What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-09 · 69 added, 74 removed, 234 unchanged (38% of the section changed)

14 unchanged sentences

Our two most advanced product candidates are wholly owned:

STRO-001, an ADC directed against CD74, for patients with multiple myeloma and non-Hodgkin lymphoma, or NHL, and STRO-002, an ADC directed against folate receptor-alpha, or FolRα, for patients with ovarian and endometrial cancers.

STRO-001, an ADC directed against CD74, for patients with multiple myeloma and non-Hodgkin’s lymphoma, or NHL, and STRO-002, an ADC directed against folate receptor-alpha, or FolRα, for patients with ovarian and endometrial cancers.

We are developing STRO-001, an optimally designed ADC directed against the cancer target CD74, for multiple myeloma and NHL.

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The trial is being conducted in two-parts, dose escalation and dose expansion.

The primary objectives of the STRO-002 clinical trial are to determine the safety and tolerability profile, to define the recommended Phase 2 dose level and interval and to evaluate preliminary anti-tumor activity.

The primary objectives of the STRO-002 clinical trial are to determine the safety and tolerability profile, to define the recommended Phase 2 dose level

and interval and to evaluate preliminary anti-tumor activity.

Our secondary objectives are to characterize the human pharmacokinetics and additional safety, tolerability and efficacy measures.

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Based on such reported data, STRO-001 has been generally well-tolerated and, unlike certain other ADCs, no ocular toxicity signals have been observed, with no patients receiving prophylactic corticosteroid eye drops.

Dose escalation in the STRO-001 Phase 1 trial is continuing, and the maximum tolerated dose has not yet been reached.

Dose escalation in the STRO-001 Phase 1 trial is continuing, and the maximum tolerated dose has not yet been reached, with the last reported doses of 5.0 mg/kg in the multiple myeloma cohort and 4.2 mg/kg in the NHL cohort.

The FDA has granted Orphan Drug Designation for STRO-001 for the treatment of multiple myeloma.

Our second candidate, STRO-002, is currently enrolling patients in a Phase 1 trial focused on ovarian and endometrial cancers with updated data from the dose-escalation portion of the trial most recently reported in May 2021.

Our second candidate, STRO-002, is currently enrolling patients in the dose expansion cohort of a Phase 1 trial focused on ovarian and endometrial cancers, with updated data from the dose-escalation portion of the trial most recently reported in May 2021.

As of April 23, 2021, the dose-escalation cohort of the Phase 1 trial had enrolled 39 ovarian cancer patients and included 34 patients treated with clinically active dose levels at 2.9 mg/kg or higher, of which 31 patients had at least one post-baseline scan and were evaluable for RECIST responses.

The results of this data is summarized as follows:

Of the 31 patients evaluable for RECIST, 10 patients met criteria for response.

One patient achieved a complete response, or CR, and nine patients achieved a partial response, or PR.

Of the nine PRs, four were confirmed PRs, or cPRs, and five were unconfirmed PRs, or uPRs;

For the five confirmed responders (1 CR and 4 cPRs), the median duration of response, or DOR, was 5.8 months;

Median study follow-up was 8.4 months and median progression-free survival, or PFS, was 7.2 months;

86% of all observed treatment-emergent adverse events, or AEs, were Grade 1 or 2.

The most common Grade 3 and 4 AEs were neutropenia (64%), arthralgia (13%), fatigue (10%), neuropathy (8%), and abdominal pain (8%);

percentages of Grade 3 and 4 AEs are the percentage of the 39 patients evaluable for safety that manifested the applicable Grade 3 or 4 AE.

All Grade 3 or 4 AEs were managed with standard medical treatment, dose reductions or dose delays;

Dose limiting toxicities, or DLTs, were observed at higher dose levels in two patients – at 6.0 mg/kg (Grade 2 neuropathy/Grade 3 arthralgia) and at 6.4 mg/kg (Grade 3 bone pain).

Tissue samples for FolRα-expression analysis were provided by clinical sites retrospectively and were available in 18 patients treated at ≥ 2.9 mg/kg in the dose-escalation cohort.

Antitumor activity was observed across a broad range of FolRα-expression levels.

Based on such reported data, STRO-002 has been well-tolerated and no ocular toxicity signals have been observed, with no patients receiving prophylactic corticosteroid eye drops.

The dose escalation portion of the STRO-002 Phase 1 trial has been fully enrolled and the dose expansion portion of the trial is ongoing to assess the efficacy, safety and tolerability of STRO-002 at dose levels of 4.3 and 5.2 mg/kg .

For the dose-expansion portion, we dosed the first patient in January 2021 and are treating less heavily pre-treated ovarian cancer patients.

For the dose-expansion portion, we dosed the first patient in January 2021, and have achieved our targeted enrollment of 40 patients.

We expect to report initial dose-expansion data in the second half of 2021.

Additionally, initiation of a STRO-002 combination expansion cohort in ovarian cancer and an expansion cohort for FolR a -selected endometrial cancer are planned for the second half of 2021.

Additionally, an expansion cohort for FolRa -selected endometrial cancer has been initiated and is enrolling patients, and initiation of a combination cohort with bevacizumab in ovarian cancer is planned for the second half of 2021.

Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development and manufacturing activities in support of our own product development efforts and those of our collaborators, raising capital to support and expand such activities and providing general and administrative support for these operations.

We have funded our operations to date primarily from upfront, milestone and other payments under

our collaboration agreements with Celgene (now BMS), Merck and EMD Serono, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public offerings of common stock , and debt proceeds.

We have funded our operations to date primarily from upfront, milestone and other payments under our collaboration agreements with Celgene (now BMS), Merck and EMD Serono, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public offerings of common stock, and debt proceeds.

We have no products approved for commercial sale and have not generated any revenue from commercial product sales.

We had a net loss of $36.5 million for the six months ended June 30, 2021.

We had a loss from operations of $35.6 million and net income of $10.3 million, due principally to an unrealized gain of $48.9 million related to our holdings of Vaxcyte common stock, for the six months ended June 30, 2020.

We had a net loss of $67.4 million for the nine months ended September 30, 2021.

We had a loss from operations of $46.2 million and net income of $27.4 million, due principally to an unrealized gain of $78.6 million related to our holdings of Vaxcyte common stock, for the nine months ended September 30, 2020.

We cannot assure you that we will have net income or that we will generate positive cash flow from operating activities in the future.

As of June 30, 2021, we had an accumulated deficit of $264.4 million.

As of September 30, 2021, we had an accumulated deficit of $295.3 million.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years.

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We may also perform research and development activities under the collaboration agreements.

Consideration under these contracts generally includes a n onrefundable upfront payment, development , regulatory and commercial milestones and other contingent payments, and royalties based on net sales of approved products.

Consideration under these contracts generally includes a nonrefundable upfront payment, development, regulatory and commercial milestones and other contingent payments, and royalties based on net sales of approved products.

Additionally, the collaborations may provide options for the customer to acquire from us materials and reagents, clinical product supply or additional research and development services under separate agreements.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Interest income consists primarily of interest earned on our invested funds.

Unrealized Loss on Equity Securities

Unrealized loss on equity securities consists of the remeasurement of our investment in Vaxcyte common stock.

Unrealized Gain (Loss) on Equity Securities

Unrealized gain (loss) on equity securities consists of the remeasurement of our investment in Vaxcyte common stock.

Interest and Other Expense, Net

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Additionally, we identified a financing component under the Merck 2018 Agreement and recorded interest expense associated with the upfront payment.

Other income (expense) in the three months ended June 30, 2021 and 2020 includes changes in values attributable to the arrangement with the Call Option Plan as defined in the notes to our financial statements included elsewhere in this report.

Comparison of the Three Months Ended June 3 0 , 20 2 1 and 20 20

Other income (expense) in the three months ended September 30, 2021 and 2020 includes changes in values attributable to the arrangement with the Call Option Plan as defined in the notes to our financial statements included elsewhere in this report.

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

Three Months Ended

September 30,

(in thousands)

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Three Months Ended

September 30,

(in thousands)

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Vaxcyte was a related party until the closing of its initial public offering on June 16, 2020.

Total revenue increased by $18.6 million, or 196%, during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

This was due to an increase of $12.8 million from Merck, which reflects the cumulative catch-up in revenue as a result of the change in transaction price due to a $15.0 million contingent payment earned in the second quarter of 2021 for the initiation of the first IND-enabling toxicology study under the first program in the collaboration and an increase of $0.1 million in clinical supply.

Further, there was an increase of $3.9 million from BMS, which was comprised of a $5.0 million increase in contract research and manufacturing activities supporting clinical trial supply, partially offset by a $1.0 decrease associated with the ongoing performance related to the partially unsatisfied performance obligations.

Additionally, there was an increase of $1.5 million from EMD Serono, which reflects a $2.0 million contingent payment earned in the second quarter of 2021 related to a patient enrollment achievement in the Phase 1 dose escalation portion of the study of M1231, partially offset by a $0.5 million decrease in research and development services.

Total revenue decreased by $9.3 million, or 52%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

This was due to a decrease of $6.0 million from BMS, which reflects a $5.0 million decrease in contract research and manufacturing activities supporting clinical trial supply and a $1.0 million decrease due to the completion in September 2020 of revenue recognition of the transaction price under the BMS Agreement.

Further, there was a decrease of $2.6 million from Merck, which was comprised of a $3.7 million decrease in the ongoing performance of research and development services on the first collaboration program which was fully recognized in July 2021, and a $1.3 million decrease in research and development services, partially offset by a $2.4 million increase in manufacturing activities supporting clinical trial supply.

EMD Serono revenue decreased by $1.3 million, which reflects a $1.0 million contingent payment earned in the third quarter of 2020, with such decrease being partially offset by a $0.6 million increase in Vaxcyte revenue.

Research and Development Expense

Research and development expense increased by $8.1 million, or 47%, during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The increase was due primarily to increases of $2.6 million in personnel-related expenses due to higher headcount, $3.1 million in laboratory supplies, clinical trial costs and production materials-related expenses, $1.3 million in consulting and outside services, and $1.0 million in facility-related expenses.

Research and development expense increased by $7.2 million, or 37%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was due primarily to increases of $3.3 million in personnel-related expenses from higher headcount, $1.3 million in laboratory supplies, clinical trial costs and production materials-related expenses, $0.5 million in consulting and outside services, and $2.1 million in facility-related expenses.

General and Administrative Expense

General and administrative expense increased by $3.9 million, or 45%, during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The increase was due primarily to increases of $2.6 million in personnel-related expenses due to higher headcount, $0.5 million in insurance and external services, and $0.6 million in facility-related expenses.

General and administrative expense increased by $7.5 million, or 83%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was due primarily to increases of $3.7 million in personnel-related expenses from higher headcount, $1.8 million in insurance and external services, $1.6 million in facility-related expenses and $0.4 million in equipment and office related expenses.

Interest Income

Interest income decreased by $0.2 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a decrease in the amortization of premiums on investments.

Interest income decreased by $0.2 million during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due primarily to a decrease in the amortization of premiums on investments.

Unrealized Gain on Equity Securities

Unrealized gain on equity securities was $4.3 million during the three months ended June 30, 2021, as compared to $48.9 million for the three months ended June 30, 2020.

The unrealized gain on equity securities in each period was entirely due to the remeasurement of the estimated fair value of our investment in Vaxcyte common stock.

Unrealized gain on equity securities was $4.5 million during the three months ended September 30, 2021, as compared to $29.7 million for the three months ended September 30, 2020.

The unrealized gain on equity securities in each period was entirely due to the remeasurement of the fair value of our investment in Vaxcyte common stock.

Interest and Other Expense, Net

Interest and other expense, net, decreased by $2.1 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a $1.8 million decrease related to the remeasurement of the vested call options under the Call Option Plan and a $0.3 million decrease in interest expense associated with the financing component related to the 2018 Merck Agreement.

Comparison of the Six Months Ended June 3 0 , 20 21 and 20 20

Six Months Ended

Interest and other expense, net, decreased by $1.5 million during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due primarily to a $1.2 million decrease related to the remeasurement of the vested call options under the Call Option Plan and a $0.3 million decrease in interest expense associated with the financing component related to the 2018 Merck Agreement.

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

Nine Months Ended

September 30,

(in thousands)

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We have recognized revenue as follows during the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Vaxcyte was a related party until the closing of its initial public offering on June 16, 2020.

Total revenue increased by $26.1 million, or 157%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

This was due to an increase of $22.0 million from Merck, primarily in revenue from ongoing performance of research and development services, of which $5.9 million was associated with the contingent third program that was fully recognized upon the determination that the related performance obligation had terminated during the first quarter of 2021, and $14.0 million was a cumulative catch-up in revenue as a result of the change in transaction price, due to a $15.0 million contingent payment earned in the second quarter of 2021 for the initiation of the first IND-enabling toxicology study under the first program in the collaboration, a $2.1 million increase in clinical trial materials supply, partially offset by a $0.6 million decrease in research and development services and a $0.7 million decrease related to the financing component associated with the upfront payment.

Further, there was an increase of $3.1 million from BMS, which was comprised of a $5.0 million increase in contract research and manufacturing activities supporting clinical trial supply, partially offset by a $2.0 million decrease due to the completion in September 2020 of revenue recognition of the transaction price under the BMS Agreement.

Additionally, there was an increase of $1.6 million of Vaxcyte revenue under our supply agreement, which was partially offset by a decrease of $0.6 million in EMD Serono revenue.

Total revenue increased by $16.8 million, or 49%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This was due primarily to an increase of $19.3 million from Merck, primarily related to revenue from ongoing performance of research and development services, of which $5.9 million was associated with the contingent third program that was fully recognized upon the determination that the related performance obligation had terminated during the first quarter of 2021, $14.0 million was a cumulative catch-up in revenue as a result of the change in transaction price, due to a $15.0 million contingent payment earned in the second quarter of 2021 for the initiation of the first IND-enabling toxicology study under the first program in the collaboration, and a $4.4 million increase in materials supply.

Revenue from Vaxcyte under our supply agreement increased by $2.1 million as well.

Partially offsetting these increases were a $2.0 million decrease in the ongoing performance of research and development services due to the performance obligation pertaining to the first collaboration program, which was fully recognized in July 2021.

This was offset by a decrease of $1.9 million in research and development services and a decrease of $1.0 million related to the financing component associated with the upfront payment.

In addition, there was a decrease of $2.9 million from BMS which was primarily due to the completion in September 2020 of revenue recognition of the transaction price under the BMS Agreement, and a decrease of $1.8 million in EMD Serono revenue.

Research and Development Expense

Research and development expense increased by $13.0 million, or 37%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The increase was due primarily to increases of $4.7 million in personnel-related expenses due to higher headcount, $3.4 million in laboratory supplies and production materials-related expenses, $2.1 million in facility-related expenses, $1.7 million in clinical trial costs, and $1.1 million in consulting and outside services.

Research and development expense increased by $20.3 million, or 37%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was due primarily to increases of $8.0 million in personnel-related expenses from higher headcount, $4.6 million in laboratory supplies and production materials-related expenses, $4.2 million in facility-related expenses, $1.8 million in clinical trial costs, $1.5 million in consulting and outside services, and $0.2 million in equipment-related expenses.

General and Administrative Expense

General and administrative expense increased by $6.3 million, or 36% during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The increase was due primarily to increases of $4.1 million in personnel-related expenses due to higher headcount, $0.5 million in equipment-related expenses, $0.4 million in insurance and other fees associated with being a public company, and $1.1 million in facility-related expenses.

General and administrative expense increased by $13.8 million, or 52% during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was due primarily to increases of $7.8 million in personnel-related expenses from higher headcount, $2.7 million in facility-related expenses, $2.5 million in insurance and external services, and $0.8 million in equipment-related expenses.

Interest Income

Interest income decreased by $0.7 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a $1.1 million decrease in the amortization of premiums on investments, partially offset by an increase of $0.5 million from higher average investment balances in the first half of 2021.

Interest income decreased by $0.8 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due primarily to a $1.6 million decrease in the amortization of premiums on investments, partially offset by an increase of $0.8 million from higher average investment balances in 2021.

Unrealized (Loss) Gain on Equity Securities

Unrealized loss on equity securities was $6.4 million during the six months ended June 30, 2021, as compared to an unrealized gain of $48.9 million for the six months ended June 30, 2020.

Unrealized (loss) on equity securities was $1.9 million during the nine months ended September 30, 2021, as compared to an unrealized gain of $78.6 million for the nine months ended September 30, 2020.

The unrealized (loss) gain on equity securities in each period was entirely due to the remeasurement of the estimated fair value of our investment in Vaxcyte common stock.

Interest and Other Expense, Net

Interest and other expense, net, decreased by $2.3 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a $1.9 million decrease in other expenses related to the remeasurement of the vested call options under the Call Option Plan and a $0.7 million decrease in interest expense associated with the financing component related to the 2018 Merck Agreement, partially offset by a $0.3 million increase in interest expense related to our outstanding debt.

Interest and other expense, net, decreased by $3.8 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due primarily to a $3.1 million decrease in other expenses related to the remeasurement of the vested call options under the Call Option Plan and a $1.0 million decrease in interest expense associated with the financing component related to the 2018 Merck Agreement, partially offset by a $0.3 million increase in interest expense related to our outstanding debt.

Liquidity and Capital Resources

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Our operations have been funded primarily by payments received from our collaborators, and net proceeds from equity sales and debt.

As of June 30, 2021, we had cash, cash equivalents and marketable securities of $283.4 million, equity securities of $35.3 million, outstanding debt of $24.8 million and an accumulated deficit of $264.4 million.

As of September 30, 2021, we had cash, cash equivalents and marketable securities of $254.2 million, equity securities of $39.8 million, outstanding debt of $25.0 million and an accumulated deficit of $295.3 million.

2021 Contingent Payment from Merck

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The gross proceeds from these sales were approximately $24.6 million, before deducting fees of approximately $0.8 million, resulting in net proceeds of approximately $23.8 million.

During the six months ended June 30, 2021, we did not sell any shares under the ATM Facility.

During the nine months ended September 30, 2021, we did not sell any shares under an ATM facility.

Vaxcyte, Inc.

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The lock-up agreement expired in December 2020.

As of June 30 , 2021, we held 1,567,324 shares of Vaxcyte common stock with an estimated fair value of $35.3 million.

As of September 30 , 2021, we held 1,567,324 shares of Vaxcyte common stock with an estimated fair value of $39.8 million.

For a description of our Loan and Security Agreement with Oxford Finance LLC and Silicon Valley Bank, please see Note 6 to our condensed financial statements.

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P lease see Note 7 to our condensed financial statements.

The following table summarizes our contractual obligations as of June 3 0 , 20 21 :

The following table summarizes our contractual obligations as of September 3 0 , 20 21 :

Payments due in the year

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Total contractual obligations

Excludes approximately $5.2 million in potential financial benefit to us of base rent abatement to be provided by sublessor for months 7 – 18 of the sublease period, subject to certain terms contained in the Sublease.

Includes approximately $5.2 million in potential financial benefit to us of base rent abatement to be provided by sublessor for months 7 – 18 of the sublease period, subject to certain terms contained in the Sublease.

Funding Requirements

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The following table summarizes our cash flows during the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Cash Flows from Operating Activities

Cash used in operating activities for the six months ended June 30, 2021 was $35.7 million.

Our net loss of $36.5 million included $6.4 million of unrealized loss on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, non-cash charges of $9.9 million for stock-based compensation, $2.4 million for depreciation and amortization, and $1.2 million for the amortization of premium on our marketable securities.

Cash used in operating activities also reflected a net decrease in operating assets and liabilities of $19.3 million, due to an a decrease of $12.4 million in our deferred revenue balance from revenue recognized under our collaboration agreements, an increase of $3.6 million in accounts receivable from our collaborators, an increase of $5.3 million in prepaid expenses and other assets, a decrease of $2.3 million in accrued compensation expense primarily due to bonuses paid in connection with certain company goal achievements, partially offset by an increase of $2.2 million in accounts payable and other liabilities due to timing of payments, and an increase of $2.1 million in deferred rent from our sublease.

Cash used in operating activities for the six months ended June 30, 2020 was $31.2 million.

Our net income of $10.3 million included $48.9 million of unrealized gain on equity securities as a result of the remeasurement of our investment in Vaxcyte common stock, which was partially offset by non-cash charges of $5.7 million for stock-based compensation, $2.2 million for depreciation and amortization, $2.0 million for the remeasurement of the vested call options, and $0.3 million for financing costs related to the public offering.

Cash used in operating activities also reflected a net decrease in operating assets and liabilities of $2.9 million, comprised of a decrease of $1.5 million in accrued compensation expense primarily due to 2019 bonuses paid in 2020, a decrease of $2.5 million in accounts payable and other liabilities due to timing of payments, and a decrease of $1.6 million in our deferred revenue balance from revenue recognized under our collaboration agreements, offset partially by a $1.2 million decrease in accounts receivable from our collaborators, and a decrease of $1.5 million in prepaid expenses and other assets.

Cash used in operating activities for the nine months ended September 30, 2021 was $60.1 million.

Our net loss of $67.4 million included $1.9 million of unrealized loss on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, non-cash charges of $16.4 million for stock-based compensation, $3.5 million for depreciation and amortization, $3.8 million for noncash lease expenses, $2.0 million for the amortization of premium on our marketable securities and $0.5 million in other non-cash charges.

Cash used in operating activities also reflected a net decrease in operating assets and liabilities of $20.8 million, due to an a decrease of $12.8 million in our deferred revenue balance from revenue recognized under our collaboration agreements, an increase of $6.8 million in accounts receivable from our collaborators, an increase of $4.5 million in prepaid expenses and other assets, an increase of $5.1 million in accounts payable and other liabilities due to timing of payments, partially offset by a decrease of $1.5 million in our operating lease liability and a decrease of $0.3 million in accrued compensation expense.

Cash used in operating activities for the nine months ended September 30, 2020 was $48.9 million.

Our net income of $27.4 million included $78.6 million of unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, and was partially offset by non-cash charges of $8.8 million for stock-based compensation, $3.1 million for depreciation and amortization, $3.2 million for the remeasurement of the vested options under the Call Option Plan, $0.3 million for the amortization of premium on our marketable securities, and $0.3 million for financing costs related to the public offering.

Cash used in operating activities also reflected a net decrease in operating assets and liabilities of $13.7 million, comprised of a decrease of $1.6 million in accounts payable and other liabilities due to timing of payments, a decrease of $11.6 million in our deferred revenue balance from revenue recognized under our collaboration agreements, an increase of $1.2 million in accounts receivable from our collaborators, and a $0.8 million decrease in prepaid expenses and other assets.

Cash Flows from Investing Activities

Cash used in investing activities of $115.9 million for the six months ended June 30, 2021, 2021 was primarily related to purchases of marketable securities of $202.3 million and purchases of property and equipment of $7.8 million, principally for leasehold improvements to the premises under the Sublease, offset partially by maturities and sales of marketable securities of $94.3 million.

Cash used in investing activities of $15.5 million for the six months ended June 30, 2020 was primarily related to purchases of marketable securities of $91.3 million and purchases of property and equipment of $2.5 million, principally to support laboratory and manufacturing activities, offset partially by maturities and sales of marketable securities of $78.0 million.

Cash used in investing activities of $118.1 million for the nine months ended September 30, 2021 was primarily related to purchases of marketable securities of $226.1 million and purchases of property and equipment of $12.8 million, principally for leasehold improvements to the premises under the Sublease, offset partially by maturities and sales of marketable securities of $120.8 million.

Cash used in investing activities of $15.2 million for the nine months ended September 30, 2020 was primarily related to purchases of marketable securities of $114.0 million and purchases of property and equipment of $5.5 million, principally to support laboratory and manufacturing activities, offset partially by maturities and sales of marketable securities of $104.3 million.

Cash Flows from Financing Activities

Cash provided by financing activities of $1.8 million for the six months ended June 30, 2021 was primarily related to $1.4 million of proceeds received from the exercise of common stock options and $0.9 million of net proceeds received from participants in our employee equity plans.

Cash provided by financing activities of $107.1 million for the six months ended June 30, 2020 was primarily related to $91.4 million of net proceeds from the issuance of common stock from our public offering, $25.0 million of gross proceeds from our debt refinancing and $0.7 million of proceeds received from participants in our employee stock purchase plan and from the exercise of common stock options, partially offset by a $10.0 million repayment of the August 2017 loan.

Cash provided by financing activities of $2.8 million for the nine months ended September 30, 2021 was primarily related to $2.0 million of proceeds received from the exercise of common stock options, and $1.8 million of net proceeds received from participants in our employee equity plans, partially offset by a $1.0 million tax payment related to the net shares settlement of vested restricted stock units.

Cash provided by financing activities of $124.4 million for the nine months ended September 30, 2020 was primarily related to $91.4 million of net proceeds from the issuance of common stock from our public offering, $16.8 million of net proceeds from the sales of common stock pursuant to our ATM, $25.0 million of gross proceeds from our debt refinancing, and $1.1 million of proceeds received from participants of our employee stock purchase plan and from the exercise of common stock options, partially offset by a $10.0 million repayment of the August 2017 Loan.

Off-Balance Sheet Arrangements

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We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenues of at least $1.07 billion, (ii) the date in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

As the market value of our common stock that was held by non-affiliates exceeded $700 million as of June 30, 2021, we expect to be classified as a large accelerated filer and cease being an emerging growth company as of December 31, 2021, and to adopt ASC 842 in the third quarter of 2021 with an effective date of January 1, 2021.

As the market value of our common stock that was held by non-affiliates exceeded $700 million as of June 30, 2021, we will be classified as a large accelerated filer and cease being an emerging growth company as of December 31, 2021.

Critical Accounting Policies and Estimates

7 unchanged sentences

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