What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-09 · 144 added, 91 removed, 223 unchanged (51% of the section changed)

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We are developing RGX-314 as a novel, single-administration gene therapy for the treatment of wet age-related macular degeneration (wet AMD), diabetic retinopathy (DR), and other additional chronic retinal conditions which cause total or partial vision loss.

We are advancing two separate routes of administration of RGX-314 to the eye, through a standardized subretinal delivery procedure as well as by delivery to the suprachoroidal space using the SCS Microinjector™ licensed from Clearside Biomedical, Inc.

In September 2021, we announced a strategic partnership with AbbVie to develop and commercialize RGX-314 for the treatment of wet age-related macular degeneration (wet AMD), diabetic retinopathy (DR) and other chronic retinal diseases.

The transaction is expected to close by the end of 2021, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals.

We are advancing two separate routes of administration of RGX-314 to the eye, through a standardized subretinal delivery procedure and by delivery to the suprachoroidal space using the SCS Microinjector™ licensed from Clearside Biomedical, Inc.

We have initiated a pivotal program to evaluate the efficacy and safety of RGX-314 in patients with wet AMD using the subretinal delivery approach.

We plan to conduct two randomized, well-controlled clinical trials to evaluate the efficacy and safety of RGX-314 in patients with wet AMD, enrolling approximately 700 patients total.

The first pivotal trial (ATMOSPHERE TM ) is enrolling patients and we are on-track to initiate the second pivotal trial in the fourth quarter of 2021.

We plan to conduct two randomized, well-controlled clinical trials to evaluate the efficacy and safety of RGX-314 in patients with wet AMD, in which we expect to enroll approximately 700 patients total.

The first pivotal trial (ATMOSPHERE TM ) is enrolling patients and we are planning to initiate the second pivotal trial in the fourth quarter of 2021.

Based on the outcome of these trials, the pivotal program is expected to support a Biologics License Application (BLA) filing in 2024.

As of January 22, 2021, RGX-314 continued to be generally well-tolerated across all dose cohorts of the ongoing Phase I/II trial of RGX-314 for the treatment of wet AMD and its Long-Term-Follow-Up study.

As of August 9, 2021, RGX-314 continued to be generally well-tolerated across all dose cohorts of the ongoing Phase I/II trial of RGX-314 for the treatment of wet AMD and its Long-Term-Follow-Up study.

Durable treatment effect was observed in patients in Cohorts 4 and 5 at 2 years after administration of RGX-314, including stable visual acuity, decreased retinal thickness, and reductions in anti-VEGF injection burden.

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We are also conducting a Phase II trial of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD known as AAVIATE®.

We have completed enrollment in Cohort 1 of this trial, and we plan to report interim data from Cohort 1 at the Retina Society 54th Annual Scientific Meeting in Chicago, IL, September 29-October 2, 2021.

We have also completed enrollment in Cohort 2 and expect to report interim data from Cohort 2 in the fourth quarter of 2021.

In addition, we have expanded AAVIATE to include a third cohort of patients and we have completed dosing of patients in Cohort 3.

Cohort 3 will evaluate the efficacy, safety and tolerability of RGX-314 in up to 20 patients who are neutralizing antibody (NAb) positive.

The same dose evaluated in Cohort 2, 5.0x10 11 genomic copies per eye (GC/eye) of RGX-314, will be delivered to patients in Cohort 3 via a single injection.

As with Cohorts 1 and 2, patients in Cohort 3 will not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.

In October 2021, we presented positive initial data from patients enrolled in the ongoing Phase II AAVIATE trial.

As of September 13, 2021, RGX-314 was reported to be well-tolerated across 50 patients dosed in Cohorts 1 through 3.

At six months following one-time administration of RGX-314, stable visual acuity and retinal thickness, as well as a meaningful reduction in anti-VEGF treatment burden was observed in patients from Cohort 1 (dose level:

2.5x10 11 genomic copies per eye (GC/eye)).

Among patients in Cohort 1, common treatment emergent adverse events (TEAE) in the study eye were generally mild, and none were severe.

Mild intraocular inflammation was observed in four out of 15 patients based on slit-lamp examination, and all cases were resolved within days to weeks on topical corticosteroids.

We plan to report interim results at six months of follow-up for patients in Cohort 2 at the American Academy of Ophthalmology 2021 Annual Meeting in New Orleans, LA, November 12-15, 2021 .

W e have also completed dosing of patients in Cohort 3 which is evaluating the efficacy, safety and tolerability of RGX-314 in up to 20 patients who are neutralizing antibody (NAb) positive with t he same dose evaluated in Cohort 2, 5.0x10 11 GC/eye of RGX-314.

In October 2021, we announced that the AAVIATE trial expanded to include two additional cohorts (Cohorts 4 and 5) to evaluate RGX-314 at a dose level of 1.0x10 12 GC/eye.

Cohort 4 will enroll 15 patients who will be dosed with RGX-314 and Cohort 5 will evaluate the same dose level evaluated in Cohort 4 in 20 patients who are neutralizing antibody (NAb) positive.

As in previous cohorts, patients will not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.

In addition, we are enrolling patients in ALTITUDE TM , a Phase II trial of the suprachoroidal delivery of RGX-314 for the treatment of DR.

We have completed enrollment of patients in Cohort 1 and we have begun enrolling patients in Cohort 2

of this trial.

W e expect to report initial data from this trial in the fourth quarter of 2021.

In addition, we have expanded ALTITUDE and plan to enroll patients in a third cohort .

Co hort 3 will evaluate the efficacy, safety and tolerability of RGX-314 in up to 20 patients who are NAb positive.

The same dose evaluated in Cohort 2 , 5.0x10 11 GC/eye of RGX-314, will be delivered to patients in Cohort 3 and , as in previous cohorts, patients will not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.

In October 2021, we presented positive initial data from patients in Cohort 1 of the ongoing Phase II ALTITUDE trial.

As of September 29, 2021, RGX-314 was reported to be well tolerated with no drug-related serious adverse events in the 15 patients dosed with RGX-314 in Cohort 1 (dose level:

2.5x10 11 GC/ eye).

No intraocular inflammation was observed on slit-lamp examination.

Three months following one-time administration of RGX-314, five patients (33%) demonstrated a two-step or greater improvement from baseline on the Early Treatment Diabetic Retinopathy Study-Diabetic Retinopathy Severity Scale (ETDRS-DRSS), including one patient who had a four-step improvement.

No patients in the observation control portion of the study demonstrated a two-step or greater improvement from baseline on the ETDRS-DRSS.

Enrollment of patients in Cohorts 2 and 3 is ongoing in ALTITUDE.

Both cohorts will evaluate RGX-314 at a dose level of 5.0x10 11 GC/eye.

Cohort 2 will include 20 patients randomized to receive RGX-314 versus observational control at a 3:1 ratio.

Cohort 3 will evaluate RGX-314 at the same dose level as Cohort 2 in 20 patients who are NAb positive.

As in Cohort 1, patients in Cohorts 2 and 3 will not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.

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 provide a program update in by the end of 2021.

We continue to conduct research and preclinical studies to advance a gene therapy candidate for the treatment of HAE.

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 by the end of 2021.

Gene therapy programs for the potential treatment of rare monogenic diseases

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Without functional dystrophin protein, muscles throughout the body degenerate and become weak.

We expect to submit an Investigational New Drug (IND) application for this program in by the end of 2021.

We expect to submit an Investigational New Drug (IND) application for this program by the end of 2021.

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 (I2S), an enzyme that is responsible for breakdown of cellular waste products.

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Patients in Cohorts 1 and 2 also demonstrated continued neurocognitive development and evidence of I2S enzyme activity in plasma and urine following administration of RGX-121.

We continue to enroll patients in Cohort 3 of the ongoing Phase I/II trial at an increased dose of 2.0x10 11 GC/g brain mass.

We have expanded Cohort 3 of the ongoing Phase I/II trial to enroll up to 6 additional patients.

Additional data from this trial is expected to be reported in the first half of 2022.

In addition, we continue to enroll patients in a second Phase I/II trial of RGX-121, for the treatment of pediatric patients with MPS II over the age of 5 years old.

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.

We have completed dosing of patients in the first cohort of a Phase I/II clinical trial for RGX-111 and enrollment is now ongoing in Cohort 2 at an increased dose of 5.0x10 10 GC/g brain mass.

We have completed dosing of patients in the first cohort of a Phase I /II clinical trial for RGX-111 and enrollment is continuing in Cohort 2 .

We expect to share initial data from this trial in the first half of 2022.

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.

An IND was submitted to the FDA, after which the FDA notified REGENXBIO that its proposed trial had been placed on clinical hold and the agency requested more information to support the initial dose selection and certain study drug administration procedures.

REGENXBIO is evaluating the FDA’s requests and plans to provide an update on the program by the end of 2021.

We continue to evaluate the path forward for RGX-181 and plan to provide a program update in 2022.

We are developing RGX-381 for the treatment of ocular manifestations of CLN2 disease.

Based on communication with the FDA and the update from the RGX-181 program, we now expect to provide a program update by the end of 2021.

In addition to our lead product candidates described above, we have also funded, and plan to continue to fund, preclinical research on potential product candidate programs that may become part of our internal product development pipeline.

We are conducting additional preclinical studies of RGX-381 and are in discussions with regulatory agencies.

We plan to provide a program update in 2022.

In addition to our product candidates described above, we have also funded, and plan to continue to fund, preclinical research on potential product candidate programs that may become part of our internal product development pipeline.

We have partnered with a number of leading academic institutions and will continue to seek partnerships with innovative institutions to develop novel NAV gene therapy product candidates.

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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, 2021, our NAV Technology Platform was being applied in one FDA approved product (Zolgensma®), and the preclinical and clinical development of 20 partnered programs.

As of September 30, 2021, our NAV Technology Platform was being applied in one FDA approved product (Zolgensma®), and the preclinical and clinical development of 20 partnered programs.

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.

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 develop and commercialize RGX-314 (the AbbVie Collaboration and License Agreement).

The transaction is contingent upon the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting or suspension period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and any other applicable competition laws.

Pursuant to the AbbVie Collaboration and License Agreement, the parties will conduct certain activities for the development of products containing RGX-314 under a development plan determined in accordance with the AbbVie Collaboration and License Agreement.

In the United States, the parties are required to use commercially reasonable efforts to develop one licensed product for the treatment of each of (a) wet AMD utilizing suprachoroidal delivery, (b) wet AMD utilizing subretinal delivery and (c) DR and, (d) following the achievement of specified milestone events, one licensed product for the treatment of an additional indication.

In specified markets outside the United States, AbbVie is required to use commercially reasonable efforts to develop one licensed product for each such indication.

Through December 31, 2022, we will be responsible for development expenses for certain ongoing trials of RGX-314 and the parties will share additional development expenses related to RGX-314.

Beginning on January 1, 2023, AbbVie will be responsible for the majority of all RGX-314 development expenses.

We will lead the manufacturing of RGX-314 for clinical development and U.S.

commercial supply, and AbbVie will lead manufacturing of RGX-314 for commercial supply outside the United States.

The parties will equally share net profits and net losses associated with commercialization of licensed products in the United States .

Outside the United States, AbbVie will be responsible, at its sole cost, for the commercialization of licensed products.

We will receive an upfront payment of $370.0 million from AbbVie in connection with the closing of the AbbVie Collaboration and License Agreement.

Additionally, we will be eligible to receive up to $1.38 billion in development, regulatory and commercial milestone payments, in the aggregate, for the achievement of specified milestones for the licensed products, of which $782.5 million are based on development and regulatory milestones, with the remainder based on commercial milestones .

We will also be eligible to

receive tiered royalties on net sales by AbbVie of licensed products outside the United States at percentages in the mid-teens to low twenties, subject to specified offsets and reductions.

Subject to the closing of the AbbVie Collaboration and License Agreement, we anticipate the agreement will have a material impact on our future revenues, research and development expenses, other operating expenses and operating cash flows associated with the development and commercialization of RGX-314.

For additional information regarding the AbbVie Collaboration and License Agreement, please refer to Note 8, “License and Royalty Revenue—Collaboration and License Agreement with AbbVie” to the accompanying unaudited consolidated financial statements.

Impact of COVID-19

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

We are continuing to actively monitor the impact of the COVID-19 pandemic, including the emergence of variant strains, 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.

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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 June 30, 2021 and 2020 were not significantly impacted by the COVID-19 pandemic.

Our results of operations for the three and nine months ended September 30, 2021 and 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.

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Our current and planned research and development activities include the following:

Continued development of RGX-314 products, including:

a Phase I/II clinical trial and associated long-term follow-up study to evaluate the safety and efficacy of the subretinal delivery of RGX-314 for the treatment of wet AMD;

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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 and planned clinical trials for RGX-181 for the treatment of CLN2 disease, and 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 addressing other diseases across a range of therapeutics areas;

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

continued investment in advanced manufacturing analytics and process development activities;

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 and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

The following table summarizes our research and development expenses incurred during the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Direct Expenses

RGX-121 and RGX-111

RGX-181 and RGX-381

Other product candidates

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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 early 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 used across programs, 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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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 and marketable securities, as well as unrealized gains and losses on marketable equity securities.

Investment Income (Loss)

Investment income consists of interest income earned and gains and losses realized from our cash equivalents, marketable securities and non-marketable equity 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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Our consolidated results of operations were as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

License and royalty revenue

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Total operating expenses

Loss from operations

Income (loss) from operations

Other Income (Expense)

Interest income from licensing

Investment income

Investment income (loss)

Interest expense

Total other income (expense)

Loss before income taxes

Income (loss) before income taxes

Income Tax Benefit (Expense)

Comparison of the Three Months Ended June 30, 2021 and 2020

Net income (loss)

Comparison of the Three Months Ended September 30, 2021 and 2020

License and Royalty Revenue.

License and royalty revenue increased by $5.5 million, from $16.6 million for the three months ended June 30, 2020 to $22.0 million for the three months ended June 30, 2021.

The increase was primarily attributable to Zolgensma royalty revenues, which increased by $6.5 million, from $11.9 million for the second quarter of 2020 to $18.4 million for the second quarter of 2021.

As reported by Novartis, sales of Zolgensma for the second quarter of 2021 increased by 54% as compared to the second quarter of 2020, driven by geographic expansion of product access.

License and royalty revenue decreased by $68.1 million, from $98.9 million for the three months ended September 30, 2020 to $30.8 million for the three months ended September 30, 2021.

The decrease was primarily attributable to an $80.0 million milestone payment recognized as revenue in the third quarter of 2020 as a result of the achievement of $1.0 billion in cumulative net sales of Zolgensma during the period.

The decrease was partially offset by an increase in Zolgensma royalty revenues, which increased by $11.5 million, from $18.8 million for the third quarter of 2020 to $30.3 million for the third quarter of 2021.

As reported by Novartis, sales of Zolgensma for the third quarter of 2021 increased by 29% as compared to the third quarter of 2020, driven by geographic expansion of product access.

The increase in Zolgensma sales also resulted in a higher effective royalty rate in the third quarter of 2021 as compared to the third quarter of 2020, as royalty rates are tiered based on specified thresholds of annual net sales.

Research and Development Expense.

Research and development expenses increased by $7.8 million, from $38.1 million for the three months ended June 30, 2020 to $45.9 million for the three months ended June 30, 2021.

Research and development expenses increased by $3.9 million, from $44.0 million for the three months ended September 30, 2020 to $47.9 million for the three months ended September 30, 2021.

The increase was primarily attributable to the following:

an increase of $3.9 million for external costs associated with clinical trial and regulatory activities for our lead product candidates, primarily attributable to RGX-314 and RGX-121 clinical trials;

an increase of $2.2 million for external costs associated with preclinical studies and other early-stage research and development;

an increase of $4.2 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 $3.3 million for laboratory costs and facilities used by research and development personnel, including depreciation expense allocated to research and development functions.

The increase in research and development expenses was partially offset by a $2.6 million decrease in external costs associated with manufacturing-related services, primarily attributable to RGX-202 and RGX-121 clinical supply.

The increase in research and development expenses was partially offset by a $2.9 million decrease in external costs associated with preclinical studies and other early-stage research and development, and a $1.6 million decrease in external costs associated with manufacturing-related activities.

General and Administrative Expense.

General and administrative expenses increased by $2.9 million, from $15.6 million for the three months ended June 30, 2020 to $18.4 million for the three months ended June 30, 2021.

General and administrative expenses increased by $5.2 million, from $15.9 million for the three months ended September 30, 2020 to $21.0 million for the three months ended September 30, 2021.

The increase was primarily attributable to the following:

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an increase of $1.4 million for professional services, primarily related to legal and other advisory services.

Investment Income .

Investment income decreased by $5.3 million, from $5.7 million for the three months ended June 30, 2020 to $0.4 million for the three months ended June 30, 2021.

The decrease was primarily attributable to net gains of $4.4 million recognized in the second quarter of 2020 related to our marketable equity securities of Prevail Therapeutics Inc.

Provision for Credit Losses and Other .

Provision for credit losses and other decreased by $2.6 million during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

We recognized a provision for credit losses of $5.0 million and $7.7 million during the quarters ended September 30, 2021 and 2020, respectively, related to our accounts receivable from Abeona Therapeutics Inc.

As of September 30, 2021, we had recorded total accounts receivable from Abeona of $30.1 million and a related allowance for credit losses of $13.2 million.

For further information regarding the provision for credit losses, refer to Note 8, “License and Royalty Revenue—Abeona Therapeutics Inc.” to the accompanying unaudited consolidated financial statements.

Investment Income (Loss) .

Investment income was $5.5 million for the three months ended September 30, 2021 as compared to investment loss of $6.6 million for the three months ended September 30, 2020, a change of $12.1 million.

(uniQure) in July 2021, and net losses of $7.5 million recognized in the third quarter of 2020 related to our marketable equity securities of Prevail Therapeutics Inc.

We sold all of our Prevail equity securities prior to the end of 2020.

The change in investment income also includes a decrease of $0.9 million in interest income in the second quarter of 2021, primarily attributable to lower yields on investments in cash equivalents and marketable debt securities.

The change in investment income was partially offset by a decrease of $0.5 million in interest income for the third quarter of 2021, primarily attributable to lower yields on investments in cash equivalents and marketable debt securities.

Interest Expense .

Interest expense increased from zero for the three months ended June 30, 2020 to $6.4 million for the three months ended June 30, 2021.

Interest expense increased from zero for the three months ended September 30, 2020 to $6.7 million for the three months ended September 30, 2021.

Interest expense consists solely of non-cash interest recognized under our royalty purchase agreement with HCR for the sale of future Zolgensma royalties which occurred in December 2020.

Comparison of the Six Months Ended June 30, 2021 and 2020

Comparison of the Nine Months Ended September 30 , 2021 and 2020

License and Royalty Revenue.

License and royalty revenue increased by $6.7 million, from $34.2 million for the six months ended June 30, 2020 to $40.9 million for the six months ended June 30, 2021.

The increase was primarily attributable to Zolgensma royalty revenues, which increased by $14.8 million, from $21.9 million for the first half of 2020 to $36.7 million for the first half of 2021.

As reported by Novartis, sales of Zolgensma for the first half of 2021 increased by 69% as compared to the first half of 2020, driven by geographic expansion of product access.

The increase in revenues was partially offset by $7.2 million of non-recurring revenue recognized during the six months ended June 30, 2020 related to a license granted to Ultragenyx Pharmaceutical Inc.

during the period.

License and royalty revenue decreased by $61.4 million, from $133.1 million for the nine months ended September 30, 2020 to $71.7 million for the nine months ended September 30, 2021.

The decrease was partially offset by an increase in Zolgensma royalty revenues, which increased by $26.2 million, from $40.7 million for the nine months ended September 30, 2020 to $66.9 million for the nine months ended September 30, 2021.

As reported by Novartis, sales of Zolgensma for the nine months ended September 30, 2021 increased by 52% as compared to the nine months ended September 30, 2020, driven by geographic expansion of product access.

Research and Development Expense.

Research and development expenses increased by $ 10.5 million, from $75.1 million for the six months ended June 30, 2020 to $ 85.6 million for the six months ended June 30, 2021.

Research and development expenses increased by $14.3 million, from $119.1 million for the nine months ended September 30, 2020 to $133.5 million for the nine months ended September 30, 2021.

The increase was primarily attributable to the following:

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an increase of $5.8 million for laboratory costs and facilities used by research and development personnel, including depreciation expense allocated to research and development functions.

an increase of $2.4 million for external costs associated with preclinical studies and other early-stage research and development.

The increase in research and development expenses was partially offset by a $6.4 million decrease in external costs associated with manufacturing-related services, primarily attributable to RGX-314 and RGX-121 clinical supply.

The increase in research and development expenses was partially offset by a $8.1 million decrease in external costs associated with manufacturing-related activities, primarily attributable to manufacturing of RGX-314 and RGX-121 clinical supply performed in 2020 for material to be used in our current and planned clinical trials for these product candidates.

General and Administrative Expense.

General and administrative expenses increased by $5.9 million, from $30.4 million for the six months ended June 30, 2020 to $36.3 million for the six months ended June 30, 2021.

General and administrative expenses increased by $11.0 million, from $46.2 million for the nine months ended September 30, 2020 to $57.3 million for the nine months ended September 30, 2021.

The increase was primarily attributable to the following:

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an increase of $3.7 million for professional services, primarily related to legal and other advisory services;

an increase of $1.1 million for facilities used by general and administrative personnel, including depreciation expense allocated to general and administrative functions.

Provision for Credit Losses and Other .

Provision for credit losses and other decreased by $2.1 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

We recognized a provision for credit losses of $5.5 million and $7.7 million during the nine months ended September 30, 2021 and 2020, respectively, related to our accounts receivable from Abeona.

As of September 30, 2021, we had recorded total accounts receivable from Abeona of $30.1 million and a related allowance for credit losses of $13.2 million.

Investment Income (Loss) .

Investment income was $6.5 million for the nine months ended September 30, 2021 as compared to investment loss of $4.1 million for the nine months ended September 30, 2020, a change of $10.6 million.

The change was primarily attributable to a realized gain of $5.2 million recognized in the third quarter of 2021 upon the acquisition of our non-marketable equity securities of Corlieve by uniQure in July 2021, and net losses of $8.3 million recognized during the nine months ended September 30, 2020 related to our marketable equity securities of Prevail.

We sold all of our Prevail equity securities prior to the end of 2020.

The change in investment income was partially offset by a decrease of $2.8 million in interest income for the nine months ended September 30, 2021, primarily attributable to lower yields on investments in cash equivalents and marketable debt securities.

Interest Expense .

Interest expense increased from zero for the six months ended June 30, 2020 to $13.1 million for the six months ended June 30, 2021.

Interest expense increased from zero for the nine months ended September 30, 2020 to $19.8 million for the nine months ended September 30, 2021.

Interest expense consists solely of non-cash interest recognized under our royalty purchase agreement with HCR for the sale of future Zolgensma royalties which occurred in December 2020.

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Sources of Liquidity

As of June 30, 2021, we had cash, cash equivalents and marketable securities of $593.0 million, which were primarily derived from the sale of our common stock, license and royalty revenue and the monetization of our Zolgensma royalty stream.

We expect that our cash, cash equivalents and marketable securities as of June 30, 2021, 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 September 30, 2021, we had cash, cash equivalents and marketable securities of $533.5 million, which were primarily derived from the sale of our common stock, license and royalty revenue and the monetization of our Zolgensma royalty stream.

We expect that our cash, cash equivalents and marketable securities as of September 30, 2021, 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.

In January 2021, we completed a public offering of 4,899,000 shares of our common stock (inclusive of 639,000 shares pursuant to the full exercise by the underwriters of their option to purchase additional shares) at a price of $47.00 per share.

The aggregate net proceeds from the offering, inclusive of the underwriters’ option exercise, were $216.1 million, net of underwriting discounts and commissions and offering expenses payable by us.

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 corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

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.

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Our consolidated cash flows were as follows (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Cash Flows from Operating Activities

Our net cash used in operating activities for the six months ended June 30, 2021 increased by $13.9 million from the six months ended June 30, 2020.

The increase was largely driven by an increase in operating expenses of $23.4 million in the first half of 2021.

We expect to continue to incur net cash out outflows from operations for the foreseeable future as we continue the development and advancement of our lead product candidates and other research programs.

For the six months ended June 30, 2021, our net cash used in operating activities of $71.0 million consisted of a net loss of $107.8 million and changes in working capital of $3.3 million, offset by $40.1 million in adjustments for non-cash items.

The changes in working capital include a $5.9 million decrease in accrued expenses and other current liabilities which was largely driven by decreases in accrued personnel costs and income taxes payable as of June 30, 2021.

Our net cash used in operating activities for the nine months ended September 30, 2021 increased by $13.8 million from the nine months ended September 30, 2020.

The increase was largely driven by an increase in operating expenses of $26.6 million in 2021.

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 lead product candidates and other research programs.

For the nine months ended September 30, 2021, our net cash used in operating activities of $107.4 million consisted of a net loss of $166.2 million and changes in working capital of $1.9 million, offset by $60.7 million in adjustments for non-cash items.

The changes in working capital include a $7.9 million increase in accounts receivable which was largely driven by an increase in Zolgensma royalties receivable at the end of the period, and a $7.9 million increase in prepaid expenses which was largely driven by advances paid during the period to service providers for clinical trial and manufacturing-related services to be performed in future periods.

The changes in working capital were partially offset by an increase in operating lease liabilities of $10.8 million which was largely driven by funds received under our tenant improvement allowance related to the ongoing buildout of our new headquarters facility in Rockville, Maryland.

Other changes in working capital were incurred in the normal course of business, primarily as a result of differences in the timing of payments to service providers and the period in which such costs are incurred.

Adjustments for non-cash items primarily consisted of stock-based compensation expense of $19.9 million, non-cash interest expense recognized under our royalty purchase agreement with HCR of $13.1 million and depreciation and amortization expense of $4.1 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.

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

Adjustments for non-cash items primarily consisted of stock-based compensation expense of $29.6 million, non-cash interest expense recognized under our royalty purchase agreement with HCR of $19.8 million, depreciation and amortization expense of $7.0 million, a provision for credit losses of $5.5 million and net amortization of premiums on marketable debt securities of $4.4 million.

Adjustments for non-cash items were partially offset by a realized gain of $5.2 million recognized upon the acquisition of our Corlieve equity securities by uniQure in July 2021.

For the nine months ended September 30, 2020, our net cash used in operating activities of $93.5 million consisted of a net loss of $65.0 million and changes in working capital of $73.9 million, offset by $45.4 million in adjustments for non-cash items.

The changes in working capital include an increase in accounts receivable of $89.4 million which was largely driven by an increase in Zolgensma royalties receivable at the end of the period, and an $80.0 million sales-based milestone fee earned during the third quarter which was recorded in accounts receivable at the end of the period.

Other changes in working capital were incurred in the normal

course of business, primarily as a result of differences in the timing of payments to service providers and the period in which such costs are incurred .

Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $24.4 million, depreciation and amortization expense of $6.3 million, net losses on our Prevail equity securities of $8.3 million and a provision for credit losses on accounts receivable of $7.7 million.

Cash Flows from Investing Activities

For the six months ended June 30, 2021, our net cash used in investing activities consisted of $242.0 million to purchase marketable debt securities and $50.9 million to purchase property and equipment, offset by $86.5 million in maturities of marketable debt securities.

The substantial majority of our capital expenditures in the first half of 2021 were related to the build out of our corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

We expect capital expenditures to continue to increase in 2021 as a result of the ongoing build out of this facility.

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

For the nine months ended September 30, 2021, our net cash used in investing activities consisted of $262.7 million to purchase marketable debt securities and $69.6 million to purchase property and equipment, offset by $136.4 million in maturities of marketable debt securities and $5.6 million of proceeds received from the acquisition of our Corlieve equity securities by uniQure in July 2021.

The substantial majority of our capital expenditures for the nine months ended September 30, 2021 were related to the build out of our corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

We expect capital expenditures related to this project to continue for the remainder of 2021 and into 2022 as we complete build out of this facility.

Total remaining capital expenditures to complete the build out of the facility, net of remaining amounts to be reimbursed by the landlord under our tenant improvement allowance, are expected to be in the low to mid-double-digit millions (USD) .

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, 2020, our 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 debt securities and $7.9 million to purchase property and equipment.

For the nine months ended September 30, 2020, our net cash provided by investing activities consisted of $204.5 million in sales and maturities of marketable securities, offset by $79.4 million to purchase marketable debt securities and $14.0 million to purchase property and equipment.

Cash Flows from Financing Activities

For the six months ended June 30, 2021, our net cash provided by financing activities primarily consisted of $216.1 million in net proceeds received from a public offering of our common stock completed in January 2021, net of underwriting discounts and commissions and other offering expenses paid during the period, and was partially offset by $22.0 million of Zolgensma royalties paid to HCR during the period under the Zolgensma royalty purchase agreement.

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 nine months ended September 30, 2021, our net cash provided by financing activities primarily consisted of $216.1 million in net proceeds received from a public offering of our common stock completed in January 2021, net of underwriting discounts and commissions and other offering expenses paid during the period, and $5.1 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan, and was partially offset by $33.3 million of Zolgensma royalties paid to HCR during the period under our royalty purchase agreement.

For the nine months ended September 30, 2020, net cash provided by financing activities consisted of $6.0 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 $396.9 million as of June 30, 2021.

We have incurred cumulative losses since our inception and had an accumulated deficit of $455.3 million as of September 30, 2021.

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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S ubject 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 our capital expenditures will continue to increase due to costs associated with building out additional office, laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts, particularly with respect to the build out of our facility at 9804 Medical Center Drive as discussed above.

Additionally, we expect our capital expenditures will continue to increase due to costs associated with building out additional office, laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts, particularly with respect to the build out of our corporate, manufacturing and research headquarters as discussed above.

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 anticipated completion of our proposed transaction with AbbVie and the outcome of our proposed collaboration with AbbVie;

the timing of enrollment, commencement and completion of our clinical trials;

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Contractual Obligations, Commitments and Contingencies

There have been no material changes to our contractual obligations, commitments and contingencies as of June 30, 2021 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, 2020.

There have been no material changes to our contractual obligations, commitments and contingencies as of September 30, 2021 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, 2020.

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 Annual Report on Form 10-K for the year ended December 31, 2020.

There have been no material changes to our exposure to market risk during the six months ended June 30, 2021.

There have been no material changes to our exposure to market risk during the nine months ended September 30, 2021.

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