What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-03 · 139 added, 67 removed, 196 unchanged (51% of the section changed)

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MC4R pathway deficiencies result in the disruption of satiety signals and energy homeostasis in the body, which, in turn, leads to intense feelings of hunger and to obesity.

We believe that the MC4R pathway is a compelling target for treating these genetic diseases because of its critical role in regulating appetite and weight by promoting satiety and weight control, and that peptide therapeutics are uniquely suited for activating this target.

IMCIVREE has been approved by the U.S.

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in the first quarter 2021.

In July 2021, the European Commission granted marketing authorization to IMCIVREE (setmelanotide) for the treatment of obesity and the control of hunger associated with genetically confirmed loss-of-function biallelic POMC, including PCSK1, deficiency or biallelic LEPR deficiency in adults and children 6 years of age and above.

We recently announced positive topline results from a pivotal Phase 3 clinical trial evaluating setmelanotide for the treatment of insatiable hunger and severe obesity in individuals with Bardet-Biedl syndrome, or BBS, or Alström syndrome.

The trial met its primary and all key secondary endpoints, showing statistically significant and clinically meaningful reductions in weight and hunger scores.

All primary endpoint responders were patients with BBS.

There were three evaluable patients with Alström syndrome and none of them met the primary endpoint.

We are continuing to analyze the full data from patients with BBS or Alström syndrome, which we plan to present at a medical meeting in the second

half of 2021.

In August 2021, we announced that, based on feedback from both the FDA and EMA, we plan to submit a supplemental New Drug Application, or sNDA, to the FDA and a Type II variation marketing authorization application or MAA to the European Medicines Agency, or EMA, in the second half of 2021, which will cover both BBS and Alström syndrome.

Our continued development efforts are focused on obesity related to several single gene-related, or monogenic, MC4R pathway deficiencies:

Bardet-Biedl syndrome, or BBS;

Alström syndrome;

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obesity due to steroid receptor coactivator 1, or SRC1, deficiency;

and obesity due to SH2B adapter protein 1, or SH2B1, deficiency;

MC4R deficiency obesity and Smith-Magenis syndrome, as well as additional diseases as part of investigator-initiated protocols.

There are currently no effective or approved treatments for these MC4R pathway-related diseases.

The trial met its primary and all key secondary endpoints, showing statistically significant and clinically meaningful reductions in weight and hunger scores.

All primary endpoint responders were patients with BBS.

There were three evaluable patients with

Alström syndrome and none of them met the primary endpoint.

We are continuing to analyze the full data from patients with BBS or Alström syndrome, which we plan to present at a medical meeting in the second half of 2021.

We plan to complete regulatory submissions to both the FDA and the EMA for BBS in the second half of 2021, and we expect to determine next steps for Alström syndrome upon completing a full analysis of the final data from the Phase 3 trial.

Food and Drug Administration, or the FDA, has acknowledged the importance of these results by giving setmelanotide Breakthrough Therapy designation for the treatment of obesity associated with genetic defects upstream of the MC4R in the leptin melanocortin pathways.

The Breakthrough Therapy designation currently covers indications for POMC deficiency obesity, LEPR deficiency obesity, BBS and Alström syndrome.

We have ongoing Phase 2 clinical trials, referred to as our Basket Study, in MC4R pathway heterozygous deficiency obesity, which we expanded in the second half of 2019 to include the following additional indications:

SRC1 deficiency obesity, SH2B1 deficiency obesity, MC4R deficiency obesity and Smith-Magenis syndrome.

We reported preliminary results in MC4R pathway heterozygous deficiency obesity in March 2019.

On January 26, 2021, we announced new proof-of-concept interim data from our ongoing Phase 2 Basket Study across individuals with one of three distinct rare genetic diseases of obesity:

HET obesity due to a genetic variant in one of the two alleles of the POMC, PCSK1 or LEPR gene, or HETs;

obesity due to SRC1 deficiency;

and obesity due to SH2B1 deficiency.

The primary endpoint of the study is the percent of patients in each subgroup showing at least a 5 percent loss of body weight over three months.

obesity due to SH2B adapter protein 1, or SH2B1, deficiency;

hypothalamic obesity;

and MC4R deficiency obesity.

On January 26, 2021, we announced new interim data from our ongoing Phase 2 Basket Study across individuals with HET obesity and SRC1 and SH2B1 deficiency obesities that we believe demonstrate proof of concept in these diseases.

The primary endpoint of the study was the percent of patients in each subgroup showing at least a 5 percent loss of body weight over three months.

Consistent with prior clinical experience, setmelanotide was generally well tolerated in each of these rare genetic diseases of obesity.

We are in discussions with the FDA to define a potential path for setmelanotide towards registration for these indications.

Pending the outcome of these discussions, we plan to initiate a pivotal Phase 3 trial evaluating setmelanotide in patients with HET obesity and SRC1 and SH2B1 deficiency obesities in the second half of 2021.

We recently presented new data generated from our proprietary gene curation and selection strategy, which is designed to evaluate a gene’s relevance to the MC4R pathway with the goal of identifying genetic patient populations with the potential to benefit from setmelanotide therapy.

In August 2021, we announced agreement with the FDA and EMA on the design of our pivotal Phase 3 EMANATE trial of setmelanotide.

The trial will be a randomized, double-blind, placebo-controlled study with five independent sub-studies evaluating setmelanotide in patients with:

heterozygous POMC/PCSK1 obesity;

heterozygous LEPR obesity;

certain variants of the SRC1;

certain variants of SH2B1 genes;

or PCSK1 N221D deletions within the MC4R pathway.

Each sub-study will be entirely independent of the others and, if successful, is designed to allow us to submit separate regulatory submissions to the FDA and EMA.

We also recently presented new data generated from our proprietary gene curation and selection strategy, which is designed to evaluate a gene’s relevance to the MC4R pathway with the goal of identifying genetic patient populations with the potential to benefit from setmelanotide therapy.

Using this proprietary approach, we identified an additional 31 MC4R pathway genes with strong or very strong pathway relevance.

Pending discussions with the FDA, we plan to initiate a new exploratory MC4R pathway basket trial in patients with these 31 new genes in the second half of 2021.

In the first half of 2021, we plan to initiate a Phase 2 clinical trial in hypothalamic obesity.

We also plan to initiate in the second half of 2021, a Phase 2 clinical trial in pediatric patients aged two to six years old and a Phase 3 potentially registration-enabling trial for the weekly formulation of setmelanotide.

In the second half of 2021, we plan to announce new top-line data from the ongoing exploratory Phase 2 Basket Study evaluating setmelanotide in MC4R-rescuable patients.

Also in the second half of 2021, we expect to obtain regulatory approval from the European Commission and make IMCIVREE commercially available in Europe in obesities due to POMC, PCSK1 and LEPR deficiencies.

On January 5, 2021, we entered into an asset purchase agreement with Alexion Pharmaceuticals, Inc., or Alexion, pursuant to which we agreed to sell our Rare Pediatric Disease Priority Review Voucher, PRV, to Alexion, or the PRV Transfer.

We plan to initiate the Phase 2 DAYBREAK trial of setmelanotide in the second half of 2021.

This trial will be a two-stage, double-blind, placebo-controlled study in patients with specific variants within one of 31 genes within the MC4R pathway.

We also plan to initiate in the second half of 2021, a Phase 3 clinical trial in pediatric patients aged two to six years old and two Phase 3 potentially registration-enabling trials for the weekly formulation of setmelanotide.

In the first quarter of 2022, we plan to announce new top-line data from the ongoing exploratory Phase 2 Basket Study evaluating setmelanotide in patients with obesity due to a variant in the MC4 receptor.

We are studying additional diseases as part of investigator-initiated protocols.

There are currently no effective or approved treatments for these MC4R pathway-related diseases.

The FDA has acknowledged the importance of these results by giving setmelanotide Breakthrough Therapy designation for the treatment of obesity associated with genetic defects upstream of the MC4R in the leptin melanocortin pathways.

The Breakthrough Therapy designation currently covers indications for POMC deficiency obesity, LEPR deficiency obesity, BBS and Alström syndrome.

Additional recent clinical and regulatory updates include:

● In July 2021, we initiated a Phase 2 clinical trial in hypothalamic obesity.

Hypothalamic obesity is a rare, acquired form of extreme obesity that occurs following damage to the hypothalamic regions of the brain, which are responsible for controlling physiological functions such as hunger and weight regulation.

We believe a subset of patients with hypothalamic obesity have the potential to see weight loss with setmelanotide if their MC4 receptor is sufficiently intact;

● In July 2021, we announced an exclusive distribution agreement with Medison Pharma, to commercialize IMCIVREE in Israel;

● In July 2021, we announced a collaborative research agreement with the Clinical Registry Investigating Bardet-Biedl Syndrome, or CRIBBS, to initiate a population study focused on the natural history of weight gain, hyperphagia and quality of life in patients with BBS;

● In Great Britain, our marketing authorisation application for IMCIVREE is under review by the Medicines & Healthcare Products Regulatory Agency.

We announced that IMCIVREE was selected for evaluation as a “Highly Specialised Technology,” (HST) by the National Institute for Health and Care Excellence (NICE).

HST is a specific status reserved for rare and severe diseases.

We were awarded the voucher under a FDA program intended to encourage the development of certain rare pediatric disease product applications.

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From August 2015 through August 2017, we raised aggregate net proceeds of $80.8 million through our issuance of series A preferred stock.

Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on offerings through February 2021, we have raised aggregate net

proceeds of approximately $611.4 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs.

Since our initial public offering, or IPO, on October 10, 2017 and our underwritten follow-on offerings through February 2021, we have raised aggregate net proceeds of approximately $611.4 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs.

As noted above, we also received $100.0 million from an asset sale, specifically in connection with the PRV Transfer.

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IMCIVREE became commercially available to patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency in the U.S.

in the first quarter of 2021.

in the first quarter of 2021 and following approval in the European Union, we are pursuing a country-by-country strategy to establish market access and reimbursement for IMCIVREE in several countries.

We expect to continue to fund our operations through the sale of equity, debt financings or other sources.

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If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide.

As of March 31, 2021 we had an accumulated deficit of $415.6 million.

Our net income (losses) were $43.8 million and ($34.2) million for the three months ended March 31, 2021 and 2020, respectively.

As of June 30, 2021 we had an accumulated deficit of $451.0 million.

Our net income (losses) were ($35.4) million, ($31.1) million, $8.4 million and ($65.3) million for the three and six months ended June 30, 2021 and 2020, respectively.

We expect to continue to incur significant expenses and increasing operating losses over the foreseeable future.

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● engage in the sales and marketing efforts necessary to support the continued commercial efforts of IMCIVREE globally;

● the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any;

● take into account the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any;

● continue to operate as a public company.

As of March 31, 2021, our existing cash and cash equivalents and short-term investments were approximately $404.8 million.

As of June 30, 2021, our existing cash and cash equivalents and short-term investments were approximately $368.2 million.

We expect that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses into at least the second half of 2023.

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In response to the COVID-19 pandemic, we have limited access to our executive offices with most employees continuing their work outside of our offices and travel has been restricted.

We have recently updated our timelines on the Basket Study but the changes were unrelated to COVID-19.

We are continuing our regular interactions with the FDA and EMA, and based on current information we do not currently anticipate any disruption in the clinical supply of setmelanotide.

Based on current information we do not currently anticipate any disruption in the clinical supply of setmelanotide.

Our CMOs have indicated that they have appropriate plans and procedures in place to ensure uninterrupted future supply of clinical and commercial-grade setmelanotide, subject to potential limitations on their operations due to COVID-19.

As a result, we do not currently expect that the COVID-19 pandemic will have a material

impact on our business, results of operations and financial condition.

As a result, we do not currently expect that the COVID-19 pandemic will have a material impact on our business, results of operations and financial condition.

At this time, however, there is still uncertainty relating to the trajectory of the pandemic and the impact of related responses, and disruptions caused by the COVID-19 pandemic have resulted and may in the future result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays.

For example, we experienced interruption of key clinical trial activities, such as patient attendance and clinical trial site monitoring, in our Phase 3 clinical trial evaluating setmelanotide for the treatment of insatiable hunger and severe obesity in individuals with BBS or Alström syndrome.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the impact of variants, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease.

See “Risk Factors—The COVID-19 pandemic has and may continue to adversely impact our business, including our preclinical studies, clinical trials and our commercialization prospects.” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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To date, we have not generated significant revenue from product sales.

Our lead product candidate, IMCIVREE, was recently approved by the FDA for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing.

Our lead product candidate, IMCIVREE, was approved by the FDA in November 2020 for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing.

IMCIVREE became commercially available in the U.S.

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Most of the manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the costs for IMCIVREE included in our cost of sales for the three months ended March 31, 2021 were insignificant.

We expect cost of sales to increase as we begin to sell inventory that is produced after we begin capitalizing IMCIVREE commercial inventory.

Accordingly, the costs for IMCIVREE included in our cost of sales for the three months ended June 30, 2021 were insignificant.

expect cost of sales to increase in 2022 as we begin to sell inventory that is produced after we begin capitalizing IMCIVREE commercial inventory.

The Company is currently evaluating the impact of this previously expensed inventory on the future cost of product sales.

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Three Months Ended

Six Months Ended

Research and development summary

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Three Months Ended

Six Months Ended

Selling, general and administrative summary

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Actual results may differ from these estimates under different assumptions or conditions.

Other than adopting ASC Topic 606, Revenue from Contracts with Customers, as of January 1, 2021, during the three months ended March 31, 2021, there were no other significant changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Except for the application of ASC Topic 606, Revenue from Contracts with Customers, that was adopted during the year-ended December 31, 2018 but was not applicable until our first commercial sale, during the six months ended June 30, 2021, there were no other significant changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Results of Operations

Comparison of the three months ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage:

Three Months Ended

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Other income, net

Loss before taxes

Provision for income taxes

NM=Not meaningful

Product revenue, net increased to $0.3 million in 2021.

There were no product revenues in the comparative prior period.

The increase is due to FDA approval of our lead product candidate, IMCIVREE in November 2020.

We recorded our first sales of IMCIVREE in March 2021 and the three months ended June 30, 2021 represent our first full quarter of sales subsequent to the launch of IMCIVREE.

We expect our initial sales of IMCIVREE will be limited by the ultra-rare nature of the disease and limited number of diagnosed patients in the United States.

Cost of sales increased to $0.1 million in 2021.

There were no cost of sales in the comparative prior period.

All of our inventory of IMCIVREE produced prior to FDA approval is available for commercial or clinical use.

Most of the manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the costs for IMCIVREE included in our cost of sales for the three months ended June 30, 2021 were insignificant and reflect the amortization of our capitalized sales based milestone payment made to Ipsen upon our first commercial sale as well as a royalty due to Ipsen on our net product sales.

We expect cost of sales to increase as we begin to sell inventory that is produced after we begin capitalizing IMCIVREE commercial inventory.

Research and development expense.

Research and development expense increased by $2.1 million to $25.1 million in 2021 from $23.0 million in 2020, an increase of 9%.

The increase was primarily due to the following:

● an increase of $2.3 million primarily related to purchases of setmelanotide API and drug product in both the daily and weekly formulation for clinical trials;

● an increase of $1.8 million due to the hiring of additional full-time employees in order to support the growth of our research and development programs.

The above increases were partially offset by:

● a decrease of $1.9 million primarily due to the absence of development milestone payments under our existing licesnse agreements during the three months ended June 30, 2021.

Selling, general and administrative expense.

Selling, general and administrative expense increased by $6.5 million to $15.5 million in 2021 from $8.9 million in 2020, an increase of 73%.

The increase was primarily due to the following:

● an increase of $4.2 million due to increased compensation and benefits related costs associated with additions to our exeutive leadership team, increased headcount to support our expanding business operations as well as to establish our commercial operations in the United States and internationally ;

● an increase of $1.7 million due to increased professional fees and consulting services to support the build out of our commercial operations in the United States and internationally as well as corporate legal and consulting support for our international expansion ;

● an increase of $0.5 million due to increased office support and insurance costs.

Other income, net.

Other income decreased by $0.8 million due primarily to historically low interest rates.

Provision for income taxes.

We recorded a tax benefit of ($5.0) million for the period ended June 30, 2021, as a result of our operating expenses incurred during the three months ended June 30, 2021.

We expect to have sufficient tax losses in the current year to offset the income from the sale and thus no current year liability is expected.

Net loss increased by $4.3 million to ($35.4) million in 2021, from ($31.1) million in 2020.

The increase in net loss was driven by higher operating expenses incurred during the period.

Comparison of the six months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage:

Six Months Ended

(in thousands)

Statement of Operations Data:

Product Revenue, net

Operating Expenses:

Cost of Sales

Research and development

Selling, general, and administrative

Total operating expenses

Loss from operations

Other income, net

Income (loss) before taxes

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NM=Not meaningful

Product revenue, net increased to $0.3 million in 2021.

There were no product revenues in the comparative prior period.

The increase is due to FDA approval of our lead product candidate, IMCIVREE in November 2020.

We recorded our first sales of IMCIVREE in March 2021 and the three months ended June 30, 2021 represent our first full quarter of sales subsequent to the launch of IMCIVREE.

We expect our initial sales of IMCIVREE will be limited by the ultra-rare nature of the disease and limited number of diagnosed patients in the United States.

Cost of sales increased to $0.1 million in 2021.

Thre were no cost of sales in the comparative prior period.

All of our inventory of IMCIVREE produced prior to FDA approval is available for commercial or clinical use.

Most of the manufacturing costs have been recorded as research and development expenses in prior periods.

Accordingly, the costs for IMCIVREE included in our cost of sales for the three months ended June 30, 2021 were insignificant and cost of sales are primarily comprised of amortization of our capitalized sales based milestone payment due to Ipsen upon our first commercial sale as well as a royalty due to Ipsen on our net product sales.

We expect cost of sales to increase as we begin to sell inventory that is produced after we begin capitalizing IMCIVREE commercial inventory.

Research and development expense.

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We completed the GO-ID genotyping study, the POMC and LEPR Phase 3 studies and the once weekly formulation Phase 2 study in early to mid-2020.

These decreases were slightly offset by increases related to the expansion of the Phase 2 basket study and the start of a new renal insufficiency PK study in late 2020;

● a decrease of $1.7 million primarily related to purchases of setmelanotide API and drug product in first quarter of 2020 for clinical trials and preparation for potential commercialization.

These decreases were mostly offset by increases related to our extension study and ongoing BBS and renal studies;

● a decrease of $2.2 million related to lower patent and regulatory filing costs in the United States and internationally.

The above decreases were partially offset by:

● an increase of $0.7 million due to the hiring of additional full-time employees in order to support the growth of our research and development programs.

● an increase of $3.2 million in compensation and benefits due to the hiring of additional full-time employees in order to support the growth of our research and development programs and expansion of regulatory affairs operations;

● an increase of $0.7 million primarily related to purchases of setmelanotide API and drug product for clinical trials and preparation for potential commercialization.

Selling, general and administrative expense.

Selling, general and administrative expense increased by $8.3 million to $30.0 million in 2021 from $21.7 million in 2020, an increase of 38%.

The increase was primarily due:

The increase was primarily due to the following:

● an increase of $4.0 million due to increased compensation and benefits related costs associated with additions to our executive leadership team, increased headcount to support our expanding business operations as well as to establish our commercial operations in the United States and internationally ;

● an increase of $2.1 million due to increased professional fees and consulting services to support the build out of our commercial operations in the United States and internationally as well as corporate legal and consulting support for our international expansion ;

● an increase of $1.6 million associated with the expenses incurred on the sale of our PRV to Alexion;

● an increase of $0.6 million due to increased office support and insurance costs.

Other income, net.

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Provision for income taxes.

We recorded a tax provision of $22.0 million for the period ended March 31, 2021, primarily related to the sale of our PRV , offset by a tax benefit from our ordinary losses.

We recorded a tax provision of $17.0 million for the period ended June 30, 2021, primarily related to the sale of our PRV , offset by a tax benefit from our ordinary losses.

We expect to have sufficient tax losses in the current year to offset the income from the sale and thus no current year liability is expected.

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Liquidity and Capital Resources

As of March 31, 2021, our cash and cash equivalents and short-term investments were approximately $404.8 million.

The following table provides information regarding our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

As of June 30, 2021, our cash and cash equivalents and short-term investments were approximately $368.2 million.

The following table provides information regarding our cash flows for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

(in thousands)

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The use of cash in all periods resulted primarily from our net income (loss) adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was $33.5 million for the three months ended March 31, 2021 and consisted primarily of a net loss of $28.9 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, the gain on the sale of the PRV, a deferred provision for income taxes, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $6.3 million from an increase in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments, offset by a decrease of $1.7 million in prepaid expenses.

Net cash used in operating activities was $36.1 million for the three months ended March 31, 2020 and consisted primarily of a net loss of $28.6 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

Net cash used in operating activities was $65.4 million for the six months ended June 30, 2021 and consisted primarily of a net loss of $63.4 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, the gain on the sale of the PRV, a deferred provision for income taxes, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $0.6 million from an increase in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments, coupled with an increase of $1.2 million in prepaid expenses.

Net cash used in operating activities was $65.8 million for the six months ended June 30, 2020 and consisted primarily of a net loss of $56.6 million adjusted for non-cash items, which consisted of non-cash stock-based compensation, depreciation and amortization and rent expense.

The change in operating assets and liabilities reflected a total use of cash of approximately $9.3 million from an increase in prepaid expenses and decreases in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments.

Net cash (used in) provided by investing activities

Net cash used in investing activities for the three months ended March 31, 2021 relates to the $245.7 million of net purchases of short-term investments, offset by the $100.0 million in proceeds from the sale of the PRV.

Net cash provided by investing activities for the three months ended March 31, 2020 relates to the net maturities of short-term investments.

Net cash used in investing activities for the six months ended June 30, 2021 relates to the $226.9 million of net purchases of short-term investments and $5.0 million for the acquisition of an intangible asset, offset by the $100.0 million in proceeds from the sale of the PRV.

Net cash provided by investing activities for the six months ended June 30, 2020 relates to the net maturities of short-term investments.

Net cash provided by financing activities

Net cash provided by financing activities was $165.6 million for the three months ended March 31, 2021, which represents the net proceeds of $161.7 million from our common stock offering in February 2021 and $3.9 million of cash proceeds from the exercise of stock options and the issuance of common stock from the ESPP.

Net cash provided by financing activities was $0.7 million for the three months ended March 31, 2020, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and proceeds from the exercise of stock options.

Net cash provided by financing activities was $166.0 million for the six months ended June 30, 2021, which represents the net proceeds of $161.7 million from our common stock offering in February 2021 and $4.2 million of cash

proceeds from the exercise of stock options and the issuance of common stock from our 2017 Employee Stock Purchase Plan, or the ESPP.

Net cash provided by financing activities was $0.9 million for the six months ended June 30, 2020, which represents net proceeds from purchases made under the ESPP and proceeds from the exercise of stock options.

Funding requirements

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● the costs of operating as a public company, including those resulting from losing our emerging growth company status.

Although IMCIVREE has been approved by the FDA in certain indications, IMCIVREE may not achieve commercial success.

Although IMCIVREE has been approved by the FDA and EC in certain indications, IMCIVREE may not achieve commercial success.

In addition, developing our setmelanotide program is a time-consuming, expensive and uncertain process that may take years to complete, and we may never generate the necessary data or results required to obtain future marketing approvals and achieve product sales.

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Contractual obligations

As of March 31, 2021, there were no material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

As of June 30, 2021, there were no material changes to our principal contractual obligations and commitments as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Recent Accounting Pronouncements

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Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2021, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

As of June 30, 2021, there were no material changes to our quantitative and qualitative disclosures about market risks as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis