What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-06 · 136 added, 91 removed, 282 unchanged (45% of the section changed)

13 unchanged sentences

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

As of June 30, 2020, we had an accumulated deficit of $240.2 million, and cash, cash equivalents and marketable securities of $71.4 million.

As of September 30, 2020, we had an accumulated deficit of $259.1 million, and cash, cash equivalents and marketable securities of $127.2 million.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

Based on our current plans, we believe that our existing cash, cash equivalents and marketable securities, together with the committed funding from our existing BARDA contract and other non-dilutive funding commitments, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2021.

Because these funds will not be sufficient to fund our operations, as currently planned, for more than one year beyond the filing date of this Quarterly Report on Form 10-Q, we have determined that there is substantial doubt regarding our ability to continue as a going concern.

We will require additional funding to fund the development of our product candidates through regulatory approval and commercialization, and to support our continued operations.

There is no assurance that we will be successful in obtaining sufficient funding on acceptable terms, if at all, and we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which could materially adversely affect our business prospects or our ability to continue operations.

This timeline is subject to uncertainty as to the timing of future expenditures.

We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, potentially new collaborations, additional grant funding and/or reducing cash expenditures.

If we are not able to secure adequate additional funding, we plan to make reductions in spending.

In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs.

The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management’s assessment of our ability to continue as a going concern.

As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates.

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In response to the pandemic, we have implemented a remote working policy for all employees to aid the global containment effort.

The FDA is working with sponsors during COVID-19 given the challenges it presents to conducting ongoing trials.

In March 2020 the FDA issued guidance on the conduct of clinical trials of medical products during COVID-19.

The FDA acknowledged that COVID-19 could impact the conduct of clinical trials such that sponsors may have challenges meeting protocol-specified procedures and recognized that protocol modifications may be required.

The FDA provided guidance centered around assuring the safety of trial participants, maintaining compliance with good clinical practice, or GCP, and minimizing risks to trial integrity for the duration of the COVID-19 public health emergency.

Among the guidance, the FDA noted the potential for evaluating alternative methods for safety assessment and modifying existing processes.

We have spoken with the FDA on our trials conducted during COVID-19 and believe we could be afforded considerations on our protocols, data collection methods and statistical analyses.

Due to COVID-19, our clinical research organizations, or CROs, are experiencing reduced capacity to conduct, validate and analyze trials, which we anticipate will have an impact on clinical trials and timelines.

As a result, we now forecast the initiation of the SPR206 Phase 1 bronchoalveolar lavage trial in the first half of 2021 versus our previous guidance of the second half of 2020.

We also believe COVID-19 could impact data validation and analysis for the planned Phase 1 trials that are required for the NDA submission of tebipenem HBr in cUTI.

To account for this risk to the timeline we anticipate beginning a rolling submission of the NDA for tebipenem HBr to the FDA in first quarter of 2021, pending positive data and the FDA’s agreement, with a final submission planned for the second quarter of 2021 versus our previous guidance of the first quarter of 2021.

Underwritten Public Offering

On September 15, 2020, we completed an underwritten public offering of 4,785,000 shares of common stock and 3,215,000 shares of our Series D Convertible Preferred Stock, or Series D Preferred Stock.

The price to the public in the offering was $10.00 per share with respect to the common stock and the Series D Preferred Stock.

We received net proceeds from the offering of approximately $74.7 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

In addition, pursuant to the Underwriting Agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to 1,200,000 additional shares of our common stock.

On October 1, 2020, we issued and sold all 1,200,000 shares of common stock at the price of $10.00 per share pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of approximately $11.2 million after deducting underwriting discounts and commissions.

The shares of Series D Preferred Stock are convertible on a one-to-one basis into shares of our common stock at any time at the option of the holder, provided that the holder will be prohibited from converting the Series D Preferred Stock into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of our common stock then issued and outstanding.

In the event of our liquidation, dissolution, or winding up, holders of our Series D Preferred Stock will receive a payment equal to $0.001 per share of Series D Preferred Stock before any proceeds are distributed to the holders of our common stock and equal to any distributions to the holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible Preferred Stock.

The Series D Preferred Stock has no voting rights, except as required by law and except that the consent of the Series D Preferred Stock holders will be required to amend the terms of the Series D Preferred Stock.

Tebipenem HBr

On May 5, 2020, we announced that ADAPT-PO completed enrollment of over 1,370 eligible subjects in a global study designed as a double-blind, double-dummy clinical trial to compare an all-oral regimen of tebipenem HBr dosed as 600 mg TID with a standard-of-care intravenous (IV) antibiotic, ertapenem, in patients with cUTI and AP, randomized 1:1 in each arm.

The trial remains blinded and the Company anticipates reporting topline results from the ADAPT-PO clinical trial in the third quarter of 2020.

We anticipate beginning a rolling submission of the NDA for tebipenem HBr to the FDA in the first quarter of 2021, pending positive data and the FDA’s agreement, with a final submission planned for the second quarter of 2021.

In May 2020, we had a meeting with the FDA to discuss the development plan for SPR720 for the treatment of nontuberculous mycobacterial disease.

In June 2020, we received written minutes from the FDA that acknowledged our planned Phase 2a as designed as the appropriate next step in what would be a stepwise development plan.

We plan to initiate a Phase 2a clinical trial of SPR720 in patients with NTM disease during the second half of 2020, subject to the FDA’s acceptance of an Investigational New Drug Application .

On September 8, 2020, we announced positive topline results for the Phase 3 ADAPT-PO clinical trial of oral tebipenem HBr in complicated urinary tract infection, or cUTI, and acute pyelonephritis, or AP.

The ADAPT-PO trial is the first ever trial to compare an all oral regimen against an all intravenous, or IV, regimen for the treatment of cUTI.

The pivotal Phase 3 clinical trial of oral tebipenem HBr met the primary endpoint, demonstrating statistical non-inferiority versus IV ertapenem.

The primary endpoint of the trial was defined as the overall response rate (combined clinical cure plus microbiological eradication) at the test-of-cure, or TOC, visit in the microbiological-intent-to-treat population, or micro-ITT.

Favorable overall response rates at TOC were 58.8% versus 61.6% for tebipenem HBr and ertapenem, respectively (treatment difference, -3.3%;

95% confidence interval [CI]:

-12.5% NI margin).

Clinical cure rates at TOC were high, at greater than 93% in both treatment groups, and overall response rates were consistent across key subgroups of interest.

In the ADAPT-PO trial, comparative safety data from the 1,372 hospitalized adult patients who enrolled in the trial suggest that tebipenem HBr was well-tolerated, with a safety profile similar to that of ertapenem.

Treatment emergent adverse events, or TEAEs, were reported in approximately 26% of patients in both treatment groups.

The most commonly reported TEAEs in both treatment groups were diarrhea (5.0%) and headache (3.8%).

Serious TEAEs were infrequent (1.3% for tebipenem HBr versus 1.7% for ertapenem) and no deaths were reported in the trial.

Three Clostridioides difficile -associated TEAEs were observed in the ertapenem group, while none were observed in the tebipenem HBr group.

ADAPT-PO is a global, randomized, placebo-controlled Phase 3 clinical trial that evaluated the safety and efficacy of tebipenem HBr in hospitalized adult patients with cUTI or AP.

Patients were randomized (1:1) to receive 600 mg of tebipenem HBr orally every 8 hours, or 1 g of ertapenem IV every 24 hours, for a total of 7 to 10 days.

Patients with concurrent bacteremia received up to 14 days of therapy.

The primary endpoint was the overall response, defined as the combination of clinical cure and microbiological eradication of the causative pathogen(s), at the TOC visit (Day 19, plus or minus 2 days) and was assessed in the micro-ITT population.

The primary analysis and assessment of non-inferiority was evaluated using a pre-specified -12.5% non-inferiority, or NI, margin.

This NI margin was a modification of the original NI margin of -10% that was discussed with the U.S.

Food and Drug Administration, or FDA, because of concern that the COVID-19 pandemic could have an adverse effect on the trial.

As a result, the NI margin was modified prior to database lock from the original NI margin.

However, as noted by the lower bound of the 95% confidence interval (-9.7), the trial also achieved success according to the original -10% NI margin.

W e presented additional details on the ADAPT-PO trial at IDWeek 2020 on October 24 , 2020 demonstrating that both the clinical cure and microbiological eradication rates were comparable between treatment groups at the end of treatment, TOC and at the late follow-up visits .

We anticipate submi tting a New Drug Application for tebipenem HBr to the FD A in the second quarter of 2021.

In September 2020, SPR720 received Fast Track designation for the treatment of adult patients with nontuberculous mycobacteria pulmonary disease (NTM-PD) by the FDA.

On August 26, 2020, we announced that the FDA accepted our investigational new drug, or IND, application for SPR720.

With the IND accepted, we expect to initiate a Phase 2a clinical trial evaluating SPR720 in patients with nontuberculous mycobacterial, or NTM, pulmonary disease by year-end 2020.

The planned Phase 2a clinical trial is designed as a multi-center, partially blinded, placebo-controlled proof-of-concept clinical trial that will enroll approximately 90 treatment-inexperienced patients with NTM pulmonary disease due to Mycobacterium avium complex.

Patients will be randomized to receive either 500mg or 1,000mg of oral SPR720, placebo or standard of care consisting of a macrolide and ethambutol, plus the option of adding a rifamycin.

The objectives of the trial are to evaluate plasma pharmacokinetics, safety, tolerability, and microbiological response of SPR720 compared with placebo and standard of care over 28 days of treatment.

Potentiator Platform

We expect to receive a development milestone payment from our partner Everest Medicines upon delivery of the SPR206-101 SAD/MAD clinical study report, or CSR, in the second half of 2020, as specified under the regional collaboration launched in 2019.

We expect to present final data from the Phase 1 clinical trial in the second half of 2020.

We achieved a development milestone from our partner Everest Medicines upon delivery of the SPR206-101 SAD/MAD clinical study report, or CSR, in October 2020, as specified under the regional collaboration launched in 2019.

We expect to present final data from the Phase 1 clinical trial in the first half of 2021.

In conjunction with Everest Medicines, and through its grant from the DoD awarded in July 2019, we plan to conduct a Phase 1 BAL clinical trial assessing the penetration of SPR206 into the pulmonary compartment in the first half of 2021, as well as initiate a renal impairment study of SPR206 in 2021.

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Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates.

Since the fourth quarter of 2016 and through June 30, 2020, we have recorded research and development expenses conducted by our Australian subsidiary net of a 43.5% research and development tax incentive we expect to receive for qualified expenses from the Australian government.

Since the fourth quarter of 2016 and through September 30, 2020, we have recorded research and development expenses conducted by our Australian subsidiary net of a 43.5% research and development tax incentive we expect to receive for qualified expenses from the Australian government.

In June 2019, we entered into a collaboration with the Bill & Melinda Gates Medical Research Institute, or the Gates MRI, a nonprofit research institution wholly owned by the Bill and Melinda Gates Foundation, to develop SPR720 for the treatment of lung infections caused by Mycobacterium tuberculosis , or Mtb.

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

The Company continues to expect that its research and development expenses will increase in 2020 relative to 2019 due to the greater expense associated with the pivotal ADAPT-PO trial, for which the Company expects to report data in the third quarter of 2020, the initiation of a SPR720 Phase 2a clinical trial in the second half of 2020, and increased research and development personnel to support the ongoing and planned programs.

The Company continues to expect that its research and development expenses will increase in 2020 relative to 2019 due to the greater expense associated with the pivotal ADAPT-PO trial, for which the Company reported data in the third quarter of 2020, the initiation of a SPR720 Phase 2a clinical trial by year-end 2020, and increased research and development personnel to support the ongoing and planned programs.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.

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Interest Income

Interest income consists of interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities that we held during the three and six months ended June 30, 2020 and 2019.

Other Income (Expense), Net

29 unchanged sentences

Reductions of research and development expense recognized upon incurring qualifying expenses in advance of receipt of tax incentive payments are recorded in our consolidated balance sheet as tax incentive receivables.

Related to these incentives, we recognized reductions of research and development expense of less than $0.1 million and $0.2 million during the three months ended June 30, 2020 and 2019, respectively, and $0.3 million and $0.2 million during the six months ended June 30, 2020 and 2019.

Related to these incentives, we recognized reductions of research and development expense of less than $0.1 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.3 million during the nine months ended September 30, 2020 and 2019

Collaboration Agreements

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These factors raise substantial doubt about our ability to continue as a going concern.

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

The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

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

The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Grant revenue

11 unchanged sentences

Grant Revenue

Three Months Ended June 30,

Three Months Ended September 30,

BARDA Contract (tebipenem HBr)

3 unchanged sentences

Total grant revenue

Grant revenue recognized during the three months ended June 30, 2020 and 2019 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The decrease in revenue during the three months ended June 30, 2020 was primarily due to decreased funding received under our NIAID contract for SPR206 and immaterial decreases under our other government awards, partially offset by an increase in funding received under our BARDA contract.

Grant revenue recognized during the three months ended September 30, 2020 and 2019 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The decrease in revenue during the three months ended September 30, 2020 was primarily due to decreased funding received under our BARDA contract for tebipenem HBr and net immaterial decreases under our other government awards.

Collaboration Revenue

During the three months ended June 30, 2020 and 2019, we recognized $0.1 million of revenue related to our agreement with Everest Medicines, consisting of the performance of research and development services.

During the three months ended September 30, 2020 and 2019, we recognized less than $0.1 million and $0.2 million of revenue, respectively, related to our agreement with Everest Medicines, consisting of the performance of research and development services.

Research and Development Expenses

Three Months Ended June 30,

Three Months Ended September 30,

Direct research and development expenses by program:

5 unchanged sentences

Total research and development expenses

Direct costs related to our tebipenem HBr program increased by $2.6 million during the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to additional costs related to our pivotal Phase 3 clinical trial.

We expect direct costs related to tebipenem HBr to continue as we conclude our pivotal Phase 3 clinical trial and incur expenses related to a potential NDA filing for tebipenem HBr.

Direct costs related to our SPR720 program increased during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019, primarily due to increased expenses related to formulation development, manufacturing process and manufacturing of clinical trial material.

Direct costs related to our SPR720 program during the three months ended June 30, 2020 reflect a $0.4 million reduction to expense related to activities funded by Gates MRI.

Direct costs related to our tebipenem HBr program decreased by $2.4 million during the three months ended September 30, 2020 compared to the three months ended September 30, 2019, primarily due to the completion of significant activities in the Phase 3 clinical trial.

We expect to continue to incur direct costs related to tebipenem HBr as we finalize activities in the Phase 3 clinical trial and incur expenses related to a potential NDA filing for tebipenem HBr.

Direct costs related to our SPR720 program increased during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 , primarily due to increased expenses related to preparation for our Phase 2a clinical trial.

These expenses were partially offset by a decrease in spending associated with formulation development, manufacturing process and manufacturing of clinical trial material .

Direct costs related to our SPR720 program during the three months ended September 3 0 , 2020 reflect a $0.2 million reduction to expense related to activities funded by Gates MRI , compared to $0.9 million during the three months ended September 30, 2019.

Direct costs related to our Potentiator Platform include costs related to our SPR206 and SPR741 programs.

Direct costs related to our SPR206 program decreased by $0.1 million during the three months ended June 30, 2020, primarily due to higher costs incurred in the prior year related to the Phase 1 trial.

Direct costs related to our SPR741 program were immaterial for both the three months ended June 30, 2020 and 2019, due to the decision in early January 2020 to proceed with SPR206 as the lead product candidate within the Potentiator Platform and discontinue development of SPR741.

During 2020 and 2019, research and development expenses conducted by our Australian subsidiary were recorded net of a 43.5% research and development tax incentive for qualified expenses from the Australian government of $1.0 million.

Direct costs related to our SPR206 program decreased by $0.4 million during the three months ended September 30, 2020, primarily due to higher costs incurred in the prior year related to the Phase 1 trial.

Direct costs related to our SPR741 program were immaterial for both the three months ended September 30, 2020 and 2019.

In early January 2020, we decided to proceed with SPR206 as the lead product candidate within the Potentiator Platform and discontinue development of SPR741.

The increase in personnel-related costs included in unallocated expenses of $1.0 million was due to an increase in research and development headcount, as well as a $0.2 million increase in share-based compensation.

The decrease in facility-related and other costs was primarily due to the termination of the laboratory lease in August 2019, which was partially offset by the increased costs of supporting a larger research and development staff.

The increase in facility-related and other costs was primarily due to the increased costs of supporting a larger research and development staff.

General and Administrative Expenses

Three Months Ended June 30,

Three Months Ended September 30,

Personnel related (including share-based compensation)

3 unchanged sentences

The increase in personnel-related costs of $0.4 million was primarily a result of an increase in headcount in our general and administrative function.

Personnel-related costs for the three months ended June 30, 2020 and 2019 included share-based compensation expense of $0.7 million and $0.5 million, respectively.

The increase in professional and consultant fees of $0.5 million was primarily due to increased IT, HR and Finance contractor and consulting expenses related to supporting the growth in our business.

Personnel-related costs for the three months ended September 30, 2020 and 2019 included share-based compensation expense of $0.6 million and $0.6 million, respectively.

The increase in professional and consultant fees of $0.9 million was primarily due to increased commercial operation expenses.

The decrease in facility-related and other costs was primarily due to the higher allocation of costs to research and development due to the increased research and development headcount.

Other Income (Expense), Net

Other income, net was $1.0 million for the three months ended June 30, 2020, compared to $0.5 million for the three months ended June 30, 2019.

The change was primarily due to a larger unrealized foreign currency gain recognized in the second quarter of 2020, as a result of favorable foreign currency fluctuations.

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

The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019 (in thousands):

Six Months Ended June 30,

Other income, net was $0.1 million for the three months ended September 30, 2020, compared to $0.3 million for the three months ended September 30, 2019.

The change was primarily due to a larger unrealized foreign currency gain recognized in the third quarter of 2020, as a result of favorable foreign currency fluctuations, offsetting lower interest income earned as a result of lower interest rates.

Comparison of the Nine Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30,

Grant revenue

11 unchanged sentences

Grant Revenue

Six Months Ended June 30,

Nine Months Ended September 30,

BARDA Contract (SPR994)

3 unchanged sentences

Total revenue

Grant revenue recognized during the six months ended June 30, 2020 and 2019 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The decrease in revenue during the six months ended June 30, 2020 was primarily due to decreased funding received under our BARDA and our other government awards.

Collaboration Revenu e

During the six months ended June 30, 2020 and 2019, we recognized $0.2 and $3.9 million of revenue, respectively, related to our agreement with Everest Medicines.

The decrease in revenue is mainly due to license and know-how transfer revenue recognized in 2019 while the 2020 revenue consists of the performance of research and development services remaining under the collaboration agreement.

Grant revenue recognized during the nine months ended September 30, 2020 and 2019 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The decrease in revenue during the nine months ended September 30, 2020 was primarily due to decreased funding received under our BARDA and our other government awards.

Collaboration Revenue

During the nine months ended September 30, 2020 and 2019, we recognized $0.3 and $4.0 million of revenue, respectively, related to our agreement with Everest Medicines.

The decrease in revenue is mainly due to decreased research and development services performed under the collaboration agreement.

Research and Development Expenses

Six Months Ended June 30,

Nine Months Ended September 30,

Direct research and development expenses by program:

5 unchanged sentences

Total research and development expenses

Direct costs related to our tebipenem HBr program increased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 due to $14.2 million in additional costs related to our pivotal Phase 3 clinical trial, as well as expenses related to formulation development, manufacturing process and manufacturing of clinical trial material.

We expect direct costs related to tebipenem HBr to continue as we conclude our pivotal Phase 3 clinical trial and incur expenses related to a potential NDA filing for tebipenem HBr.

Direct costs related to our SPR720 program decreased during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019, primarily due to higher costs in the prior year to prepare for and run our Phase 1 clinical trial of SPR720, partially offset by an increase in current year expenses related to the formulation development, manufacturing process and manufacturing of clinical trial material.

Direct costs related to our SPR720 program during the six months ended June 30, 2020 reflect a $0.6 million reduction to expense related to activities funded by Gates MRI.

Direct costs related to our tebipenem HBr program increased during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 , primarily due to costs related to significant activities performed in the Phase 3 clinical trial, as well as expenses related to formulation development, manufacturing process and manufacturing of clinical trial material We expect to continue to incur direct costs related to tebipenem HBr as we finalize activities in the Phase 3 clinical trial and incur expenses related to a potential NDA filing for tebipenem HBr.

Direct costs related to our SPR720 program increased during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to increased expenses related to preparation for our Phase 2a clinical trial and increased costs related to the formulation development, manufacturing process and manufacturing of clinical trial material.

Direct costs related to our SPR720 program during the nine months ended September 30, 2020 reflect a $0.7 million reduction to expense related to activities funded by Gates MRI, compared to $0.9 million during the nine months ended September 30, 2019.

Direct costs related to our Potentiator Platform include costs related to our SPR206 and SPR741 programs.

Direct costs related to our SPR206 program decreased by $1.0 million during the six months ended June 30, 2020, primarily due to higher costs incurred in the prior year related to the Phase 1 trial.

Direct costs related to our SPR741 program were immaterial for both the six months ended June 30, 2020 and 2019, due to the decision in early January 2020 to proceed with SPR206 as the lead product candidate within the Potentiator Platform and discontinue development of SPR741.

The increase in personnel-related costs included in unallocated expenses of $1.6 million was due to an increase in research and development headcount, as well as a $0.3 million increase in share-based compensation.

The decrease in facility-related and other costs was primarily due to the termination of the laboratory lease in August 2019, partially offset by the increased costs of supporting a larger research and development staff.

Direct costs related to our SPR206 program decreased by $1.4 million during the nine months ended September 30, 2020, primarily due to higher costs incurred in the prior year related to the Phase 1 trial.

Direct costs related to our SPR741 program were immaterial for both the nine months ended September 30, 2020 and 2019.

In early January 2020, we decided to proceed with SPR206 as the lead product candidate within the Potentiator Platform and discontinue development of SPR741.

The increase of $2.6 million in personnel-related costs included in unallocated expenses was due to an increase in research and development headcount, as well as a $0.4 million increase in share-based compensation.

The increase in facility-related and other costs was primarily due to the increased costs of supporting a larger research and development staff.

General and Administrative Expenses

Six Months Ended June 30,

Nine Months Ended September 30,

Personnel related (including share-based compensation)

3 unchanged sentences

The increase in personnel-related costs of $1.0 million was primarily a result of an increase in headcount in our general and administrative function.

Personnel-related costs for the six months ended June 30, 2020 and 2019 included share-based compensation expense of $1.3 million and $1.1 million, respectively.

The increase in professional and consultant fees of $0.5 million was primarily related to increased IT, HR and Finance contractor and consulting expenses related to supporting the growth in our business.

Personnel-related costs for the nine months ended September 30, 2020 and 2019 included share-based compensation expense of $1.9 million and $1.7 million, respectively.

The increase in professional and consultant fees of $1.4 million was primarily related to increased commercial operations expenses, as well as increased IT, HR and Finance contractor and consulting expenses related to supporting the growth in our business.

The decrease in facility-related and other costs was primarily due to the higher allocation of costs to research and development due to the increased research and development headcount.

Other Income (Expense), Net

Other income, net was $0.5 million for the six months ended June 30, 2020, compared to $1.1 million for the six months ended June 30, 2019.

Other income, net in the first half of 2020 was primarily comprised of unrealized foreign currency gains as a result of favorable foreign currency fluctuations.

In comparison, other income, net in the first half of 2019 was primarily comprised of interest earned on invested cash balances and marketable securities.

Other income, net was $0.6 million for the nine months ended September 30, 2020, compared to $1.4 million for the nine months ended September 30, 2019.

Other income, net in the nine months ended September 30, 2020 was primarily comprised of unrealized foreign currency gains, offsetting decreased interest income due to falling interest rates.

In comparison, other income, net in the nine months ended September 30, 2019 was primarily comprised of interest earned on invested cash balances and marketable securities, offset by unrealized foreign currency losses.

Liquidity and Capital Resources

3 unchanged sentences

To date, we have funded our operations with proceeds from the sales of preferred units and bridge units, payments received under license and collaboration agreements and funding from government contracts, with proceeds from the IPO of our common stock, in July 2018 with an underwritten public offering of our common and preferred stock, and subsequent sales of our common stock and preferred stock.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $71.4 million.

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $127.2 million.

On September 15, 2020, we completed an underwritten public offering of an aggregate of 4,785,000 shares of our common stock, and 3,215,000 shares of our Series D Preferred Stock.

The price to the public in the offering was $10.00 per share with respect to the c ommon s tock and the Series D Preferred Stock.

In addition, under the terms of the Underwriting Agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to 1,200,000 additional shares of common stock.

The shares of Series D Preferred Stock are convertible on a one-to-one basis into shares of common stock at any time at the option of the holder, provided that the holder will be prohibited from converting the Series D Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding, subject to certain exceptions.

In the event of the Company’s liquidation, dissolution, or winding up, holders of Series D Preferred Stock will receive a payment equal to $0.001 per share of Series D Preferred Stock before any proceeds are distributed to the holders of common stock and equal to any distributions to the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.

Shares of Series D Preferred Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the then outstanding Series D Preferred Stock will be required to amend the terms of the Series D Preferred Stock.

As such, we have classified the Series D Convertible Preferred Stock within permanent equity in its consolidated balance sheet.

The offering closed on September 15, 2020 with an aggregate public offering price of $80.0 million.

Aggregate net proceeds from the offering were $74.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

In addition, pursuant to the Underwriting Agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to 1,200,000 additional shares of our common stock.

On February 11, 2020, the Company announced a rights offering pursuant to which it distributed to holders of its common stock and Series A Preferred Stock and Series B Preferred Stock, at no charge, non-transferable subscription rights to purchase shares of our common stock and Series C Convertible Preferred Stock, or Series C Preferred Stock, with an aggregate offering value of $30.0 million.

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Under the sales agreement, Cantor may sell shares of our common stock by any method permitted by law deemed to be an “at the market,” or ATM, offering as defined in Rule 415 of the Securities Act, subject to the terms of the sales agreement.

During the six months ended June 30, 2020, we sold 645,218 shares of our common stock under the ATM agreement at an average price of approximately $11.62 per share for aggregate gross proceeds of approximately $7.5 million prior to deducting sales commissions.

The prospectus underlying the ATM offering program was terminated on September 9, 2020 in connection with our underwritten public offering that was completed in September 2020.

At such time, we had raised approximately $15.4 million in sales of our common stock under the ATM offering program, prior to deducting sales commissions, and had remaining available capacity of approximately $34.6 million.

During the nine months ended September 30, 2020, we sold 786,447 shares of our common stock under the ATM agreement at an average price of approximately $12.02 per share for aggregate gross proceeds of approximately $9.4 million prior to deducting sales commissions.

The COVID-19 pandemic has resulted in ongoing volatility in financial markets.

If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted.

The following table summarizes our sources and uses of cash for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Cash used in operating activities

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Operating Activities

Net cash used in operating activities for the six months ended June 30, 2020 was $48.2 million, primarily resulting from our net loss of $40.8 million, adjusted for net non-cash items of $2.6 million (primarily stock-based compensation, depreciation, amortization, and unrealized foreign currency transaction gain).

Net cash provided by changes in our operating assets and liabilities was $(10.1) million and consisted primarily of a $3.5 million decrease in receivables, a $(2.6) million increase in accounts payable, a $4.3 million increase in prepaid expenses and other current assets and a decrease of $4.8 million in accrued expenses.

Net cash used in operating activities for the six months ended June 30, 2019 was $23.0 million, primarily resulting from our net loss of $18.2 million, adjusted for net non-cash items of $1.6 million (primarily stock-based compensation).

Net cash provided by changes in our operating assets and liabilities was $6.4 million and consisted primarily of uses of cash related to a $4.9 million decrease in accounts payable and accrued expenses, a $0.7 million increase in other assets, an increase of $1.9 million in receivables related to the Australian research and development tax initiative and our receivables under our government awards, offset by a $1.2 million decrease in prepaid expenses and other current assets.

Net cash used in operating activities for the nine months ended September 30, 2020 was $69.5 million, primarily resulting from our net loss of $59.7 million, adjusted for net non-cash items of $4.2 million (primarily stock-based compensation, depreciation, amortization, and unrealized foreign currency transaction gains).

Net cash provided by changes in our operating assets and liabilities was $(14.0) million and consisted primarily of a $1.9 million increase in other assets, a $(1.7) million increase in accounts payable, a $2.5 million increase in prepaid expenses and other current assets and a decrease of $8.3 million in accrued expenses.

Net cash used in operating activities for the nine months ended September 30, 2019 was $32.7 million, primarily resulting from our net loss of $35.9 million, adjusted for net non-cash items of $3.2 million (primarily stock-based compensation and depreciation and amortization expense).

Net cash provided by changes in our operating assets and liabilities was $0.1 million and consisted primarily of an increase of $5.0 million in receivables related to the Australian research and development tax initiative and our receivables under our government awards, and a $1.0 million decrease in accounts payable.

These uses of cash were offset by a $3.8 million decrease in prepaid expenses and other current assets and an increase of $2.7 million in accrued expenses.

Changes in accounts payable, accrued expenses and other current liabilities, and prepaid expenses and other current assets in all periods were generally due to growth in our business, the advancement of our development programs and the timing of vendor invoicing and payments.

Investing Activities

Cash provided by investing activities during the six months ended June 30, 2020 was $46.3 million primarily related to the maturities of marketable securities of $50.4 million offset by purchases of marketable securities of $4.0 million.

Cash provided by investing activities during the six months ended June 30, 2019 was $49.5 million primarily related to the net maturities of marketable securities.

Cash used in investing activities during the six months ended June 30, 2019 was $17.8 million related to the net purchase of marketable securities.

Cash provided by investing activities during the nine months ended September 30, 2020 was $50.2 million primarily related to the maturities of marketable securities of $54.4 million, offset by purchases of marketable securities of $4.0 million.

Cash provided by investing activities during the nine months ended September 30, 2019 was $33.6 million primarily related to the net maturities of marketable securities.

Financing Activities

Cash provided by financing activities during the six months ended June 30, 2020 was $37.6 million, consisting primarily of proceeds of $30.0 million from the sale of common stock and Series C Preferred Stock in our rights offering, proceeds of $7.3 million from the sale of common stock under our ATM offering program sales agreement and proceeds of $0.8 million from the exercise of employee stock options, offset by offering expenses of $0.5 million.

Cash used in financing activities during the six months ended June 30, 2019, of $10.5 million, consisting primarily of proceeds of $5.3 million from the sale of common stock under our ATM offering program sales agreement, proceeds of $5.0 million from the sale of common stock to Novo Holdings A/S, offset by offering expenses of $0.1 million, as well as $0.4 million of proceeds from the exercise of employee stock options.

Cash provided by financing activities during the nine months ended September 30, 2020 was $114.8 million, consisting primarily of proceeds of $105.2 million from the sale of common stock, Series C Preferred Stock and Series D Preferred Stock in our rights offering and underwritten public offering, proceeds of $9.2 million from the sale of common stock under our ATM offering program sales agreement and proceeds of $1.0 million from the exercise of employee stock options, offset by the payment of offering expenses of $0.6 million.

Cash provided by financing activities during the nine months ended September 30, 2019 was $10.5 million, consisting primarily of proceeds of $5.3 million from the sale of common stock under our ATM offering program sales agreement, proceeds of $5.0 million from the sale of common stock to Novo, offset by offering expenses of $0.2 million, as well as $0.4 million of proceeds from the exercise of employee stock options.

Funding Requirements

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the extent to which we in-license or acquire other products and technologies.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $71.4 million.

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $127.2 million.

In accordance with Accounting Standards Update, or ASU, 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements.

Based on our current plans, we believe that our existing cash, cash equivalents and marketable securities as of June 30, 2020, together with the committed funding from our existing BARDA contract and other non-dilutive funding commitments, will not be sufficient to fund our operating expenses and capital expenditure requirements, as currently planned, for more than one year beyond the filing date of this Quarterly Report on Form 10-Q.

Specifically, we believe these funds will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2021.

This timeline is subject to uncertainty as to the timing of future expenditures.

If we are not able to secure adequate additional funding, we plan to make reductions in spending.

In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials, research stage programs and commercial activities.

As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.

Our consolidated financial statements as of December 31, 2019 were prepared under the assumption that we will continue as a going concern for the next twelve months.

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Contractual Obligations and Commitments

During the three months ended June 30, 2020, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2019.

During the three months ended September 30, 2020, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Off-Balance Sheet Arrangements

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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