHERE ® and ASCENT™ pivotal trials for the treatment of patients with wet AMD using subretinal delivery. These trials are expected to support global regulatory submissions with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) in the first half of 2026. The open label fellow eye study evaluating ABBV-RGX-314 in patients treated in the subretinal Phase I/IIa study is now fully enrolled. This study is designed to monitor safety, immune responses, and efficacy of ABBV-RGX-314 treatment in the fellow eye and these study data are intended to support the inclusion of bilateral use in the product label. Bilateral disease impacts a significant number of patients with wet AMD. Suprachoroidal Delivery for Treatment of Wet AMD The AAVIATE ® trial is a multi-center, open label, randomized, controlled, dose-escalation Phase II trial to evaluate the efficacy, safety and tolerability of suprachoroidal delivery of ABBV-RGX-314 for the treatment of wet AMD. As of July 29, 2024, ABBV-RGX-314 at dose level 3 with short course prophylactic steroid eye drops continues to be well tolerated with no drug-related serious adverse events (SAEs) and no cases of intraocular inflammation, endophthalmitis, vasculitis, retinal artery occlusion, choroidal effusion, or hypotony. Mild episcleritis occurred in three patients, all resolved and completed treatment with topical steroids. There were no cases of elevated intraocular pressure. Based on this favorable safety profile, the Phase II AAVIATE trial is initiating enrollment in a new cohort to evaluate ABBV-RGX-314 at dose level 4 (1.5x10e12 GC/eye). Patients in this cohort will also receive short course prophylactic steroid eye drops. Suprachoroidal Delivery for Treatment of DR and DME The ALTITUDE ® trial is a multi-center, open label, randomized, controlled, dose-escalation Phase II trial to evaluate the efficacy, safety and tolerability of ABBV-RGX-314 for the treatment of DR. Based on positive interim results from this 25 Table of Contents trial to date, the design and evaluation of two pivotal trials is on-going. With AbbVie, we have accelerated a planned End-of-Phase II (EOP2) meeting with the FDA, now expected in the fourth quarter of 2024. The Company expects to initiate the first global pivotal trial in the first half of 2025. The ALTITUDE trial is now enrolling a new cohort of patients with center-involved DME. Patients will receive a one-time, in-office injection of ABBV-RGX-314 at dose level 4 (1.5x10e12 GC/eye) with short course prophylactic steroid eye drops. DME is a vision-threatening complication of DR; an estimated 34 million people globally have DME. • RGX-202: We are developing RGX-202 as an investigational one-time AAV therapeutic for the treatment of Duchenne muscular dystrophy (Duchenne), using the NAV AAV8 vector to deliver a transgene for a novel microdystrophin that includes the functional elements of the C-Terminal (CT) domain as well as a muscle-specific promoter to support a targeted therapy for improved resistance to muscle damage associated with Duchenne. AFFINITY DUCHENNE ® is a multicenter, open-label dose escalation and dose expansion clinical study to evaluate the safety, tolerability and clinical efficacy of a one-time intravenous (IV) dose of RGX-202 in patients with Duchenne aged 1 to 11 years old. In March 2024 and May 2024, we reported interim safety and efficacy data from the trial, including RGX-202 microdystrophin expression for the first two patients who received RGX-202 at dose level 2 (DL2). In August 2024, we announced new data from two patients, aged 5.8 and 8.5 years, who received RGX-202 at DL2. RGX-202 microdystrophin expression in these patients was measured to be 77.2% and 46.5%, respectively, compared to control at three months. As of July 8, 2024, RGX-202 has been well tolerated with no SAEs. Data from all seven patients who completed three-month trial assessments indicate meaningful increases in expression of RGX-202 microdystrophin and reduction from baseline in serum creatinine kinase levels, supporting evidence of clinical improvement. We expect to complete enrollment in the DL2 expansion cohort in early third quarter 2024 and have initiated enrollment in the cohort for boys aged 1 to 3 years old. We remain on track to share initial strength and functional assessment data for both dose levels of the AFFINITY DUCHENNE trial in the second half of 2024. We recently held a successful EOP2 meeting with the FDA and are moving forward with plans to initiate a pivotal trial in the fourth quarter of 2024. Discussions with the FDA continue to support use of microdystrophin as a surrogate endpoint reasonably likely to predict clinical benefit for accelerated approval. We expect to share the pivotal trial design in late third quarter to early fourth quarter 2024. RGX-202 is manufactured using our proprietary, high-yielding NAVXpress™ platform process. This suspension-based manufacturing process has demonstrated scalability up to 2,000 liters with consistent yield and product purity. Our Manufacturing Innovation Center has the capacity and yields to produce up to 2,500 doses of RGX-202 per year to support future commercialization. • RGX-121: We are developing RGX-121 as an investigational one-time AAV therapeutic for the treatment of Mucopolysaccharidosis Type II (MPS II), also known as Hunter syndrome, using the NAV AAV9 vector to deliver the gene that encodes the iduronate-2-sulfatase enzyme. CAMPSIITE ® is a Phase I/II/III multi-center, open-label trial to evaluate the efficacy, safety, tolerability and pharmacodynamics of RGX-121 in patients with MPS II aged 4 months up to 5 years old. We continue to follow patients in the trial, and in February 2024, we reported that the pivotal phase of the CAMPSIITE trial achieved its primary endpoint. We plan to use levels of cerebrospinal fluid Heparan sulfate D2S6 as a surrogate endpoint reasonably likely to predict clinical benefit for accelerated approval and we are completing remaining activities in order to support a biologics license application (BLA) submission in 2024. We believe that RGX-121 is likely to be eligible for priority review, especially if no other gene therapy product for MPS II is approved before submission of a BLA for RGX-121, and potential approval of the Company's planned BLA for RGX-121 could result in receipt of a Rare Pediatric Disease Priority Review Voucher in 2025, assuming the statutory criteria are met. We completed a successful pre-BLA meeting with the FDA and will initiate a rolling BLA submission using the accelerated approval pathway in the third quarter of 2024, potentially making RGX-121 the first approved gene therapy and one-time treatment for MPS II. We expect to share additional safety and efficacy data from the Phase I/II/III CAMPSIITE trial in the second half of 2024. Overview of Our NAV Technology Platform In addition to our internal product development efforts, we also selectively license the NAV Technology Platform to other leading biotechnology and pharmaceutical companies, which we refer to as NAV Technology Licensees. As of June 30, 2024, our NAV Technology Platform was being applied in one commercial product, Zolgensma ® , and the preclinical and clinical development of a number of other licensed products. Licensing the NAV Technology Platform allows us to maintain our internal product development focus on our core disease indications and therapeutic areas while still expanding the NAV gene therapy pipeline, developing a greater breadth of treatments for patients, providing additional technological and potential clinical proof-of-concept for our NAV Technology Platform and creating potential additional revenue opportunities. 26 Table of Contents Financial Overview Revenues Our revenues to date consist primarily of license and royalty revenue resulting from the licensing of our NAV Technology Platform and other intellectual property rights. We have not generated any revenues from commercial sales of our own products. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval and adequate labeling, our ability to generate future revenues will be materially compromised. We license our NAV Technology Platform and other intellectual property rights to other biotechnology and pharmaceutical companies, including collaborators for the joint development and commercialization of our product candidates. The terms of the licenses vary, and licenses may be exclusive or non-exclusive and may be sublicensable by the licensee. Licenses may grant intellectual property rights for purposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drug therapies for specific diseases using the NAV Technology Platform and other licensed rights. License agreements generally have a term at least equal to the life of the underlying patents, but are terminable at the option of the licensee. Consideration from licensees under our license agreements may include: (i) up-front and annual fees, (ii) milestone payments based on the achievement of certain development and sales-based milestones, (iii) sublicense fees, (iv) royalties on sales of licensed products and (v) other consideration payable upon optional goods and services purchased by licensees. Future license and royalty revenues are dependent on the successful development and commercialization of licensed products, which is uncertain, and revenues may fluctuate significantly from period to period. Additionally, we may never receive consideration in our license agreements that is contemplated on option fees, development and sales-based milestone payments, royalties on sales of licensed products or sublicense fees, given the contingent nature of these payments. Our revenues are concentrated among a low number of licensees and licenses are terminable at the option of the licensee. The termination of our licenses by licensees may materially impact the amount of revenue we recognize in future periods. Zolgensma Royalties Royalty revenue to date consists primarily of royalties on net sales of Zolgensma, which is marketed by Novartis Gene Therapies, Inc. (formerly AveXis, Inc.) (Novartis Gene Therapies), a wholly owned subsidiary of Novartis AG (Novartis), for the treatment of spinal muscular atrophy (SMA). Zolgensma is a licensed product under our license agreement with Novartis Gene Therapies for the development and commercialization of treatments for SMA using the NAV Technology Platform. Collaboration and License Agreement with AbbVie In September 2021, we entered into a collaboration and license agreement with AbbVie Global Enterprises Ltd. (AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize ABBV-RGX-314 (the AbbVie Collaboration Agreement). The AbbVie Collaboration Agreement may materially impact our future revenues, research and development expenses, other operating expenses and operating cash flows associated with the development and commercialization of ABBV-RGX-314. For additional information regarding the AbbVie Collaboration Agreement, please refer to Note 9, “License and Collaboration Agreements—AbbVie Collaboration and License Agreement” to the accompanying unaudited consolidated financial statements. Operating Expenses Our operating expenses consist primarily of cost of revenues, research and development expenses and general and administrative expenses. Personnel costs including salaries, wages, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general and administrative expenses. We allocate indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costs between research and development and general and administrative categories based on employee headcount and the nature of work performed by each employee or using other reasonable allocation methodologies. 27 Table of Contents Cost of Revenues Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform and other intellectual property rights, including sublicense fees and royalties on net sales of licensed products. Sublicense fees are based on a percentage of license fees received by us from licensees and are recognized in the period that the underlying license revenue is recognized. Royalties are based on a percentage of net sales of licensed products by licensees and are recognized in the period that the underlying sales occur. Future costs of revenues are uncertain due to the nature of our license agreements and significant fluctuations in cost of revenues may occur from period to period. Research and Development Expense Our research and development expenses consist primarily of: • salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for our scientific personnel and others performing research and development activities; • costs related to executing preclinical studies and clinical trials; • costs related to acquiring, developing and manufacturing materials for preclinical studies and clinical trials; • fees paid to consultants and other third-parties who support our product candidate development; • other costs in seeking regulatory approval of our product candidates; and • direct costs and allocated costs related to laboratories and facilities, depreciation expense, information technology and other overhead. Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are charged to research and development expense as incurred if the technology licensed has no alternative future use. We expect to continue to incur significant research and development expenses for the foreseeable future as we continue the development of our product candidates and engage in early research and development for prospective product candidates and new technologies. The following table summarizes our research and development expenses incurred during the three and six months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Direct Expenses ABBV-RGX-314 $ 9,179 $ 5,333 $ 17,969 $ 10,369 RGX-202 2,211 1,568 5,178 6,145 RGX-121 3,488 5,837 7,781 7,632 Other product candidates 862 2,867 1,884 4,538 Total direct expenses 15,740 15,605 32,812 28,684 Unallocated Expenses Platform and new technologies 4,203 11,556 11,650 22,905 Personnel-related 20,846 23,943 43,014 49,417 Facilities and depreciation expense 7,044 7,273 14,124 14,350 Other unallocated 1,036 1,509 2,113 3,046 Total unallocated expenses 33,129 44,281 70,901 89,718 Total research and development $ 48,869 $ 59,886 $ 103,713 $ 118,402 Direct expenses related to the development of ABBV-RGX-314 include $21.3 million and $46.2 million for the three and six months ended June 30, 2024, respectively, and $18.2 million and $36.7 million for the three and six months ended June 30, 2023, respectively, in net cost reimbursement from AbbVie under our eye care collaboration which were recorded as a reduction of research and development expenses. Net cost reimbursement from AbbVie includes reimbursement of personnel and overhead costs attributable to the development of ABBV-RGX-314, the underlying costs of which are reported as unallocated expenses in the table above. We typically utilize our employee and infrastructure resources across our development programs. As a result, we generally do not allocate personnel and other internal costs, such as facilities and other overhead costs, to specific product candidates or development programs. 28 Table of Contents Platform and new technologies reported in the table above include direct costs not identifiable with a specific lead product candidate, including costs associated with our research and development platform used across programs, process development, manufacturing analytics and early research and development for prospective product candidates and new technologies. Direct expenses related to the development of product candidates for which we have discontinued internal development are included in other product candidates in the table above. We expect to continue to incur minor development expenses associated with long-term follow up studies for certain discontinued product candidates. General and Administrative Expense Our general and administrative expenses consist primarily of salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for employees performing functions other than research and development. This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology, facilities and administrative support functions. Additionally, general and administrative expenses include costs associated with accounting, legal, commercial and other corporate advisory services, obtaining and maintaining patents, insurance, information systems and other general corporate activities, as well as facility-related costs and other corporate overhead costs not otherwise allocated to research and development expense. We expect that our general and administrative expenses will increase as we continue to develop, and potentially commercialize, our product candidates. Other Income (Expense) Interest Income from Licensing In accordance with our revenue recognition policy, interest income from licensing consists of imputed interest recognized from significant financing components identified in our license agreements with NAV Technology Licensees as well as interest income accrued on unpaid balances due from licensees. Investment Income Investment income consists of interest income earned and gains and losses realized from our cash equivalents, marketable securities and non-marketable equity securities. Cash equivalents are comprised of money market mutual funds and highly liquid debt securities with original maturities of 90 days or less at acquisition. Marketable securities are comprised of available-for-sale debt securities. Interest Expense Interest expense consists primarily of interest imputed on the liability related to the sale of future Zolgensma royalties to entities managed by Healthcare Royalty Management, LLC (collectively, HCR). Interest expense is recognized using the effective interest method, based on our estimate of total royalty payments expected to be received by HCR under the royalty purchase agreement. For further information regarding the royalty purchase agreement with HCR, please refer to Note 7, “Liability Related to Sale of Future Royalties” to the accompanying unaudited consolidated financial statements. Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. We base our estimates on 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, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. Our significant accounting policies are fully described in Note 2 to the accompanying unaudited consolidated financial statements and in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes in our critical accounting policies and estimates since December 31, 2023. 29 Table of Contents Results of Operations Our consolidated results of operations were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 Change 2024 2023 Change Revenues License and royalty revenue $ 22,295 $ 19,977 $ 2,318 $ 37,917 $ 39,115 $ (1,198 ) Total revenues 22,295 19,977 2,318 37,917 39,115 (1,198 ) Operating Expenses Cost of revenues 10,579 9,475 1,104 14,862 13,587 1,275 Research and development 48,869 59,886 (11,017 ) 103,713 118,402 (14,689 ) General and administrative 18,855 23,698 (4,843 ) 37,146 46,332 (9,186 ) Impairment of long-lived assets — — — 2,101 — 2,101 Other operating expenses (income) 29 26 3 (5 ) 59 (64 ) Total operating expenses 78,332 93,085 (14,753 ) 157,817 178,380 (20,563 ) Loss from operations (56,037 ) (73,108 ) 17,071 (119,900 ) (139,265 ) 19,365 Other Income (Expense) Interest income from licensing 29 40 (11 ) 66 110 (44 ) Investment income 3,468 2,127 1,341 5,937 4,293 1,644 Interest expense (449 ) (1,120 ) 671 (2,422 ) (3,875 ) 1,453 Total other income 3,048 1,047 2,001 3,581 528 3,053 Net loss $ (52,989 ) $ (72,061 ) $ 19,072 $ (116,319 ) $ (138,737 ) $ 22,418 Comparison of the Three Months Ended June 30, 2024 and 2023 License and Royalty Revenue. License and royalty revenue increased by $2.3 million, from $20.0 million for the three months ended June 30, 2023 to $22.3 million for the three months ended June 30, 2024. The increase was primarily attributable to Zolgensma royalty revenues, which increased by $2.8 million, from $19.0 million for the second quarter of 2023 to $21.8 million for the second quarter of 2024. Novartis reported Zolgensma sales of $349 million for the second quarter of 2024, an increase of 12% from the second quarter of 2023. As reported by Novartis, Zolgensma sales grew particularly in the U.S. and established markets continue to treat mainly incident patients. Research and Development Expense. Research and development expenses decreased by $11.0 million, from $59.9 million for the three months ended June 30, 2023 to $48.9 million for the three months ended June 30, 2024. The decrease was primarily attributable to the following: • a decrease of $4.7 million in manufacturing expenses and other costs of clinical supply for our lead product candidates, largely driven by ABBV-RGX-314 and RGX-202 clinical supply costs; • a decrease of $3.1 million in personnel-related costs for research and development personnel, including a $0.8 million decrease in stock-based compensation expense, largely driven by the reduction in workforce associated with our corporate restructuring implemented in the fourth quarter of 2023; • a decrease of $3.1 million in preclinical activities and other early stage research and development; and • a decrease of $2.2 million in costs for laboratories and facilities used by research and development personnel, including a $0.4 million decrease in depreciation expense allocated to research and development functions, primarily driven by a decrease in laboratory supplies and consumables. The decrease in research and development expenses was partially offset by an increase of $2.6 million in costs associated with clinical trial activities, largely driven by clinical trial expenses for ABBV-RGX-314 and RGX-202. General and Administrative Expense. General and administrative expenses decreased by $4.8 million, from $23.7 million for the three months ended June 30, 2023 to $18.9 million for the three months ended June 30, 2024. The decrease was primarily attributable to professional services and consulting fees, including legal and other corporate advisory services. 30 Table of Contents Comparison of the Six Months Ended June 30, 2024 and 2023 License and Royalty Revenue. License and royalty revenue decreased by $1.2 million, from $39.1 million for the six months ended June 30, 2023 to $37.9 million for the six months ended June 30, 2024. The decrease was primarily attributable to non-recurring development milestone revenue recognized in the first half of 2023. The decrease was partially offset by Zolgensma royalty revenues, which increased by $1.9 million, from $35.1 million for the first half of 2023 to $37.0 million for the first half of 2024. As reported by Novartis, sales of Zolgensma for the first half of 2024 were $644 million, an increase of 4% from the first half of 2023, and established markets continue to treat mainly incident patients. Research and Development Expense. Research and development expenses decreased by $14.7 million, from $118.4 million for the six months ended June 30, 2023 to $103.7 million for the six months ended June 30, 2024. The decrease was primarily attributable to the following: • a decrease of $11.8 million in manufacturing expenses and other costs of clinical supply for our lead product candidates, largely driven by ABBV-RGX-314 and RGX-202 clinical supply costs; • a decrease of $6.4 million in personnel-related costs for research and development personnel, including a $1.9 million decrease in stock-based compensation expense, largely driven by the reduction in workforce associated with our corporate restructuring implemented in the fourth quarter of 2023; • a decrease of $4.2 million in costs for laboratories and facilities used by research and development personnel, including a $0.4 million decrease in depreciation expense allocated to research and development functions, primarily driven by a decrease in laboratory supplies and consumables; and • a decrease of $3.1 million in preclinical activities and other early stage research and development. The decrease in research and development expenses was partially offset by an increase of $11.8 million in costs associated with clinical trial activities, largely driven by clinical trial expenses for ABBV-RGX-314 and RGX-202. General and Administrative Expense. General and administrative expenses decreased by $9.2 million, from $46.3 million for the six months ended June 30, 2023 to $37.1 million for the six months ended June 30, 2024. The decrease was primarily attributable to the following: • a decrease of $7.0 million in professional services and consulting fees, including legal and other corporate advisory services; and • a decrease of $1.9 million in personnel-related costs for general and administrative personnel, including a $0.7 million decrease in stock-based compensation expense, largely driven by the reduction in workforce associated with our corporate restructuring implemented in the fourth quarter of 2023. Liquidity and Capital Resources Sources of Liquidity As of June 30, 2024, we had cash, cash equivalents and marketable securities of $327.3 million, which were primarily derived from the sale of our common stock and pre-funded warrants described below and license fees received under the AbbVie Collaboration Agreement. We expect that our cash, cash equivalents and marketable securities as of June 30, 2024 will enable us to fund our operating expenses and capital expenditure requirements, and are sufficient to meet our financial commitments and obligations, for at least the next 12 months from the date of this report based on our current business plan. In March 2024, we completed a public offering of 4,565,260 shares of our common stock at a price of $23.00 per share and 1,521,740 pre-funded warrants to purchase shares of our common stock at a price of $22.9999 per pre-funded warrant, which equaled the public offering price per share of the common stock less the $0.0001 exercise price of each pre-funded warrant. The aggregate net proceeds received from the offering were $131.1 million, net of underwriting discounts and commissions and offering expenses. 31 Table of Contents We intend to devote the majority of our current capital to preclinical research, clinical development, seeking regulatory approval of our product candidates and, if approved, commercialization of our product candidates, as well as additional capital expenditures needed to support these activities. Because of the numerous risks and uncertainties associated with the development and commercialization of gene therapy product candidates, we are unable to estimate the total amount of operating expenditures and capital outlays necessary to complete the development of our product candidates. While we expect the pipeline prioritization and corporate restructuring implemented in November 2023 to result in cost savings, we may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the restructuring. In addition, we may not achieve the expected benefits of any cost reduction measures on our currently anticipated timeline, or at all. Furthermore, our estimates are based on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect which could accelerate our liquidity needs. At-the-Market Offering Program In September 2023, we entered into an ATM Equity Offering SM Sales Agreement with BofA Securities, Inc. (BofA) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million from time to time through BofA, acting as our sales agent (the ATM Program). We intend to use proceeds obtained from the sale of shares under the ATM Program, if any, for general corporate purposes. As of June 30, 2024, no shares of common stock had been sold under the ATM Program. Cash Flows Our consolidated cash flows were as follows (in thousands): Six Months Ended June 30, 2024 2023 Net cash used in operating activities $ (100,952 ) $ (128,240 ) Net cash provided by investing activities 12,915 118,312 Net cash provided by (used in) financing activities 111,280 (18,199 ) Net increase (decrease) in cash and cash equivalents and restricted cash $ 23,243 $ (28,127 ) Cash Flows from Operating Activities Our net cash used in operating activities for the six months ended June 30, 2024 decreased by $27.3 million from the six months ended June 30, 2023, largely as a result of lower operating expenses and increased cost reimbursement received from AbbVie under our ABBV-RGX-314 collaboration in the first half of 2024. We expect to continue to incur regular net cash outflows from operations for the foreseeable future as we continue the development and advancement of our product candidates and other research programs. For the six months ended June 30, 2024, our net cash used in operating activities of $101.0 million consisted of a net loss of $116.3 million and unfavorable changes in operating assets and liabilities of $12.2 million, offset by adjustments for non-cash items of $27.6 million. The changes in operating assets and liabilities include a decrease in total accounts payable and accrued expenses and other current liabilities of $14.0 million, which was driven largely by decreases in accrued sublicense fees, royalties and personnel-related expenses. Other changes in operating working capital occurred in the normal course of business. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $19.0 million and depreciation and amortization expense of $8.2 million. For the six months ended June 30, 2023, our net cash used in operating activities of $128.2 million consisted of a net loss of $138.7 million and unfavorable changes in operating assets and liabilities of $19.5 million, offset by adjustments for non-cash items of $30.0 million. The changes in operating assets and liabilities include a net decrease in total accounts payable and accrued expenses and other current liabilities of $10.6 million, which was driven primarily by the timing of invoices from suppliers and associated payments made by the Company as of the end of the period, and an increase in total prepaid expenses and other current assets of $14.1 million, which was driven primarily by an increase in net cost reimbursement due from AbbVie under our ABBV-RGX-314 collaboration. The unfavorable changes in operating assets and liabilities were partially offset by a decrease in accounts receivable of $7.1 million, which was driven primarily by a reduction in Zolgensma royalties receivable. Other changes in operating working capital occurred in the normal course of business. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $21.7 million and depreciation and amortization expense of $8.6 million. 32 Table of Contents Cash Flows from Investing Activities For the six months ended June 30, 2024, our net cash provided by investing activities consisted of $151.7 million in maturities of marketable debt securities, offset by $137.7 million used to purchase marketable debt securities and $1.0 million used to purchase property and equipment. For the six months ended June 30, 2023, our net cash provided by investing activities consisted of $175.5 million in maturities of marketable debt securities, offset by $49.8 million used to purchase marketable debt securities and $7.4 million used to purchase property and equipment. Cash Flows from Financing Activities For the six months ended June 30, 2024, our net cash provided by financing activities primarily consisted of $131.4 million in net proceeds received from the public offering of common stock and pre-funded warrants completed in March 2024, net of underwriting discounts and commissions and other offering expenses paid during the period, and $1.5 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan. Our net cash provided by financing activities was partially offset by $20.5 million of Zolgensma royalties paid to HCR, net of imputed interest, under our royalty purchase agreement. For the six months ended June 30, 2023, our net cash used in financing activities primarily consisted of $19.6 million of Zolgensma royalties paid to HCR, net of imputed interest, under our royalty purchase agreement, and was partially offset by $1.8 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan. Additional Capital Requirements Our material capital requirements from known contractual and other obligations primarily relate to vendor service contracts and purchase commitments, in-license agreements, operating lease agreements and our Zolgensma royalty purchase agreement with HCR. Our material commitments and obligations are further described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, and in the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Other than the changes described in the notes to the unaudited consolidated financial statements accompanying this Quarterly Report on Form 10-Q, including Note 6, “Leases,” there have been no material changes to our commitments and obligations since December 31, 2023. Future Funding Requirements We have incurred cumulative losses since our inception and had an accumulated deficit of $821.4 million as of June 30, 2024. Our transition to recurring profitability is dependent upon achieving a level of revenues adequate to support our cost structure, which depends heavily on the successful development, approval and commercialization of our product candidates. We do not expect to achieve such revenues, and expect to continue to incur losses, for at least the next several years. We expect to continue to incur significant research and development and general and administrative expenses for the foreseeable future as we continue the development of, and seek regulatory approval for, our product candidates. Subject to obtaining regulatory approval for our product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. Additionally, we expect to continue to incur capital expenditures associated with building out additional laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts. As a result, we will need significant additional capital to fund our operations, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. Our future capital requirements will depend on many factors, including: • the timing of enrollment, commencement and completion of our clinical trials; • the results of our clinical trials; • the results of our preclinical studies for our product candidates and any subsequent clinical trials; • the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our product candidates; • the costs associated with building out additional laboratory and manufacturing capacity; 33 Table of Contents • the costs, timing and outcome of regulatory review of our product candidates; • the costs of future product sales, medical affairs, marketing, manufacturing and distribution activities for any of our product candidates for which we receive marketing approval; • revenue, if any, received from commercial sales of our products, should any of our product candidates receive marketing approval; • revenue received from commercial sales of Zolgensma and the timing and amount of Zolgensma royalties paid to HCR under our royalty purchase agreement; • revenue received from other commercial sales of our licensees’ and collaborators’ products, should any of their product candidates receive marketing approval, and other revenue received under our licensing agreements and collaborations; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; • our current licensing agreements or collaborations remaining in effect, including the AbbVie Collaboration Agreement, and our ability to timely achieve any milestones set forth in such agreements or collaborations; • our ability to establish and maintain additional licensing agreements or collaborations on favorable terms, if at all; and • the extent to which we acquire or in-license other product candidates and technologies. Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products that may not be commercially available for many years, if at all. In addition, revenue from our NAV Technology Platform licensing is dependent in part on the clinical and commercial success of our licensing partners, including the commercialization of Zolgensma, and on maintaining our license agreements with our licensor partners, including GlaxoSmithKline LLC and The Trustees of the University of Pennsylvania. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. Adequate additional financing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with partners or others that may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 34 Table of Contents Item 3. Quantitative and Qualitati ve Disclosures about Market Risk. For information regarding market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our exposure to market risk during the six months ended June 30, 2024.