What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-02 · 165 added, 233 removed, 134 unchanged (75% of the section changed)

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We are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy.

Our gene therapy product candidates are designed to deliver genes to cells to address genetic defects or to enable cells in the body to produce therapeutic proteins that are intended to impact disease.

Through a single administration, our gene therapy product candidates are designed to provide long-lasting effects, potentially significantly altering the course of disease and delivering improved patient outcomes.

Our investigational gene therapies are designed to deliver functional genes to address genetic defects in cells, enabling the production of therapeutic proteins or antibodies that are intended to impact disease.

Through a single administration, gene therapy could potentially alter the course of disease significantly and deliver improved patient outcomes with long-lasting effects .

Overview of Product Candidates

We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) to address genetic diseases through two modalities:

AAV-mediated antibody delivery and monogenic gene replacement.

The AAV-mediated antibody delivery modality is designed to treat serious and chronic diseases by delivering the genes necessary for the sustained production of therapeutic antibodies in vivo .

Our monogenic gene replacement approach builds upon the well-understood mechanism of replacing a dysfunctional or missing gene with a functional copy of the gene in order to enable sustained production of necessary proteins.

Gene therapy using NAV Vectors for AAV-mediated antibody delivery

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.

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, 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 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.

Long-term, durable treatment effect was demonstrated in Cohort 3 over three years, including mean improvement in vision and stable retinal thickness, and reductions in anti-VEGF treatment burden.

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®.

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.

We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) to address genetic diseases.

Our programs and product candidates are described below:

We are developing RGX-314 in collaboration with AbbVie as a potential one-time treatment for 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 evaluating two separate routes of administration of RGX-314 to the eye:

a subretinal delivery procedure as well as a targeted, in-office administration to the suprachoroidal space.

We have licensed certain exclusive rights to the SCS Microinjector ® from Clearside Biomedical, Inc.

(Clearside) to deliver gene therapy treatments to the suprachoroidal space of the eye.

Enrollment is ongoing in two pivotal trials, ATMOSPHERE™ and ASCENT™, to evaluate the efficacy and safety of RGX-314 in patients with wet AMD using the subretinal delivery approach, and we expect these pivotal trials to support a Biologics Licensing Application (BLA) submission in 2024.

ATMOSPHERE and ASCENT are multi-center, randomized, active-controlled trials to evaluate the efficacy and safety of a single-administration of RGX-314 versus standard of care in patients with wet AMD.

We initiated the pivotal program using cGMP material produced from our existing manufacturing process and plan to incorporate our scalable suspension cell culture manufacturing process to support future commercialization, upon completion of a bridging study.

We are also evaluating the efficacy, safety and tolerability of suprachoroidal delivery of RGX-314 through AAVIATE®, a multi-center, open label, randomized, controlled, dose-escalation Phase II trial of RGX-314 for the treatment of wet AMD.

Enrollment in AAVIATE is expected to be completed in the first half of 2022.

Cohorts 4 and 5 are evaluating RGX-314 at a third dose level of 1x10 12 genomic copies per eye (GC/eye).

Cohort 5 is evaluating RGX-314 in 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.

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):

We are developing a novel, one-time treatment utilizing a NAV Vector to deliver a gene encoding for a therapeutic antibody that targets and binds to plasma kallikrein, a key protein left unregulated in patients with HAE.

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

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).

Gene therapy programs for the potential treatment of rare monogenic diseases

We are developing RGX-202 for the treatment of Duchenne Muscular Dystrophy (DMD), a severe, progressive, degenerative muscle disease caused by mutations in the gene which encodes dystrophin, a protein involved in muscle cell structure and function.

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 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.

We are conducting a Phase I/II trial of RGX-121 in patients with MPS II up to the age of 5 years old.

As reported in February 2021, RGX-121 was well-tolerated in Cohorts 1 and 2 of the Phase I/II trial, and no drug-related SAEs were reported.

Biomarker data from patients in both cohorts indicated encouraging signals of I2S enzyme activity in the central nervous system following one-time administration of RGX-121, with consistent reductions of heparan sulfate (HS) and D2S6, a component of HS.

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 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 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.

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.

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.

Enrollment is complete in ALTITUDE TM , a multi-center, open label, randomized, controlled, dose-escalation Phase II trial to evaluate the efficacy, safety and tolerability of RGX-314 for the treatment of DR.

Cohorts 2 and 3 are evaluating RGX-314 at an increased dose level of 5x10 11 GC/eye, with Cohort 3 evaluating RGX-314 in patients who are NAb positive.

As in Cohort 1, patients did not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.

As of January 18, 2022, suprachoroidal delivery of RGX-314 continued to be well tolerated in the 15 patients dosed with RGX-314 in Cohort 1 in ALTITUDE, with no drug-related serious adverse events (SAEs), and no intraocular inflammation observed.

Of the patients dosed with RGX-314 in Cohort 1, 47% demonstrated a two-step or greater improvement from baseline on the Early Treatment Diabetic Retinopathy Study-Diabetic Retinopathy Severity Scale (ETDRS-DRSS) at six months, compared to 0% in the observational control group.

One patient (7%) dosed with RGX-314 continued to demonstrate a four-step improvement.

The percentage of Cohort 1 patients dosed with RGX-314 achieving at least two-step improvement at six months in RGX-314 treated eyes (47%) increased from the previously reported three-month results (33%).

We are developing RGX-202 for the treatment of Duchenne muscular dystrophy (Duchenne), a rare disease caused by mutations in the gene responsible for making dystrophin, a protein of central importance for muscle cell structure and function.

Without dystrophin, muscles throughout the body degenerate and become weak, eventually leading to loss of movement and independence, required support for breathing, cardiomyopathy and premature death.

We have received clearance of our Investigational New Drug (IND) application by the U.S.

Food and Drug Administration (the FDA ) to evaluate RGX-202 in a first-in-human, Phase I/II clinical trial named AFFINITY DUCHENNE TM .

This will be a multicenter, open-label dose escalation and dose expansion clinical study to evaluate the safety, tolerability and clinical efficacy of RGX-202 in patients with Duchenne.

We have taken proactive measures that will result in the delayed dosing of the first patient in AFFINITY DUCHENNE due to a n unexpected observation in the final stages of manufacturing at one of our third-party manufacturers .

We continue to prepare for trial initiation, including readying clinical trial sites and manufacturing additional clinical supply for the upcoming trial .

We anticipate dosing the first patient in this trial in the first half of 2023.

We are developing RGX-121 for the treatment of Mucopolysaccharidosis Type II (MPS II), a rare disease caused by a deficiency of the IDS gene which encodes I2S, an enzyme that is responsible for the breakdown of structures that dispose of waste products inside cells.

We are conducting a Phase I/II trial of RGX-121 in patients with MPS II under the age of 5 years old to evaluate the safety and tolerability of RGX-121, as well as the effects of RGX-121 on biomarkers of I2S enzyme activity, neurocognitive development and other clinical measures.

As of December 20, 2021, RGX-121 continued to be well-tolerated, with no drug-related SAEs across three dose levels.

Preliminary results indicated dose-dependent reductions in key cerebrospinal fluid biomarkers, with patients in Cohort 3 approaching normal levels of the D2S6 biomarker.

Measures of neurodevelopmental function from patients in Cohorts 1 and 2 demonstrated continued developmental skill acquisition up to 2 years after RGX-121 administration.

Evidence of systemic enzyme expression and biomarker activity continued to be observed.

We continue with plans for enrollment in the Cohort 3 expansion arm of this trial using commercial-scale cGMP material.

Enrollment is ongoing in a second Phase I/II trial of RGX-121 for the treatment of pediatric patients with MPS II ages 5-18 years old to evaluate the safety of a single administration of RGX-121, the effects of RGX-121 on biomarkers of I2S enzyme activity, and changes in cognitive function, adaptive behavior, daily function and quality of life.

We are developing RGX-111 for the treatment of Mucopolysaccharidosis Type I (MPS I), a rare disease caused by a deficiency of IDUA, an enzyme required for the breakdown of structures that dispose of waste products inside cells.

We are conducting a Phase I/II clinical trial in patients with MPS I to evaluate the safety, tolerability and pharmacodynamics of RGX-111, as well as the effects of RGX-111 on biomarkers of IDUA activity, neurocognitive development and other outcome measures.

As of December 20, 2021, RGX-111 was well tolerated across two dose levels in the Phase I/II trial and in the single-patient IND, with no drug-related SAEs.

Biomarker and neurodevelopmental assessments indicated encouraging central nervous system profile in patients dosed with RGX-111, with emerging evidence of systemic biomarker activity observed.

We continue with plans for enrollment in the Cohort 2 expansion arm of the Phase I/II trial.

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

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

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 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.

As of March 31, 2022, our NAV Technology Platform was being applied in one FDA approved product (Zolgensma®), and the preclinical and clinical development of a number of 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

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Our other business initiatives, such as preclinical development and manufacturing operations, may also be affected by the COVID-19 pandemic.

For example, the construction of our current good manufacturing practice production facility has been delayed from our original estimates, and may be delayed further, due to various government orders and restrictions relating to the COVID-19 pandemic .

For example, the construction of our current good manufacturing practice production facility was delayed from our original estimates 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 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.

Our results of operations for three months ended March 31, 2022 and 2021 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 remains unknown at this time and will depend on future developments that are highly unpredictable.

Please refer to the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion of the risks we face as a result of the COVID-19 pandemic.

Financial Overview

Our revenues to date consist primarily of license and royalty revenue resulting from the licensing of our NAV Technology Platform.

Our revenues to date consist primarily of license and royalty revenue resulting from the licensing of our NAV Technology Platform and other intellectual property rights.

We have not generated any revenues from commercial sales of our own products.

If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval and adequate labeling, our ability to generate future revenues will be materially compromised.

We license our NAV Technology Platform to other biotechnology and pharmaceutical companies.

We license our NAV Technology Platform and other intellectual property rights to other biotechnology and pharmaceutical companies, including collaborators for the joint development and commercialization of our product candidates.

The terms of the licenses vary, and licenses may be exclusive or non-exclusive and may be sublicensable by the licensee.

Licenses may grant intellectual property rights for purposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drug therapies for specific diseases using the NAV Technology Platform.

License agreements generally have a term at least equal to the life of the underlying patents, but are terminable at the option of the licensee.

Consideration from licensees under our license agreements may include:

(i) up-front and annual fees, (ii) option fees to acquire additional licenses, (iii) milestone payments based on the achievement of certain development and sales-based milestones by licensees, (iv) sublicense fees and (v) royalties on sales of licensed products.

Royalty revenue to date consists primarily of royalties on net sales of Zolgensma, which is marketed by Novartis Gene Therapies, Inc.

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

Zolgensma is a licensed product under our license agreement with Novartis Gene Therapies for the development and commercialization of treatments for SMA.

Future license and royalty revenues are dependent on the successful development and commercialization of licensed products by our licensees, which is uncertain, and revenues may fluctuate significantly from period to period.

(i) up-front and annual fees, (ii) milestone payments based on the achievement of certain development and sales-based milestones, (iii) sublicense fees, (iv) royalties on sales of licensed products and (v) other consideration payable upon optional goods and services purchased by licensees.

Future license and royalty revenues are dependent on the successful development and commercialization of licensed products, which is uncertain, and revenues may fluctuate significantly from period to period.

Additionally, we may never receive consideration in our license agreements that is contemplated on option fees, development and sales-based milestone payments, royalties on sales of licensed products or sublicense fees, given the contingent nature of these payments.

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The termination of our licenses by licensees may materially impact the amount of revenue we recognize in future periods.

Zolgensma Royalties

Royalty revenue to date consists primarily of royalties on net sales of Zolgensma, which is marketed by Novartis Gene Therapies, Inc.

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

Zolgensma is a licensed product under our license agreement with Novartis Gene Therapies for the development and commercialization of treatments for SMA.

Collaboration and License Agreement with AbbVie

In September 2021, we entered into a collaboration and license agreement with AbbVie Global Enterprises Ltd.

(AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize RGX-314 (the AbbVie Collaboration Agreement).

The AbbVie Collaboration Agreement became effective in November 2021.

The AbbVie Collaboration Agreement may materially impact our future revenues, research and development expenses, other operating expenses and operating cash flows associated with the development and commercialization of RGX-314.

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

Operating Expenses

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Cost of Revenues

Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform, including sublicense fees, milestone payments and royalties on net sales of licensed products.

Sublicense fees are based on a percentage of license fees received by us from NAV Technology Licensees and are recognized in the period that the underlying license revenue is recognized.

Milestone payments are payable to licensors upon the achievement of specified milestones by NAV Technology Licensees and are recognized in the period the milestone is achieved or deemed probable of achievement.

Royalties are based on a percentage of net sales of licensed products by NAV Technology Licensees and are recognized in the period that the underlying sales occur.

Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform and other intellectual property rights, including sublicense fees, milestone payments and royalties on net sales of licensed products.

Sublicense fees are based on a percentage of license fees received by us from licensees and are recognized in the period that the underlying license revenue is recognized.

Milestone payments are payable to licensors upon the achievement of specified milestones by licensees and are recognized in the period the milestone is achieved or deemed probable of achievement.

Royalties are based on a percentage of net sales of licensed products by licensees and are recognized in the period that the underlying sales occur.

Future costs of revenues are uncertain due to the nature of our license agreements and significant fluctuations in cost of revenues may occur from period to period.

Research and Development Expense

Our research and development expense primarily consists of:

salaries and personnel-related costs, including benefits and stock-based compensation, for our scientific personnel performing research and development activities;

Our research and development expenses consist primarily of:

salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for our scientific personnel performing research and development activities;

costs related to executing preclinical studies and clinical trials;

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other costs in seeking regulatory approval of our product candidates;

allocated facility-related costs, depreciation expense and other overhead.

Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are expensed as incurred if the technology licensed has no alternative future use.

direct costs and allocated costs related to laboratories and facilities, depreciation expense, information technology and other overhead.

Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are charged to research and development expense as incurred if the technology licensed has no alternative future use.

We plan to increase our research and development expenses for the foreseeable future as we continue development of our product candidates.

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

Continued development of RGX-314 products, including:

continued development of RGX-314 products under our collaboration with AbbVie, 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;

pivotal trials (ATMOSPHERE and one additional pivotal trial) to evaluate the safety and efficacy of the subretinal delivery of RGX-314 for the treatment of wet AMD;

pivotal trials (ATMOSPHERE and ASCENT) to evaluate the safety and efficacy of the subretinal delivery of RGX-314 for the treatment of wet AMD;

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 (ALTITUDE);

preclinical research and development and a planned clinical trial for RGX-202 for the treatment of DMD;

additional long-term follow-up and other studies associated with RGX-314.

a Phase I/II clinical trial to evaluate the safety and efficacy of RGX-202 for the treatment of Duchenne (AFFINITY DUCHENNE);

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

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 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 RGX-181 for the treatment of CLN2 disease and RGX-381 for the treatment of the ocular manifestations of CLN2 disease;

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

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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 and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes our research and development expenses incurred during the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Direct Expenses

RGX-314 (net of cost reimbursement from AbbVie)

RGX-121 and RGX-111

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Total research and development

Direct expenses related to the development of RGX-314 for the three months ended March 31, 2022 include $2.9 million in net costs reimbursable by AbbVie under our eye care collaboration which were recorded as a reduction of research and development expenses during the period.

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.

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General and Administrative Expense

Our general and administrative expense consists primarily of salaries and personnel-related costs, including benefits and stock-based compensation, for employees performing functions other than research and development.

This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology and administrative support functions.

Other general and administrative expenses include facility-related and overhead costs not otherwise allocated to research and development expense, professional fees for accounting, legal and advisory services, expenses associated with obtaining and maintaining patents, insurance costs, costs of our information systems and other commercial and general corporate activities.

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

Our general and administrative expenses consist primarily of salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for employees performing functions other than research and development.

This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology, facilities and administrative support functions.

Additionally, general and administrative expenses include facility-related and overhead costs not otherwise allocated to research and development expense, professional fees for accounting, legal, commercial and other advisory services, expenses associated with obtaining and maintaining patents, insurance costs, costs of our information systems and other general corporate activities.

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

Other Income ( Expense)

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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 (Loss)

Investment Income

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

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Interest Expense

Interest expense consists of non-cash interest imputed on the liability related to the sale of future Zolgensma royalties to entities managed by Healthcare Royalty Management, LLC (collectively, HCR).

Non-cash interest expense is recognized using the effective interest method, based on our estimate of total royalty payments expected to be received by HCR under the royalty purchase agreement.

Critical Accounting Policies and Significant Judgments and Estimates

Interest expense consists primarily of interest imputed on the liability related to the sale of future Zolgensma royalties to entities managed by Healthcare Royalty Management, LLC (collectively, HCR).

Interest expense is recognized using the effective interest method, based on our estimate of total royalty payments expected to be received by HCR under the royalty purchase agreement.

For further information regarding the royalty purchase agreement with HCR, please refer to Note 6, “Liability Related to Sale of Future Royalties” to the accompanying unaudited consolidated financial statements.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

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Our significant accounting policies are fully described in Note 2 to the accompanying unaudited consolidated financial statements and in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no significant changes in our critical accounting policies since December 31, 2020.

There have been no significant changes in our critical accounting policies and estimates since December 31, 2021.

Results of Operations

Our consolidated results of operations were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

License and royalty revenue

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General and administrative

Provision for credit losses and other

Credit losses and other

Total operating expenses

Income (loss) from operations

Loss from operations

Other Income (Expense)

Interest income from licensing

Investment income (loss)

Investment income

Interest expense

Total other income (expense)

Income (loss) before income taxes

Loss before income taxes

Income Tax Benefit (Expense)

Net income (loss)

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

License and Royalty Revenue.

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 $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 $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 $2.9 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 $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:

an increase of $2.3 million for personnel-related costs as a result of increased headcount of general and administrative personnel, including a $0.9 million increase in stock-based compensation expense;

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

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 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 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 Nine Months Ended September 30 , 2021 and 2020

Comparison of the Three Months Ended March 31, 2022 and 2021

License and Royalty Revenue.

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.

License and royalty revenue increased by $3.3 million, from $18.9 million for the three months ended March 31, 2021 to $22.2 million for the three months ended March 31, 2022.

The increase was primarily attributable to Zolgensma royalty revenues, which increased by $3.3 million, from $18.3 million for the first quarter of 2021 to $21.5 million for the first quarter of 2022.

As reported by Novartis, sales of Zolgensma for the first quarter of 2022 increased by 14% as compared to the first quarter of 2021, driven by geographic expansion of product access.

Cost of Revenues.

Cost of revenues increased by $10.9 million, from $4.9 million for the three months ended March 31, 2021 to $15.7 million for the three months ended March 31, 2022.

The increase was primarily attributable to a non-recurring charge of $9.2 million recognized in the first quarter of 2022 related to the amendment of our license agreement with The Trustees of the University of Pennsylvania (Penn) to buy out our obligation to pay sublicense fees to Penn under the license agreement.

For further information regarding the amendment of the license agreement with Penn, please refer to Note 7, “Commitments and Contingencies” to the accompanying unaudited consolidated financial statements.

Research and Development Expense.

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.

Research and development expenses increased by $15.9 million, from $39.7 million for the three months ended March 31, 2021 to $55.6 million for the three months ended March 31, 2022.

The increase was primarily attributable to the following:

an increase of $10.0 million for personnel-related costs as a result of increased headcount of research and development personnel, including a $2.6 million increase in stock-based compensation expense;

an increase of $5.6 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 $5.8 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 $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.

an increase of $8.5 million in costs associated with clinical trial and regulatory activities for our lead product candidates, largely driven by RGX-314 clinical trials;

an increase of $3.7 million in personnel-related costs as a result of increased headcount of research and development personnel, including a $0.6 million increase in stock-based compensation expense, largely driven by the expected commencement of in-house manufacturing of clinical supply in 2022;

an increase of $2.9 million in manufacturing-related expenses, primarily related to clinical supply for our lead product candidates;

an increase of $1.5 million in costs of laboratories and facilities used by research and development personnel, including a $0.6 million increase in depreciation expense allocated to research and development functions, largely driven by the occupation of our new corporate, research and manufacturing headquarters in mid-2021;

an increase of $1.3 million in costs associated with preclinical activities and other early stage research and development.

The increase in research and development expenses was partially offset by $2.9 million of net development cost reimbursement from AbbVie recorded in the first quarter of 2022 under our RGX-314 collaboration, which was recorded as a reduction of research and development expenses.

General and Administrative Expense.

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.

General and administrative expenses increased by $4.5 million, from $17.8 million for the three months ended March 31, 2021 to $22.3 million for the three months ended March 31, 2022.

The increase was primarily attributable to the following:

an increase of $4.8 million for personnel-related costs as a result of increased headcount of general and administrative personnel, including a $2.7 million increase in stock-based compensation expense;

an increase of $1.6 million in personnel-related costs as a result of increased headcount of general and administrative personnel, including a $0.2 million increase in stock-based compensation expense;

an increase of $1.6 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 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.

Liquidity and Capital Resources

Sources of Liquidity

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 in Rockville, Maryland.

As of March 31, 2022, we had cash, cash equivalents and marketable securities of $764.8 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 March 31, 2022, will enable us to fund our operating expenses and capital expenditure requirements, and are sufficient to meet our financial commitments and obligations, for at least the next 12 months from the date of this report, based on our current business plan.

We intend to devote the majority of our current capital to clinical development, seeking regulatory approval of our product candidates and additional capital expenditures needed to support these activities.

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

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

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents and restricted cash

Cash Flows from Operating Activities

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 $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.

Our net cash used in operating activities for the three months ended March 31, 2022 increased by $11.9 million from the three months ended March 31, 2021.

The increase was largely driven by an increase in operating expenses in the first quarter of 2022.

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

For the three months ended March 31, 2022, our net cash used in operating activities of $55.9 million consisted of a net loss of $76.7 million, offset by adjustments for non-cash items of $14.8 million and favorable changes in working capital of $6.0 million.

Adjustments for non-cash items primarily consisted of stock-based compensation expense of $10.8 million and depreciation and amortization expense of $2.6 million.

The changes in working capital include a decrease in accounts receivable of $5.7 million which was largely driven by a decrease in Zolgensma royalties receivable, a decrease in other current assets of $3.0 million which was largely driven by a decrease in amounts due from AbbVie for net reimbursement of development costs under our RGX-314 collaboration, and an increase in other liabilities of $6.9 million which was largely driven by a long-term liability recorded during the period resulting from the amendment of our license agreement with Penn.

The favorable changes in working capital were partially offset by a net decrease in total accounts payable and accrued expenses and other current liabilities of $9.7 million, which was primarily driven by a decrease in accrued personnel costs.

Other changes in working capital were incurred in the normal course of business.

For the three months ended March 31, 2021, our net cash used in operating activities of $44.0 million consisted of a net loss of $50.1 million and unfavorable changes in working capital of $11.2 million, offset by $17.3 million in adjustments for non-cash items.

The changes in working capital include a $10.5 million decrease in accrued expenses and other current liabilities which was largely driven by decreases in accrued personnel costs, accrued royalties payable to licensors and accrued external research and development expenses as of March 31, 2021.

The changes in working capital were partially offset by an increase in operating lease liabilities of $4.2 million which was largely driven by funds received under our tenant improvement allowance for the buildout of our new headquarters facility in Rockville, Maryland.

Other changes in working capital were incurred in the normal course of business.

Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $9.9 million, non-cash interest expense recognized under our royalty purchase agreement with HCR of $ 3.8 million and depreciation and amortization expense of $1.9 million.

Cash Flows from Investing Activities

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 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.

For the three months ended March 31, 2022, our net cash used in investing activities consisted of $129.5 million to purchase marketable debt securities and $11.0 million to purchase property and equipment, offset by $49.9 million in maturities of marketable debt securities.

The substantial majority of our capital expenditures for the three months ended March 31, 2022 were related to the build out of our corporate, manufacturing and research headquarters at 9804 Medical Center Drive in Rockville, Maryland.

We have completed the build out of this facility, and capital expenditures in 2022 are expected to be lower than 2021 as a result of the completed build out of this facility.

For the three months ended March 31, 2021, our net cash used in investing activities consisted of $233.6 million to purchase marketable debt securities and $31.0 million to purchase property and equipment, offset by $50.5 million in maturities of marketable debt securities.

Cash Flows from Financing Activities

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.

For the three months ended March 31, 2022, our net cash used in financing activities primarily consisted of $7.5 million of Zolgensma royalties paid to HCR under our royalty purchase agreement, net of imputed interest, and was partially offset by $1.0 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, 2021, our net cash provided by financing activities primarily consisted of $216.2 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 $6.6 million of Zolgensma royalties paid to HCR, net of imputed interest, under our royalty purchase agreement.

Additional Capital Requirements

Our financial obligations primarily consist of vendor contracts to provide research services and other purchase commitments with suppliers.

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties.

Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement.

The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

Our commitments also include obligations to our licensors under our in-license agreements, which may include sublicense fees, milestones fees, royalties and reimbursement of patent maintenance costs.

Sublicense fees are payable to licensors when we sublicense underlying intellectual property to third parties;

the fees are based on a percentage of the license fees we receive from sublicensees.

Milestone fees are payable to licensors upon our future achievement of certain development and regulatory milestones.

Royalties are payable to licensors based on a percentage of net sales of licensed products.

Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining of license patents.

Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period.

We have entered into a number of long-term operating leases for office, laboratory and manufacturing space in Rockville, Maryland and New York, New York, as well as a number of laboratory and other equipment leases.

Please refer to Note 6 to the audited consolidated financial statements accompanying our Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding our lease commitments.

There have been no material changes to our leasing arrangements since December 31, 2021.

Under the terms of our royalty purchase agreement with HCR, our future Zolgensma royalties, less amounts payable by us to certain licensors, will be payable to HCR up to a specified capped amount.

As of March 31, 2022 , the total amount of future Zolgensma royalties to be paid to HCR under the agreement was $ 194.2 million if paid by November 7, 2024, or $ 234.2 million if paid after that date.

We have no obligation to repay any amounts to HCR if total future Zolgensma royalty payments are not sufficient to repay these amounts.

Future Funding Requirements

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

We have incurred cumulative losses since our inception and had an accumulated deficit of $238.0 million as of March 31, 2022.

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 corporate, manufacturing and research headquarters as discussed above.

Additionally, we expect to continue to incur capital expenditures associated with building out additional laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts.

As a result, we will need significant additional capital to fund our operations, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements.

Our future capital requirements will depend on many factors, including:

the 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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revenue, if any, received from commercial sales of our products, should any of our product candidates receive marketing approval;

revenue received from commercial sales of Zolgensma and other revenue, if any, received in connection with commercial sales of our NAV Technology Licensees’ products, should any of their product candidates receive marketing approval;

revenue received from commercial sales of Zolgensma and other revenue, if any, received in connection with commercial sales of our licensees’ and collaborators’ products, should any of their product candidates receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

our current licensing agreements or collaborations remaining in effect;

our current licensing agreements or collaborations remaining in effect, including the AbbVie Collaboration Agreement;

our ability to establish and maintain additional licensing agreements or collaborations on favorable terms, if at all;

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In addition, our product candidates, if approved, may not achieve commercial success.

Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products, the majority of which may not be commercially available for many years, if at all.

In addition, revenue from our NAV Technology Platform sublicensing is dependent in part on the clinical and commercial success of our licensing partners.

Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products that may not be commercially available for many years, if at all.

In addition, revenue from our NAV Technology Platform licensing is dependent in part on the clinical and commercial success of our licensing partners, including the commercialization of Zolgensma.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

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We also could be required to seek funds through arrangements with partners or otherwise that may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us.

Contractual Obligations, Commitments and Contingencies

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, 2021.

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

There have been no material changes to our exposure to market risk during the three months ended March 31, 2022.

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