REGENXBIO Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which we filed with the SEC on March 1, 2022. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our investigational gene therapies are designed to deliver functional genes to address genetic defects in cells, enabling the production of therapeutic proteins or antibodies that are intended to impact disease. Through a single administration, gene therapy could potentially alter the course of disease significantly and deliver improved patient outcomes with long-lasting effects . Overview of Product Candidates We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) to address genetic diseases. Our programs and product candidates are described below: • RGX-314: 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. 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%). • RGX-202: 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. 22 Table of Contents 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. • RGX-121: 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. • RGX-111: 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. • RGX-181: 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. • RGX-381: 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 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. 23 Table of Contents Impact of COVID-19 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. At certain times during the COVID-19 pandemic, we have implemented a work-from-home policy for all employees who are not essential to be onsite, and we may take additional actions that alter our operations, as may be required by federal, state or local authorities or which we determine are in the best interests of our employees. The COVID-19 pandemic has caused delays to our clinical trials and may further delay or prevent us from proceeding with our clinical trials. 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 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 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 Revenues Our revenues to date consist primarily of license and royalty revenue resulting from the licensing of our NAV Technology Platform and other intellectual property rights. We have not generated any revenues from commercial sales of our own products. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval and adequate labeling, our ability to generate future revenues will be materially compromised. We license our NAV Technology Platform and other intellectual property rights to other biotechnology and pharmaceutical companies, including collaborators for the joint development and commercialization of our product candidates. The terms of the licenses vary, and licenses may be exclusive or non-exclusive and may be sublicensable by the licensee. Licenses may grant intellectual property rights for purposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drug therapies for specific diseases using the NAV Technology Platform and other licensed rights. License agreements generally have a term at least equal to the life of the underlying patents, but are terminable at the option of the licensee. Consideration from licensees under our license agreements may include: (i) up-front and annual fees, (ii) milestone payments based on the achievement of certain development and sales-based milestones, (iii) sublicense fees, (iv) royalties on sales of licensed products and (v) other consideration payable upon optional goods and services purchased by licensees. Future license and royalty revenues are dependent on the successful development and commercialization of licensed products, which is uncertain, and revenues may fluctuate significantly from period to period. Additionally, we may never receive consideration in our license agreements that is contemplated on option fees, development and sales-based milestone payments, royalties on sales of licensed products or sublicense fees, given the contingent nature of these payments. Our revenues are concentrated among a low number of licensees and licenses are terminable at the option of the licensee. The termination of our licenses by licensees may materially impact the amount of revenue we recognize in future periods. Zolgensma Royalties Royalty revenue to date consists primarily of royalties on net sales of Zolgensma, which is marketed by Novartis Gene Therapies, Inc. (formerly AveXis, Inc.) (Novartis Gene Therapies), a wholly owned subsidiary of Novartis AG (Novartis), for the treatment of spinal muscular atrophy (SMA). Zolgensma is a licensed product under our license agreement with Novartis Gene Therapies for the development and commercialization of treatments for SMA. 24 Table of Contents 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 Our operating expenses consist primarily of cost of revenues, research and development expenses and general and administrative expenses. Personnel costs including salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general and administrative expenses. We allocate indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costs between research and development and general and administrative categories based on employee headcount and the nature of work performed by each employee. Cost of Revenues Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform and other intellectual property rights, including sublicense fees, 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 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; • costs related to acquiring, developing and manufacturing materials for preclinical studies and clinical trials; • fees paid to consultants and other third-parties who support our product candidate development; • other costs in seeking regulatory approval of our product candidates; and • direct costs and allocated costs related to laboratories and facilities, depreciation expense, information technology and other overhead. Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are charged to research and development expense as incurred if the technology licensed has no alternative future use. We 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 under our collaboration with AbbVie, including: o 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; o pivotal trials (ATMOSPHERE and ASCENT) to evaluate the safety and efficacy of the subretinal delivery of RGX-314 for the treatment of wet AMD; o 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); and o additional long-term follow-up and other studies associated with RGX-314. 25 Table of Contents • 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 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; • continued investment in advanced manufacturing analytics and process development activities; and • continued acquisition and manufacture of clinical trial materials in support of our anticipated clinical trials. The following table summarizes our research and development expenses incurred during the three months ended March 31, 2022 and 2021 (in thousands): Three Months Ended March 31, 2022 2021 Direct Expenses RGX-314 (net of cost reimbursement from AbbVie) $ 7,527 $ 3,341 RGX-202 2,493 1,918 RGX-121 and RGX-111 3,249 1,923 RGX-181 and RGX-381 260 769 Other product candidates 283 337 Total direct expenses 13,812 8,288 Unallocated Expenses Platform and new technologies 13,042 7,388 Personnel-related 23,371 19,661 Facilities and depreciation expense 4,530 4,129 Other unallocated 872 256 Total unallocated expenses 41,815 31,434 Total research and development $ 55,627 $ 39,722 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. We typically utilize our employee and infrastructure resources across our development programs. We do not allocate personnel and other internal costs, such as facilities and other overhead costs, to specific product candidates or development programs. General and Administrative Expense Our general and administrative expenses consist primarily of salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for employees performing functions other than research and development. This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology, facilities and administrative support functions. Additionally, general and administrative expenses include 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. 26 Table of Contents Other Income ( Expense) Interest Income from Licensing In accordance with our revenue recognition policy, interest income from licensing consists of imputed interest recognized from significant financing components identified in our license agreements with NAV Technology Licensees as well as interest income accrued on unpaid balances due from licensees. Investment Income Investment income consists of interest income earned and gains and losses realized from our cash equivalents, marketable securities and non-marketable equity securities, 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. Marketable securities are comprised of available-for-sale debt securities and equity securities. Interest Expense Interest expense consists primarily of interest imputed on the liability related to the sale of future Zolgensma royalties to entities managed by Healthcare Royalty Management, LLC (collectively, HCR). Interest expense is recognized using the effective interest method, based on our estimate of total royalty payments expected to be received by HCR under the royalty purchase agreement. For further information regarding the royalty purchase agreement with HCR, please refer to Note 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). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. Our significant accounting policies are fully described in Note 2 to the accompanying unaudited consolidated financial statements and in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in our critical accounting policies and estimates since December 31, 2021. 27 Table of Contents Results of Operations Our consolidated results of operations were as follows (in thousands): Three Months Ended March 31, 2022 2021 Change Revenues License and royalty revenue $ 22,218 $ 18,884 $ 3,334 Total revenues 22,218 18,884 3,334 Operating Expenses Cost of revenues 15,717 4,851 10,866 Research and development 55,627 39,722 15,905 General and administrative 22,318 17,838 4,480 Credit losses and other 83 515 (432 ) Total operating expenses 93,745 62,926 30,819 Loss from operations (71,527 ) (44,042 ) (27,485 ) Other Income (Expense) Interest income from licensing 94 29 65 Investment income 799 580 219 Interest expense (6,130 ) (6,702 ) 572 Total other income (expense) (5,237 ) (6,093 ) 856 Loss before income taxes (76,764 ) (50,135 ) (26,629 ) Income Tax Benefit (Expense) 41 (4 ) 45 Net loss $ (76,723 ) $ (50,139 ) $ (26,584 ) Comparison of the Three Months Ended March 31, 2022 and 2021 License and Royalty Revenue. 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 $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 $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; and • an increase of $1.3 million in costs associated with preclinical activities and other early stage research and development. 28 Table of Contents 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 $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 $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; and • an increase of $1.6 million for professional services, primarily related to legal and other advisory services. Liquidity and Capital Resources Sources of Liquidity 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. Additionally, our estimates are based on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Furthermore, given the continuing uncertainty and volatile market and economic conditions caused by the COVID-19 pandemic, as well as the potential for further effects due to a resurgence in COVID-19 infections, we will continue to monitor the nature and extent of the impact of the COVID-19 pandemic on our liquidity and capital resources. Cash Flows Our consolidated cash flows were as follows (in thousands): Three Months Ended March 31, 2022 2021 Net cash used in operating activities $ (55,911 ) $ (44,047 ) Net cash used in investing activities (90,591 ) (214,183 ) Net cash provided by (used in) financing activities (6,834 ) 211,286 Net decrease in cash and cash equivalents and restricted cash $ (153,336 ) $ (46,944 ) Cash Flows from Operating Activities 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. 29 Table of Contents 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 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 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. 30 Table of Contents 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 $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. We do not expect to achieve such revenues, and expect to continue to incur losses, for at least the next several years. We expect that our research and development and general and administrative expenses will continue to increase for the foreseeable future as we continue the development of, and seek regulatory approval for, our product candidates. 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 to continue to incur capital expenditures associated with building out additional laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts. As a result, we will need significant additional capital to fund our operations, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. Our future capital requirements will depend on many factors, including: • the timing of enrollment, commencement and completion of our clinical trials; • the results of our clinical trials; • the results of our preclinical studies for our product candidates and any subsequent clinical trials; • the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our product candidates; • the costs associated with building out additional laboratory and manufacturing capacity; • the costs, timing and outcome of regulatory review of our product candidates; • the costs of future product sales, medical affairs, marketing, manufacturing and distribution activities for any of our product candidates for which we receive marketing approval; • revenue, if any, received from commercial sales of our products, should any of our product candidates receive marketing approval; • revenue received from commercial sales of Zolgensma and 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, including the AbbVie Collaboration Agreement; • our ability to establish and maintain additional licensing agreements or collaborations on favorable terms, if at all; and • the extent to which we acquire or in-license other product candidates and technologies. Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products that may not be commercially available for many years, if at all. In addition, revenue from our NAV Technology Platform licensing is dependent in part on the clinical and commercial success of our licensing partners, including the commercialization of Zolgensma. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. 31 Table of Contents The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. Adequate additional financing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with partners or otherwise that may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Item 3. Quantitative and Qualitative Disclosures about Market Risk. For information regarding market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our exposure to market risk during the three months ended March 31, 2022.