What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-07 · 125 added, 83 removed, 191 unchanged (52% of the section changed)

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We expect to initiate a pivotal program for the subretinal delivery of RGX-314 for the treatment of wet AMD in the second half of 2020.

We plan to initiate a Phase II trial for the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD in the first half of 2020 and expect to report interim data from Cohort 1 of the trial by the end of 2020.

Additionally, we expect to submit an IND for a Phase II trial of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of DR in the first half of 2020, and expect to report interim data in 2021.

AAV-Mediated Antibody Expression for the Treatment of Neurodegenerative Diseases:

We have established a research program in partnership with Neurimmune AG (Neurimmune) to jointly develop and commercialize novel gene therapies using NAV Vectors to deliver human antibodies for chronic neurodegenerative diseases, with an initial focus on diseases associated with the accumulation and deposition of the microtubule-associated protein tau (tauopathies) and alpha-synuclein (alpha-synucleinopathies).

We expect to provide a program update in the second half of 2020.

We expect to dose the first patient in a Phase II trial for the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD (AAVIATE) in the third quarter of 2020 and plan to report interim data from the first cohort of the trial by the end of 2020.

Additionally, we expect to initiate a Phase II trial of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of DR in the second half of 2020, and expect to report interim data in 2021.

AAV-Mediated Antibody Expression for the Treatment of Hereditary Angioedema (HAE):

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HAE is a chronic and severe disease characterized by recurring severe swelling (angioedema), most commonly in the face, airway, intestines and limbs.

We expect to select a lead product candidate in the first half of 2020 and provide a program update in the second half of 2020.

We expect to provide a program update in the second half of 2020.

AAV-Mediated Antibody Expression for the Treatment of Neurodegenerative Diseases:

We continue to collaborate with Neurimmune AG (Neurimmune) to jointly develop novel gene therapies using NAV Vectors to deliver human antibodies for chronic neurodegenerative diseases, with an initial focus on diseases associated with the accumulation and deposition of the microtubule-associated protein tau (tauopathies) and alpha-synuclein (alpha-synucleinopathies).

We expect to provide a program update in the second half of 2020.

Gene therapy programs for the potential treatment of rare monogenic diseases

We are developing RGX-501 for the treatment of homozygous familial hypercholesterolemia (HoFH), a severe genetic disease characterized by premature and aggressive plaque buildup, life threatening coronary artery disease and aortic valve disease predominantly due to abnormalities in the function or expression of the receptor for low-density lipoprotein (LDL-C).

We have completed dosing of patients in the expanded second cohort of the Phase I/II clinical trial for RGX-501 with corticosteroid prophylaxis, and we plan to assess LDL-C after all patients have completed steroid prophylaxis treatment.

We expect to provide a program update in the first half of 2020.

We are developing RGX-121 for the treatment of the neurological symptoms of Mucopolysaccharidosis Type II (MPS II), a severe genetic lysosomal storage disease caused by deficiency of iduronate-2-sulfatase (IDS), an enzyme that is responsible for breakdown of cellular waste products.

Initial data from the first cohort demonstrated consistent and sustained reduction in heparan sulfate (HS) in the cerebral spinal fluid (CSF) and available data support early signs of neurocognitive stability.

We expect to provide additional data from the first cohort in mid-2020, and we plan to complete enrollment in the second cohort in the first half of 2020, with interim data available in the second half of 2020.

We have completed enrollment in the second cohort and expect to report interim data from both cohorts and a program update in the second half of 2020.

We are developing RGX-111 for the treatment of the neurological symptoms of Mucopolysaccharidosis Type I (MPS I), a severe genetic lysosomal storage disease caused by deficiency of α-l-iduronidase (IDUA), an enzyme required for breakdown of cellular waste products.

Recruitment, screening and additional site activations are ongoing in the Phase I clinical trial for RGX-111.

We expect to provide a program update in the second half of 2020.

Recruitment and patient screening are ongoing in the Phase I/II clinical trial for RGX-111.

We expect to provide a program update by the end of 2020.

We are developing RGX-181 for the treatment of late-infantile neuronal ceroid lipofuscinosis type 2 (CLN2) disease, one of the most common forms of Batten disease, caused by mutations in the tripeptidyl peptidase 1 (TPP1) gene.

We are conducting preclinical development of RGX-181, including assessment of unmet clinical needs such as neurologic and ophthalmologic manifestations of the disease.

We expect to provide a program update in mid-2020 and submit an IND for a first-in-human trial in the second half of 2020.

We expect to submit an Investigational New Drug (IND) application for the intracisternal delivery of RGX-181 by the end of 2020, and plan to initiate enrollment in a Phase I/II trial in the first half of 2021.

RGX-381 is a new program targeting the ocular manifestations of CLN2 disease in patients and is designed to use the AAV9 vector to deliver the TPP1 gene directly to the retina.

We believe that one-time administration of RGX-381 could provide a durable source of TPP1 activity in the retina, thereby potentially preventing visual decline.

There is currently no available treatment for ocular manifestations of CLN2 disease.

We expect to submit an IND application for a Phase I/II study of RGX-381 in patients with CLN2 disease in the second half of 2020 and initiate enrollment in the first half of 2021.

We have discontinued internal clinical development of RGX-501 for the treatment of homozygous familial hypercholesterolemia (HoFH) and plan to evaluate strategic alternatives to support the continued advancement of this program.

Gene Therapy Research Program for the Treatment of Neuromuscular Disorders:

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RGX-314 Interim Update

In our Phase I/IIa trial for RGX-314, as of April 6, 2020, all 42 patients with wet AMD had received a single administration of RGX-314 across five dose cohorts.

In our Phase I/IIa trial for RGX-314, all 42 patients with wet AMD had received a single administration of RGX-314 across five dose cohorts.

To qualify for inclusion in the trial, participants were required to have a history of frequent anti-vascular endothelial growth factor (VEGF) treatments (including at least four anti-VEGF injections in the eight months preceding trial enrollment) and a documented history of response to anti-VEGF therapy.

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Patients will be assessed every four weeks to the six-month primary endpoint, with long-term follow-up continuing for two years.

Below is a summary of the preliminary results of our Phase I/IIa trial as of April 6, 2020:

RGX-314 continued to be well-tolerated at all dose levels, with no drug related serious adverse events (SAEs) reported.

Long-term, durable treatment effect was demonstrated over two years in Cohort 3, including mean improvement in vision (+14 letters) and stable retinal thickness (+2 µm).

In addition, 50% of patients (3/6) remained anti-VEGF injection-free over two years and 67% of patients (4/6) were anti-VEGF injection-free from nine months to two years and intraocular RGX-314 protein expression was stable over two years.

73% of patients (8/11) in Cohort 5 remained anti-VEGF injection-free over nine months after administration of RGX-314.

Intraocular RGX-314 protein levels at six months demonstrated dose-dependent expression across cohorts.

Below is a summary of the interim results of our Phase I/IIa trial as of July 13, 2020:

RGX-314 was generally well-tolerated at all dose levels, with one possibly drug-related serious adverse event (SAE) of significant decrease in vision reported in Cohort 5.

In Cohorts 4 and 5, durable treatment effect was observed, with stable to improved visual acuity and retinal thickness, and meaningful reductions in anti-VEGF treatment burden were demonstrated over one year.

Patients in Cohort 4 and Cohort 5 at one year after administration of RGX-314 demonstrated stable visual acuity with a mean BCVA change of +4 letters and -2 letters from baseline, respectively, as well as decreased retinal thickness, with a mean change in CRT of -61 µm and -79 µm, respectively.

Patients in Cohort 4 received a mean of 4.1 injections over one year following administration of RGX-314, a 61% reduction in treatment burden.

Patients in Cohort 5 received a mean of 1.4 injections over one year following administration of RGX-314, a reduction in treatment burden of 85%.

In Cohort 4, three out of twelve (25%) patients received no anti-VEGF injections over one year, and these patients demonstrated a mean BCVA improvement of +6 letters and a mean reduction in CRT of -62 µm at one year.

In Cohort 5, eight out of the eleven (73%) patients observed through one year have received no anti-VEGF injections after administration of RGX-314 and these patients demonstrated a stable mean BCVA change of 0 letters and a mean reduction in CRT of -95 µm at one year.

Intraocular RGX-314 protein levels at one year demonstrated dose-dependent expression across cohorts.

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 March 31, 2020, our NAV Technology Platform was being applied in one commercially approved product (Zolgensma®), and the clinical development of 15 partnered product candidates, with over 20 partnered programs in total.

As of June 30, 2020, our NAV Technology Platform was being applied in one commercially approved product (Zolgensma®), and many partnered product candidates are in development, several of which are in active clinical development.

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.

Impact of COVID-19

We are actively monitoring the impact of the novel coronavirus (COVID-19) pandemic on our business, results of operations and financial condition.

We are actively monitoring the impact of the COVID-19 pandemic on our business, results of operations and financial condition.

Our offices, laboratories, clinical trial sites, prospective clinical trial sites, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other collaborators and partners are located in jurisdictions where quarantines, executive orders, shelter-in-place orders, guidelines, and other similar orders and restrictions intended to control the spread of the disease have been put in place by governmental authorities.

We have implemented a work-from-home policy for all employees who are not essential to be onsite, and we may take further actions that alter our operations, as may be required by federal, state or local authorities or which we determine are in the best interests of our employees.

The COVID-19 pandemic could require us to delay or prevent us from proceeding with our clinical trials and other business initiatives, such as preclinical development, manufacturing operations and the ongoing construction of our future corporate, manufacturing and research headquarters in Rockville, Maryland.

The COVID-19 pandemic could require us to delay or prevent us from proceeding with our clinical trials and other business initiatives, such as preclinical development and manufacturing operations.

For example, the ongoing construction of our future corporate, manufacturing and research headquarters in Rockville, Maryland is expected to be delayed due to various government orders and restrictions relating to the COVID-19 pandemic .

In addition, if the business and operations of our licensees are adversely affected by the COVID-19 pandemic, our revenues could in turn be adversely affected.

We are proactively taking measures to mitigate or reduce any adverse impact of the COVID-19 pandemic on the progress of our clinical trials and other business initiatives.

Our results of operations for the three months ended March 31, 2020 were not significantly impacted by the COVID-19 pandemic.

However, the full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.

Our results of operations for the three and six months ended June 30, 2020 were not significantly impacted by the COVID-19 pandemic.

However, the full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable at this time.

Please refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q for further discussion of the risks we face as a result of the COVID-19 pandemic.

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Royalty revenue to date consists of royalties on net sales of Zolgensma, which is marketed by AveXis, Inc.

(AveXis), a wholly owned subsidiary of Novartis AG (Novartis), for use in children less than two years old with spinal muscular atrophy (SMA).

(AveXis), a wholly owned subsidiary of Novartis AG (Novartis) , for the treatment of spinal muscular atrophy (SMA) .

Zolgensma is a licensed product under our March 2014 License with AveXis for the development and commercialization of treatments for SMA.

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a Phase I/IIa clinical trial and a planned pivotal program to evaluate the safety and efficacy of the subretinal delivery of RGX-314 for the treatment of wet AMD;

planned Phase II clinical trials to evaluate the safety and efficacy of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD and DR;

a Phase I/II clinical trial to evaluate the safety and efficacy of RGX-501 for the treatment of HoFH;

planned Phase II clinical trials to evaluate the safety and efficacy of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD (AAVIATE) and DR;

a Phase I/II clinical trial to evaluate the safety and efficacy of RGX-121 for the treatment of MPS II;

a Phase I clinical trial to evaluate the safety and efficacy of RGX-111 for the treatment of MPS I;

preclinical research and development and a planned clinical trial for RGX-181 for the treatment of CLN2;

preclinical research and development for potential product candidates to treat neurodegenerative diseases, including tauopathies and alpha-synucleinopathies , under our collaboration with Neurimmune;

a Phase I/II clinical trial to evaluate the safety and efficacy of RGX-111 for the treatment of MPS I;

preclinical research and development and a planned clinical trial for RGX-181 for the treatment of CLN2 disease;

preclinical research and development and a planned clinical trial for RGX-381 for the treatment of ocular manifestations of CLN2 disease;

preclinical research and development for potential product candidates to treat HAE;

preclinical research and development for potential product candidates to treat neurodegenerative diseases, including tauopathies and alpha-synucleinopathies , under our collaboration with Neurimmune;

preclinical research and development for potential product candidates to treat neuromuscular disorders;

completion of a long-term follow-up study for patients dosed in the Phase I/II clinical trial for RGX-501 as we evaluate strategic alternatives to support the continued advancement of this program;

preclinical research and development for potential product candidates addressing other diseases across a range of therapeutics areas;

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continued acquisition and manufacture of clinical trial materials in support of our anticipated clinical trials.

The following table summarizes our research and development expenses incurred during the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

The following table summarizes our research and development expenses incurred during the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Direct Expenses

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Total research and development

Platform and new technologies include direct costs not identifiable with a specific lead product candidate, including costs associated with our research and development platform, process development, manufacturing analytics and preclinical research and development for prospective product candidates and new technologies.

Platform and new technologies include direct costs not identifiable with a specific lead product candidate, including costs associated with our research and development platform, process development, manufacturing analytics and early research and development for prospective product candidates and new technologies.

We typically utilize our employee and infrastructure resources across our development programs.

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We expect that our general and administrative expense will continue to increase as we continue to develop, and potentially commercialize, our product candidates.

Other Income (Loss)

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.

Investment Income (Loss)

Investment income (loss) consists of interest income earned and gains and losses realized from our cash equivalents and marketable securities, as well as unrealized gains and losses on marketable equity securities.

Investment Income

Investment income consists of interest income earned and gains and losses realized from our cash equivalents and marketable securities, as well as unrealized gains and losses on 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.

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Results of Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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General and administrative

Other operating expenses

Other operating expenses (income)

Total operating expenses

Loss from operations

Other Income (Loss)

Interest income from licensing

Investment income (loss)

Total other income (loss)

Investment income

Total other income

Loss before income taxes

Income Tax Benefit

Comparison of the Three Months Ended March 31, 2020 and 2019

Comparison of the Three Months Ended June 30, 2020 and 2019

License and Royalty Revenue.

License and royalty revenue increased by $16.8 million, from $0.9 million for the three months ended March 31, 2019 to $17.6 million for the three months ended March 31, 2020.

The increase was primarily attributable to $10.0 million of royalty revenue recognized related to net sales of Zolgensma and $7.2 million of license revenue recognized related to a new license granted to Ultragenyx Pharmaceutical Inc.

during the three months ended March 31, 2020.

License and royalty revenue increased by $8.7 million, from $7.9 million for the three months ended June 30, 2019 to $16.6 million for the three months ended June 30, 2020.

The increase was primarily attributable to an $11.0 million increase in Zolgensma royalty revenue.

Commercial sales of Zolgensma commenced in the second quarter of 2019, and we are eligible to receive a milestone payment of $80.0 million from AveXis upon the achievement of $1.0 billion in cumulative net sales of Zolgensma.

Cumulative net sales of Zolgensma through June 30, 2020 were more than $735.0 million.

The increase in license and royalty revenue for the three months ended June 30, 2020 was partially offset by non-recurring revenue recognized during the three months ended June 30, 2019 resulting from license options exercised by licensees during the period.

Research and Development Expense.

Research and development expenses increased by $11.8 million, from $25.2 million for the three months ended March 31, 2019 to $37.0 million for the three months ended March 31, 2020.

Research and development expenses increased by $8.6 million, from $29.5 million for the three months ended June 30, 2019 to $38.1 million for the three months ended June 30, 2020.

The increase was primarily attributable to the following:

an increase of $3.9 million for personnel-related costs as a result of increased headcount of research and development personnel, including a $0.8 million increase in stock-based compensation expense;

an increase of $2.5 million for external costs associated with manufacturing-related services to support the ongoing development of our product candidates;

an increase of $1.7 million for laboratory costs and facilities used by research and development personnel, including a $0.3 million increase in depreciation expense allocated to research and development functions;

an increase of $2.2 million for external costs associated with clinical trial and regulatory activities;

an increase of $1.5 million for laboratory costs and facilities used by research and development personnel, including a $0.3 million increase in depreciation expense allocated to research and development functions;

an increase of $1.1 million for external costs associated with manufacturing-related services to support the ongoing development of our product candidates and process development activities;

an increase of $0.6 million for external costs associated with preclinical studies and other early-stage research and development.

General and Administrative Expense.

General and administrative expenses increased by $3.3 million, from $11.6 million for the three months ended March 31, 2019 to $14.8 million for the three months ended March 31, 2020.

General and administrative expenses increased by $2.1 million, from $13.4 million for the three months ended June 30, 2019 to $15.6 million for the three months ended June 30, 2020.

The increase was primarily attributable to the following:

an increase of $1.5 million for professional services, primarily related to legal services for the maintenance of intellectual property and other matters which were non-recurring in nature;

an increase of $1.4 million for professional services, primarily related to commercial consulting and legal services;

an increase of $ 0.7 million for personnel -related costs as a result of increased headcount of general and administrative personnel, including a $ 0.5 million increase in stock-based compensation expense .

Investment Income (Loss) .

Investment loss was $3.2 million for the three months ended March 31, 2020 as compared to investment income of $3.0 million for the three months ended March 31, 2019, a change of $6.2 million.

The change was primarily attributable to unrealized losses, net of realized gains, of $5.1 million recognized during the three months ended March 31, 2020 related to our marketable equity securities of Prevail Therapeutics Inc.

Investment Income .

Investment income decreased by $28.8 million, from $34.5 million for the three months ended June 30, 2019 to $5.7 million for the three months ended June 30, 2020.

The decrease was primarily attributable to an unrealized gain of $31.7 million recognized during the three months ended June 30, 2019 related to our marketable equity securities of Prevail Therapeutics Inc.

We acquired the securities as consideration for a commercial license to the NAV Technology Platform granted to Prevail in August 2017.

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Upon Prevail’s IPO in June 2019, the securities were reclassified to marketable securities and are measured at fair value.

As of March 31, 2020, the Company’s marketable equity securities of Prevail had a fair value of $19.9 million.

The decrease in investment income was partially offset by net realized and unrealized gains of $4.4 million recognized during the three months ended June 30, 2020 related to our marketable equity securities of Prevail.

As of June 30, 2020, our marketable equity securities of Prevail had a fair value of $24.3 million.

Significant fluctuations in the fair value of the securities may continue to occur from period to period.

Comparison of the Six Months Ended June 30, 2020 and 2019

License and Royalty Revenue.

License and royalty revenue increased by $25.4 million, from $8.8 million for the six months ended June 30, 2019 to $34.2 million for the six months ended June 30, 2020.

The increase was primarily attributable to a $21.0 million increase in Zolgensma royalty revenue.

Cumulative net sales of Zolgensma through June 30, 2020 were more than $735.0 million.

Research and Development Expense.

Research and development expenses increased by $20.5 million, from $54.7 million for the six months ended June 30, 2019 to $75.1 million for the six months ended June 30, 2020.

The increase was primarily attributable to the following:

an increase of $9.1 million for personnel-related costs as a result of increased headcount of research and development personnel, including a $2.5 million increase in stock-based compensation expense;

an increase of $3.6 million for external costs associated with manufacturing-related services to support the ongoing development of our product candidates and process development activities;

an increase of $3.6 million for external costs associated with clinical trial and regulatory activities;

an increase of $3.2 million for laboratory costs and facilities used by research and development personnel, including a $0.5 million increase in depreciation expense allocated to research and development functions;

an increase of $1.4 million for external costs associated with preclinical studies and other early-stage research and development.

General and Administrative Expense.

General and administrative expenses increased by $5.4 million, from $25.0 million for the six months ended June 30, 2019 to $30.4 million for the six months ended June 30, 2020.

The increase was primarily attributable to the following:

an increase of $2.9 million for professional services, primarily related to commercial consulting and legal services;

an increase of $1.9 million for personnel-related costs as a result of increased headcount of general and administrative personnel, including a $1.1 million increase in stock-based compensation expense.

Investment Income .

Investment income decreased by $35.0 million, from $37.5 million for the six months ended June 30, 2019 to $2.5 million for the six months ended June 30, 2020.

The decrease was primarily attributable to an unrealized gain of $31.7 million recognized during the six months ended June 30, 2019 related to our marketable equity securities of Prevail.

We acquired the securities as consideration for a commercial license to the NAV Technology Platform granted to Prevail in August 2017.

Prevail completed its IPO in June 2019.

Prior to Prevail’s IPO, the securities were accounted for as non-marketable equity securities without a readily determinable fair value and had a carrying value of $0.4 million.

Upon Prevail’s IPO in June 2019, the securities were reclassified to marketable securities and are measured at fair value.

As of June 30, 2020, our marketable equity securities of Prevail had a fair value of $24.3 million.

Significant fluctuations in the fair value of the securities may continue to occur from period to period.

Liquidity and Capital Resources

As of March 31, 2020, we had cash, cash equivalents and marketable securities of $356.6 million, which were primarily derived from the sale of common stock as well as revenues generated from the licensing of our NAV Technology Platform.

We expect that our cash, cash equivalents and marketable securities as of March 31, 2020 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this report, based on our current business plan.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $339.2 million, which were primarily derived from the sale of our common stock as well as revenues generated from the licensing of our NAV Technology Platform.

We expect that our cash, cash equivalents and marketable securities as of June 30, 2020 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this report, based on our current business plan.

Commercial sales of Zolgensma commenced in the second quarter of 2019, upon which we began recognizing royalty revenue on net sales of the licensed product.

We are eligible to receive, in addition to other development milestone payments, a milestone payment of $80.0 million from AveXis upon the achievement of $1.0 billion in cumulative net sales of Zolgensma.

Because of the numerous risks and uncertainties associated with the development and commercialization of gene therapy product candidates, we are unable to estimate the amount of operating expenditures and capital outlays necessary to complete the development of our product candidates.

We are eligible to receive a milestone payment of $80.0 million from AveXis upon the achievement of $1.0 billion in cumulative net sales of Zolgensma.

Cumulative net sales of Zolgensma through June 30, 2020 were more than $735.0 million.

However, there is no guarantee that the net sales milestone will be achieved.

We intend to devote the majority of our current capital to clinical development, seeking regulatory approval of our product candidates and capital expenditures to build out additional office, laboratory and manufacturing capacity, including the buildout of our future corporate, manufacturing and research headquarters at 9804 Medical Center Drive.

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.

Additionally, 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.

Furthermore, given the uncertainty and rapidly changing market and economic conditions caused by the COVID-19 pandemic, we will continue to monitor the nature and extent of the impact of the COVID-19 pandemic on our liquidity and capital resources.

Three Months Ended March 31,

Furthermore, given the uncertainty and rapidly changing market and economic conditions caused by the COVID-19 pandemic, as well as potential for further effects due to a resurgence in COVID-19 infections, we will continue to monitor the nature and extent of the impact of the COVID-19 pandemic on our liquidity and capital resources.

Six Months Ended June 30,

(in thousands)

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Net cash provided by financing activities

Net decrease in cash and cash equivalent and restricted cash

Net increase (decrease) in cash and cash equivalents

and restricted cash

Cash Flows from Operating Activities

Our net cash used in operating activities for the three months ended March 31, 2020 increased by $6.3 million from the three months ended March 31, 2019.

The change was primarily attributable to an increase in operating expenses of $18.6 million during the three months ended March 31, 2020 as compared to the same period in 2019, partially offset by $10.9 million of royalty payments received related to net sales of Zolgensma during the three months ended March 31, 2020.

Our net cash used in operating activities for the six months ended June 30, 2020 increased by $4.0 million from the six months ended June 30, 2019.

The increase was primarily attributable to an increase in operating expenses of $32.2 million during the six months ended June 30, 2020, offset primarily by an increase in license and royalty payments received during this period.

The increase in operating expenses during the period was primarily attributable to increased employee headcount and external research and development expenses as we continue the development and advancement of our lead product candidates and other research programs.

For the three months ended March 31, 2020 , our net cash used in operating activities of $ 35.6 million consisted of a net loss of $ 40.0 million and changes in working capital of $9.9 million, offset by $14.3 million in adjustments for non-cash items.

The changes in working capital were primarily attributable to an increase in accounts receivable of $5.7 million which was largely driven by new licenses granted by us during the first quarter of 2020, and a decrease in accrued expenses and other current liabilities of $3.8 million which was largely driven by a decrease in accrued personnel costs as of March 31, 2020 as compared to December 31, 2019 .

Other changes in working capital were primarily attributable to the timing of invoices from and payments to our service providers relative to the timing in which the goods or services were received, primarily related to research and development expenses.

Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $ 8.0 million , unrealized losses on our marketable equity securities of Prevail, net of realized gains, of $5.1 million and depreciation and amortization expense of $ 2.0 million .

For the three months ended March 31, 2019, our net cash used in operating activities of $29.3 million consisted of a net loss of $32.2 million and changes in working capital of $3.7 million, offset by $6.7 million in adjustments for non-cash items.

The changes in working capital were primarily attributable to a decrease in accrued expenses and other current liabilities of $2.9 million which was largely driven by decreases in accrued personnel costs and accrued sublicense fees as of March 31, 2019 as compared to December 31, 2018.

Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $5.7 million and depreciation and amortization expense of $1.6 million and were partially offset by imputed interest earned from our license agreements of $0.6 million and net accretion of discounts on marketable debt securities of $0.4 million.

For the six months ended June 30, 2020, our net cash used in operating activities of $57.1 million consisted of a net loss of $73.8 million and changes in working capital of $3.1 million, offset by $19.8 million in adjustments for non-cash items.

The changes in working capital include an increase in accounts receivable of $2.7 million which was largely driven by an increase in unbilled Zolgensma royalties during the period.

Other changes in working capital were incurred in the normal course of business, primarily as a result of the timing of invoices from and payments to suppliers, prepayments to suppliers, and accrued liabilities for unbilled goods and services from suppliers and personnel-related costs.

Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $16.3 million, depreciation and amortization expense of $4.1 million, and an unrealized loss on our marketable equity securities of Prevail, net of realized gains, of $0.7 million, and were partially offset by imputed interest earned from our license agreements of $1.9 million.

For the six months ended June 30, 2019, our net cash used in operating activities of $53.0 million consisted of a net loss of $33.7 million, $17.2 million in adjustments for non-cash items and changes in working capital of $2.2 million.

Adjustments for non-cash items primarily consisted of an unrealized gain on our marketable equity securities of Prevail of $31.7 million, imputed interest earned from our license agreements of $1.4 million and net accretion of discounts on marketable debt securities of $0.8 million, and were partially offset by stock-based compensation expenses of $12.8 million and depreciation and amortization expense of $3.4 million.

The changes in working capital include an increase in accounts receivable of $1.4 million and a decrease in deferred revenue of $0.6 million, which were largely driven by new licenses we granted as a result of license options exercised by licensees during the period.

Other changes in working capital were incurred in the normal course of business, primarily as a result of the timing of invoices

from and payments to suppliers, prepayments to suppliers, and accrued liabilities for unbilled goods and services from suppliers and personnel -related costs.

Cash Flows from Investing Activities

For the three months ended March 31, 2020, net cash provided by investing activities consisted of $68.0 million in sales and maturities of marketable securities, offset by $30.7 million to purchase marketable securities and $4.6 million to purchase property and equipment.

We expect capital expenditures to continue to increase in 2020 as a result of the buildout of our future corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

For the three months ended March 31, 2019, net cash provided by investing activities consisted of $87.2 million in sales and maturities of marketable securities, offset by $79.2 million to purchase marketable securities and $2.5 million to purchase property and equipment.

For the six months ended June 30, 2020, net cash provided by investing activities consisted of $155.8 million in sales and maturities of marketable securities, offset by $70.7 million to purchase marketable securities and $7.9 million to purchase property and equipment.

We expect capital expenditures to increase in the second half of 2020 and in 2021 as a result of the buildout of our future corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

Total remaining capital expenditures related to the build out of the facility at 9804 Medical Center Drive, net of amounts to be reimbursed by the landlord under our tenant improvement allowance, are expected to be in the upper double-digit millions (USD) and are expected to be incurred through 2022.

However, the actual amount and timing of these capital expenditures are uncertain and may differ materially from our current estimates.

For the six months ended June 30, 2019, net cash provided by investing activities consisted of $141.3 million in sales and maturities of marketable securities, offset by $106.1 million to purchase marketable securities and $8.0 million to purchase property and equipment.

Cash Flows from Financing Activities

For the three months ended March 31, 2020, net cash provided by financing activities consisted of $2.8 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan.

For the three months ended March 31, 2019, net cash provided by financing activities consisted of $4.1 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan.

For the six months ended June 30, 2020, net cash provided by financing activities consisted of $4.6 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan.

For the six months ended June 30, 2019, net cash provided by financing activities consisted of $5.5 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan..

Future Funding Requirements

We have incurred cumulative losses since our inception and had an accumulated deficit of $217.9 million as of March 31, 2020.

We have incurred cumulative losses since our inception and had an accumulated deficit of $251.6 million as of June 30, 2020.

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.

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Contractual Obligations, Commitments and Contingencies

There have been no material changes to our contractual obligations, commitments and contingencies as of March 31, 2020 from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no material changes to our contractual obligations, commitments and contingencies as of June 30, 2020 from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Off-Balance Sheet Arrangements

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For information regarding market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our most recent Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no material changes to our exposure to market risk during the three months ended March 31, 2020.

There have been no material changes to our exposure to market risk during the six months ended June 30, 2020.

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