Spero Therapeutics, 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 together with the unaudited financial information and the notes thereto included appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could 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 multi-asset, clinical-stage biopharmaceutical company focused on identifying, developing and commercializing treatments in high unmet need areas involving multi-drug resistant, or MDR, bacterial infections and rare diseases. Our most advanced product candidate, Tebipenem Pivoxil Hydrobromide, or tebipenem HBr, is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use in adults to treat MDR Gram-negative infections. Treatment with effective orally administrable antibiotics may prevent hospitalizations for serious infections and enable earlier, more convenient and cost-effective treatment of patients after hospitalization. We are also developing SPR720, a novel oral antibiotic designed for the treatment of a rare, orphan disease caused by non-tuberculous mycobacterial pulmonary infections, or NTM disease. In addition, we have a Potentiator technology, which includes an IV-administered product candidate, SPR206, being developed to treat MDR Gram-negative infections in the hospital. We believe that our novel product candidates, if successfully developed and approved, would have a meaningful patient impact and significant commercial applications for the treatment of MDR infections in both the community and hospital settings. Since our inception in 2013, we have focused substantially all of our efforts and financial resources on organizing and staffing our company, business planning, raising capital, acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. We have experienced net losses and significant cash outflows from cash used in operating activities since our inception. 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 March 31, 2021, we had an accumulated deficit of $297.1 million, and cash, cash equivalents and marketable securities of $115.7 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 second quarter of 2022, including through the submission of the New Drug Application, or NDA, for tebipenem HBr. 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, potential 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. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, we expect to incur additional costs associated with our continued operation as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, government funding arrangements, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. 25 Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . Recent Developments Pre-NDA Meeting for tebipenem HBr On March 25, 2021, we completed a pre-NDA meeting with the U.S. Food and Drug Administration, or FDA, for tebipenem HBr and subsequently obtained written minutes from the meeting. The purpose of the meeting was to discuss format and content of the submission. Subject to FDA’s review of the full submission, we achieved consensus that the package as described would allow review of the NDA. We anticipate submitting an NDA for tebipenem HBr to the FDA in the second half of 2021. Updates on SPR206 In conjunction with Everest Medicines, and through our grant from the DoD awarded in July 2019, we plan to conduct a Phase 1 bronchoalveolar lavage (BAL) clinical trial assessing the penetration of SPR206 into the pulmonary compartment in the second quarter of 2021, as well as initiate a renal impairment study (RIS) of SPR206 in the second quarter of 2021. Update on Phase 2a Clinical Trial of SPR720 On February 5, 2021, we announced that the FDA informed us that a clinical hold had been placed on our Phase 2a clinical trial of SPR720, following our notification to the FDA of our decision to pause dosing in our ongoing Phase 2a clinical trial of SPR720 as a precautionary measure related to events in our ongoing animal toxicology study of SPR720. The decision to implement the pause was made based on a recommendation from the Company’s Safety Review Board, or SRB, following review of data from an ongoing toxicology study of SPR720 in adult non-human primates in which mortalities with inconclusive causality to treatment were observed. The animal study is being conducted to assess the potential toxicity of SPR720. A concurrent study of SPR720 in rats is proceeding uneventfully. These studies are meant to support longer-term treatment with SPR720 beyond the 28 days currently supported by IND-enabling toxicology studies. No serious adverse events have been observed in any human study participants. Subsequent to receiving verbal notification from the FDA of the clinical hold, we received a formal clinical hold letter in which the FDA has requested additional information from the non-human primate trial, including a study report. We have decided to discontinue the Phase 2a clinical trial at this time to best facilitate future potential adjustments to the protocol based on FDA feedback and to avoid incurring costs associated with the trial while on clinical hold. We are continuing to work with the FDA to evaluate the findings and determine the further development pathway for the SPR720 clinical program. Business Update regarding COVID-19 The continued spread of SARS-CoV-2, and the resulting disease COVID-19, has resulted in an economic downturn on a global scale, as well as significant volatility in the financial markets. In response to the pandemic, we have maintained a remote working policy for all employees to aid the global containment effort. Components of Our Results of Operations Sales Revenue To date, we have not generated any revenue from product sales. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. Grant Revenue To date, the majority of our revenue has been derived from government awards. We expect that our revenue for the next few years will be derived primarily from payments under our government awards that we have currently entered into and that we may enter into in the future. Collaboration Revenue Collaboration revenue relates to our agreement with Everest Medicines. 26 Operating Expenses Research and Development Expenses 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, which include: • employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions; • expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with contract research organizations, or CROs; • costs incurred in connection with our government awards; • the cost of consultants and contract manufacturing organizations, or CMOs, that manufacture drug products for use in our preclinical studies and clinical trials; • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and • payments made under third-party licensing agreements. 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. In furtherance of the Gates MRI’s charitable purposes, we also granted the Gates MRI a no cost, exclusive license to develop, manufacture and commercialize SPR720 for the treatment of tuberculosis, or TB, in low- and middle- income countries. Gates MRI will conduct and fund preclinical and clinical studies for the development of SPR720 against TB, and fund certain agreed upon collaborative research activities performed by us. Due to our assessment that we do not have a vendor/customer relationship with the Gates MRI, we recognize the funding received under the agreement as a reduction to the research and development expenses as the related expenses are incurred. We expense research and development costs as incurred. Nonrefundable advance payments we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. License fees and other costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program. License fees and other costs incurred prior to designating a product candidate are included in early stage research programs. We do not allocate employee costs, costs associated with our preclinical programs or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. 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. 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. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following: • successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of the COVID-19 pandemic ; • receipt of marketing approvals from applicable regulatory authorities; • establishment of arrangements with third-party manufacturers to obtain manufacturing supply; • obtainment and maintenance of patent, trade secret protection and regulatory exclusivity, both in the United States and internationally, including our ability to maintain our license agreement with Meiji with respect to tebipenem HBr; • protection of our rights in our intellectual property portfolio; 27 • launch of commercial sales of tebipenem HBr and our other product candidates, if approved, whether alone or in collaboration with others; • acceptance of tebipenem HBr and our other product candidates, if approved, by patients, the medical community and third-party payors; • competition with other therapies; and • a continued acceptable safety profile of tebipenem HBr and our other product candidates, if approved. A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that our general and administrative expenses will increase in the foreseeable future as we increase our headcount to support our continued research, development and commercialization of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, infrastructure and director and officer insurance costs as well as investor and public relations expenses associated with our continued operation as a public company. Other Income (Expense) 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 months ended March 31, 2021 and 2020. Other Income (Expense), Net Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as realized and unrealized gains and losses from foreign currency-denominated cash balances, vendor payables and receivables from the Australian research and development tax incentive. Critical Accounting Policies and Significant Judgments and Estimates A description of our significant accounting policies is disclosed in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 and in Note 2 to our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We have made no changes to our existing critical accounting policies, as described in our Annual Report on Form 10-K for the year ended December 31, 2020. Results of Operations Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of revenues and the satisfaction of liabilities in the normal course of business. We have incurred losses from the inception of our operations. These factors raise substantial doubt about our ability to continue as a going concern. 28 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 (in thousands): Three Months Ended March 31, 2021 2020 $ Change Revenues: Grant revenue $ 7,300 $ 1,532 $ 5,768 Collaboration revenue — 169 (169 ) Total revenues 7,300 1,701 5,599 Operating expenses: Research and development 18,404 20,436 (2,032 ) General and administrative 8,299 4,086 4,213 Total operating expenses 26,703 24,522 2,181 Loss from operations (19,403 ) (22,821 ) 3,418 Other income (expense): Interest income 98 237 (139 ) Other income (expense), net (118 ) (674 ) 556 Total other income (expense), net (20 ) (437 ) 417 Net loss $ (19,423 ) $ (23,258 ) $ 3,835 Grant Revenue Three Months Ended March 31, 2021 2020 $ Change BARDA Contract (tebipenem HBr) $ 6,296 $ 1,182 $ 5,114 NIAID Contract (SPR206) 359 301 58 NIAID Award (SPR720) — 40 (40 ) DoD Agreement (Potentiator product candidates) 645 9 636 Total grant revenue $ 7,300 $ 1,532 $ 5,768 Grant revenue recognized during the three months ended March 31, 2021 and 2020 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards. The increase in revenue during the three months ended March 31, 2021 was primarily due to an increase of $5.1 million in qualified expenses incurred under our BARDA contract for tebipenem HBr, an increase of $0.6 million in funding under our DoD agreement relating to SPR206, and net immaterial activity under our other government awards. Collaboration Revenue During the three months ended March 31, 2021, we did not recognize any collaboration revenue, as the aggregate amount of the transaction price related to our agreement with Everest Medicines was fully allocated to satisfied performance obligations in prior periods. During the three months ended March 31, 2020, we recognized $0.2 million of revenue, related to our agreement with Everest Medicines, consisting of the performance of research and development services. Research and Development Expenses Three Months Ended March 31, 2021 2020 $ Change Direct research and development expenses by program: Tebipenem HBr (SPR994) $ 10,115 $ 15,308 $ (5,193 ) SPR720 1,243 571 672 Potentiator product candidates (SPR206 and SPR741) 1,090 373 717 Unallocated expenses: Personnel related (including share-based compensation) 4,752 3,258 1,494 Facility related and other 1,204 926 278 Total research and development expenses $ 18,404 $ 20,436 $ (2,032 ) 29 Direct costs related to our tebipenem HBr program decreased by $5.2 million during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, 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 ongoing clinical trials to support a potential NDA filing for tebipenem HBr. Direct costs related to our SPR720 program increased by $0.7 million during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, primarily due to expenses related to 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. On February 5, 2021, we announced that the FDA informed us that a clinical hold had been placed on our Phase 2a clinical trial of SPR720, which is further described elsewhere in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Quarterly Report on Form 10-Q under the heading “Recent Developments – Update on Phase 2a Clinical Trial.” Direct costs related to our SPR720 program during the three months ended March 31, 2021 reflect a $0.6 million reduction to expense related to activities funded by Gates MRI, compared to $0.2 million during the three months ended March 31, 2020. Direct costs related to our Potentiator product candidates during the three months ended March 31, 2021 includes costs related to our SPR206 program. Direct costs related to our SPR206 program increased by $0.7 million during the three months ended March 31, 2021, primarily due to higher preclinical costs incurred and from clinical costs for the planned Phase 1 BAL and renal impairment trials . In early January 2020, we decided to proceed with SPR206 as the lead Potentiator product candidate and discontinue development of SPR741. Direct costs related to our SPR741 program were immaterial for both the three months ended March 31, 2021 and 2020. During 2021 and 2020, research and development expenses incurred by our Australian subsidiary were recorded net of a 43.5% research and development tax incentive for qualified expenses from the Australian government, resulting in a receivable of $0.4 million as of March 31, 2021. The increase in personnel-related costs of $1.5 million was primarily a result of an increase in research and development headcount. Personnel-related costs for the three months ended March 31, 2021 and 2020 included share-based compensation expense of $0.8 million and $0.5 million, respectively. 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 March 31, 2021 2020 $ Change Personnel related (including share-based compensation) $ 4,429 $ 2,287 $ 2,142 Professional and consultant fees 3,112 1,333 1,779 Facility related and other 758 466 292 Total general and administrative expenses $ 8,299 $ 4,086 $ 4,213 The increase in personnel-related costs of $2.1 million was primarily a result of an increase in headcount in our general and administrative functions. Personnel-related costs for the three months ended March 31, 2021 and 2020 included share-based compensation expense of $1.2 million and $0.6 million, respectively. The increase in professional and consultant fees of $1.8 million was primarily due to increased commercial operation expenses to support the potential commercialization of tebipenem HBr. The increase in facility-related and other costs was primarily due to the increased costs of supporting a larger general and administrative staff. Other Income (Expense), Net Other income, net was less than $(0.1) million for the three months ended March 31, 2021, compared to $(0.4) million for the three months ended March 31, 2020. The changes quarter over quarter were primarily due to fluctuations in unrealized foreign currency gains, offset by interest income. 30 Liquidity and Capital Resources Since our inception, we have incurred significant operating losses. We have recognized limited revenue to date from funding arrangements with the DoD, NIAID, CARB-X and BARDA and our license agreement with Everest. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for a few years, if at all. 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, and from multiple equity financings of our common and preferred stock. As of March 31, 2021, we had cash, cash equivalents and marketable securities of $115.7 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 common stock 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 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, on October 1, 2020, we issued and sold 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. 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 Preferred Stock, with an aggregate offering value of $30.0 million. For each share of common stock (including shares of common stock issuable upon conversion of the Company’s outstanding shares of Series A Preferred Stock and Series B Preferred Stock) owned by holders of record as of 5:00 p.m., New York time, on February 10, 2020, such holders received 0.152 rights to purchase shares of our common stock (subject to the aggregate offering threshold and certain ownership limitations). Each whole right allowed holders to subscribe for one share of common stock at the subscription price equal to $9.00 per whole share (or an equivalent number of shares of Series C Preferred Stock). The total number of subscription rights issued to each stockholder was rounded down to the nearest whole number. Any participant in the rights offering that, following exercise of such participant’s subscription right, would be or become a holder of greater than 9.99% of the outstanding number of shares of the Company’s common stock following the offering could elect to instead purchase Series C Preferred Stock at a purchase price of $9,000 per share (ratably adjusted for fractional shares), and any such holder so electing had a right to purchase one one-thousandth of a share of Series C Preferred Stock for each share of common stock it had a right to purchase under the subscription rights. Each share of Series C Preferred Stock is convertible into 1,000 shares of our common stock at the election of the holder, subject to beneficial ownership conversion limits applicable to the Series C Preferred Stock. The Series C Preferred Stock generally have no voting rights, except as required by law, and participate pari passu (on an as-converted basis) with any distribution of proceeds to holders of common stock and Series A Preferred Stock and Series B Preferred Stock, in the event of the Company’s liquidation, dissolution or winding up or the payment of a dividend on the common stock. At the closing of the rights offering on March 5, 2020, a total of 1,046,249 shares of our common stock and 2,287 shares of Series C Preferred Stock were issued for aggregate gross proceeds of $30.0 million. Issuance costs related to the offering were $0.5 million. On December 3, 2018, we filed a universal shelf registration statement on Form S-3 (Registration No. 333-228661) with the SEC, which was declared effective on December 11, 2018, and pursuant to which we registered for sale up to $200.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $50.0 million of our common stock available for issuance pursuant to an at-the-market offering program sales agreement that we entered into with Cantor Fitzgerald & Co, or Cantor. Under the sales agreement, Cantor was permitted to sell shares of our common stock by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, subject to the terms of the sales agreement. 31 The prospectus underlying the “at the market” 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 “at the market” offering program, prior to deducting sales commissions, and had remaining available capacity of approximately $34.6 million. On November 13, 2020, we reinstated the “at-the-market” offering program with a capacity of up to $34.0 million by filing an updated prospectus. On March 11, 2021, we entered into a new sales agreement with Cantor and filed a new universal shelf registration statement on Form S-3 (Registration No. 333-254170), and pursuant to which we registered for sale up to $300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $75.0 million of our common stock available for issuance pursuant to the new “at-the-market” offering program sales agreement that we entered into with Cantor. Under the new sales agreement, Cantor may sell shares of our common stock by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, subject to the terms of the new sales agreement. Our universal shelf registration statement on Form S-3 (Registration No. 333-254170) became effective on March 29, 2021 and our prior sales agreement with Cantor terminated automatically at such time. During the three months ended March 31, 2021, we sold 257,185 shares of our common stock under the prior “at the market” agreement at an average price of approximately $17.05 per share for aggregate gross proceeds of approximately $4.4 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. Cash Flows The following table summarizes our sources and uses of cash for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Cash used in operating activities $ (15,479 ) $ (23,329 ) Cash provided by investing activities 3,003 27,776 Cash provided by financing activities 4,309 30,186 Net increase in cash and cash equivalents $ (8,167 ) $ 34,633 Operating Activities Net cash used in operating activities for the three months ended March 31, 2021 was $15.5 million, primarily resulting from our net loss of $19.4 million, adjusted for net non-cash items of $2.4 million (primarily stock-based compensation, depreciation and amortization). Net cash provided by changes in our operating assets and liabilities was $1.5 million and consisted primarily of a $2.7 million increase in accounts payable, a $2.4 million net increase in receivables, a $0.9 million decrease in prepaid expenses and other current assets and an increase of $0.6 million in accrued expenses. Net cash used in operating activities for the three months ended March 31, 2020 was $23.3 million, primarily resulting from our net loss of $23.3 million, adjusted for net non-cash items of $1.8 million (primarily stock-based compensation and unrealized foreign currency transaction loss). Net cash provided by changes in our operating assets and liabilities was $(1.9) million and consisted primarily of a decrease of $4.8 million in receivables and a $4.8 million increase in accounts payable. These increases in cash were offset by a $0.9 million increase in prepaid expenses and other current assets and a decrease of $9.3 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 the advancement of our development programs and the timing of vendor invoicing and payments. Investing Activities Cash provided by investing activities during the three months ended March 31, 2021 was $3.0 million primarily related to the maturities of marketable securities of $6.0 million, offset by purchases of marketable securities of $3.0 million. Cash provided by investing activities during the three months ended March 31, 2020 was $27.8 million primarily related to the maturities of marketable securities of $31.8 million offset by purchases of marketable securities of $4.0 million. Financing Activities Cash provided by financing activities during the three months ended March 31, 2021 was $4.3 million, and consisted primarily of $4.3 million net sales of common stock under our “at-the-market” offering program sales agreement and proceeds of $0.1 million from the exercise of employee stock options, offset by the payment of offering expenses of less than $0.1 million. 32 Cash provided by financing activities during the three months ended March 31, 2020 was $30.2 million, and consisted primarily of proceeds of $30.0 million from the sale of common stock and Preferred Series C shares in our rights offering and proceeds of $0.5 million from the exercise of employee stock options, offset by offering expenses of $0.4 million. Funding Requirements We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our clinical programs and prepare for possible commercialization of one or more of our product candidates. In addition, we expect to incur additional costs associated with our continued operation as a public company. The timing and amount of our operating expenditures will depend largely on: • the timing and costs of our ongoing and planned clinical trials; • the initiation, progress, timing, costs and results of preclinical studies and clinical trials of our other product candidates and potential new product candidates; • the amount of funding that we receive under government contracts that we have applied for; • the number and characteristics of product candidates that we pursue; • the outcome, timing and costs of seeking regulatory approvals; • the costs of commercialization activities for tebipenem HBr and other product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; • the receipt of marketing approval and revenue received from any potential commercial sales of tebipenem HBr; • the terms and timing of any future collaborations, licensing or other arrangements that we may establish; • the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements; • the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property related claims; • the costs of operating as a public company; and • the extent to which we in-license or acquire other products and technologies. As of March 31, 2021, we had cash, cash equivalents and marketable securities of $115.7 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, 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 second quarter of 2022, including through the submission of the NDA for tebipenem HBr. 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, potential 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, research stage programs and commercial activities. 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. 33 Our consolidated financial statements as of December 31, 20 20 were prepared under the assumption that we will not continue as a going concern for the next twelve months. As a result, the opinion from our independent registered public accounting firm with respect to our annual financial statements contains an explanatory paragraph about such substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The substantial doubt about our ability to continue as a going concern may adversely affect our stock price and our ability to raise capital. 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. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including those listed above. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government funding, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. 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, including relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations and Commitments During the three months ended March 31, 2021, 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, 2020. Off-Balance Sheet Arrangements We did not have 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. Recently Issued and Adopted Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.