What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-12 compared with 2020-08-13 · 95 added, 79 removed, 194 unchanged (47% of the section changed)

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Based on the analysis, the independent Data Monitoring Committee, or DMC, recommended that the PRISM trial should continue and that the trial size should increase from an initial enrollment target of 240 to 360 subjects, which maintains the statistical power for the primary endpoint.

Based on the DMC’s recommendation, we plan to increase the size of the trial to 360 subjects.

The pace of enrollment in the trial has been impacted by the COVID-19 pandemic as new patient screening and most patient enrollment was temporarily halted.

Based on the DMC’s recommendation, we have increased the planned trial size to 360 subjects.

The pace of enrollment in the trial has been impacted by the COVID-19 pandemic as new patient screening and most patient enrollment were temporarily halted.

Patient screening restrictions have been lifted in the United States and Europe.

Many of our sites restarted patient screening and enrollment throughout May and June 2020.

Our sites began to restart patient screening and enrollment during May and June 2020.

We now have approximately 80% of our sites screening patients.

We have increased the number of active sites to more than 60 globally and approximately 190 subjects have enrolled in the trial.

Based on the increased sample size, and considering the ongoing COVID-19 related restrictions, we expect to complete enrollment in the third quarter of 2021 and report top-line data in the fourth quarter of 2021.

Based on the increased sample size, and considering the uncertainties associated with the COVID-19 pandemic, we continue to expect to complete enrollment in the third quarter of 2021 and report top-line data in the fourth quarter of 2021.

We are also conducting a Phase 2 clinical trial of Haduvio for chronic cough in patients with IPF.

This Phase 2 clinical trial is a randomized, double-blind, placebo controlled, two-treatment, two-period, crossover study designed to evaluate the efficacy, safety, tolerability and dosing of Haduvio for chronic cough in up to 56 patients with IPF in the United Kingdom.

Due to the COVID-19 pandemic and the specific at-risk nature of IPF patients, our clinical sites halted their enrollment and treatment of patients in this trial.

We are amending the study protocol to reduce the number of in-person visits to facilitate this study being completed in an at-risk patient population for COVID-19.

We are planning to restart enrollment in the second half of 2020.

In addition, we are conducting a Phase 1b cli nical trial in patients with chronic liver disease to evaluate the safety and pharm a cokinetics , or PK , of Haduvio in this population.

This trial was designed as an open label, non-randomized, parallel-group, single and multiple ascending dose pharmacokinet ic trial in patients with mild, moderate and severe hepatic impairment.

We completed the single ascending dosing portion of this trial in patients with mild , moderate and severe hepatic impairment and there were no se rious adverse events reported in the trial.

After reviewing the safety and PK data generated to date in the single ascending dose portion of the trial, we believe that these data are sufficient to support further investigation of Haduvio in potential future safety and efficacy studie s in patients with relevant liver diseases.

We intend to start planning for a Phase 2 trial of Haduvio in patients with pruritus associated with primary biliary cholangitis, or PBC.

In addition, we intend to use the data from the hepatic impairment study t o support a new drug application, or NDA, submission for Haduvio for pruritus in prurigo nodularis .

We have written the protocol for a Phase 2 clinical trial for LID in patients with Parkinson’s disease and plan to submit an Investigational New Drug, or IND, application to the FDA in the upcoming months.

We are currently focusing our resources on completing the PRISM trial and Phase 2 trial for chronic cough in patients with IPF.

We are continuing to prepare to conduct the Phase 2 trials for LID in patients with Parkinson’s disease and pruritus associated with PBC but plan to prioritize our cash and operational resources on our two lead clinical programs.

While patient screening and enrollment resumed at certain clinical trial sites in the fourth quarter of 2020, some sites may take longer to resume screening and enrollment due to increased COVID-19

infection rates in the areas where they are located, and we expect other sites may cease to participate in the trial entirely.

We recently amend ed the study proto col to reduce the number of in-person visits and procedures to facilitate this study being completed in an at-risk patient population for COVID-19.

This trial is currently being conducted in the United Kingdom, and w e are assessing additional study sites i n Germany which could potentially accelerate enrollment and reduce the risks inherent to single-country recruitment during the C OVID -19 pandemic.

In addition, we conducted a Phase 1b clinical trial in patients with chronic liver disease to evaluate the safety and pharmacokinetics, or PK, of Haduvio in this population.

This trial was designed as an open label, non-randomized, parallel-group, single and multiple ascending dose pharmacokinetic trial in patients with mild, moderate and severe hepatic impairment.

We completed the single ascending dosing portion of this trial in patients with mild, moderate and severe hepatic impairment and there were no serious adverse events reported in the trial.

After reviewing the safety and PK data generated in the single ascending dose portion of the trial, we believe that these data are sufficient to support further investigation of Haduvio in potential future safety and efficacy studies in patients with relevant liver diseases without the need to conduct the multiple ascending dose portion of the trial.

We intend to use the data from the hepatic impairment study to support a new drug application, or NDA, submission for Haduvio for pruritus in prurigo nodularis and evaluate the potential to conduct a Phase 2 trial with pruritus associated with primary biliary cholangitis, or PBC.

We have written the protocol for a Phase 2 clinical trial for LID in patients with Parkinson’s disease and plan to submit an Investigational New Drug, or IND, application to the FDA in the future.

We are currently focusing our resources on completing the PRISM trial and our Phase 2 trial for chronic cough in patients with IPF.

We are continuing to prepare to conduct the Phase 2 trial for LID in patients with Parkinson’s disease and evaluate the potential to conduct a Phase 2 trial in patients with pruritus associated with PBC, but plan to prioritize our cash and operational resources on our two lead clinical programs.

Since commencing operations in 2011, we have devoted substantially all of our efforts and financial resources to the clinical development of Haduvio.

We have not generated any revenue from product sales and, as a result, we have never been profitable and have incurred net losses in each year since commencement of our operations.

As of June 30, 2020, we had an accumulated deficit of $130.1 million, primarily as a result of research and development and general and administrative expenses.

As of September 30, 2020, we had an accumulated deficit of $137.5 million, primarily as a result of research and development and general and administrative expenses.

We do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize Haduvio for the treatment of pruritus associated with prurigo nodularis, chronic cough in patients with IPF or LID in patients with Parkinson’s disease, and we can provide no assurance that we will ever generate significant revenue or profits.

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We are not obligated to make any sales of our common stock under the ATM Sales Agreement.

We began making sales pursuant to the ATM Sales Agreement in July 2020, and as of August 13, 2020 we have issued and sold an aggregate of 385,823 shares of common stock for gross proceeds of $2.2 million, before deducting estimated commissions and fees of $0.1 million.

On August 13, 2020, we entered into a loan and security agreement, or the SVB Loan Agreement, with Silicon Valley Bank pursuant to which Silicon Valley Bank has agreed to provide a term loan, or the SVB Term Loan, to us in the original principal amount of $14.0 million.

We began making sales pursuant to the ATM Sales Agreement in July 2020, and as of September 30, 2020 we had issued and sold an aggregate of 466,758 shares of common stock for gross proceeds of $2.5 million, before deducting estimated commissions and fees of $0.2 million.

On August 13, 2020, we entered into a loan and security agreement, or the SVB Loan Agreement, with Silicon Valley Bank pursuant to which Silicon Valley Bank provided a term loan, or the SVB Term Loan, to us in the original principal amount of $14.0 million.

On the first business day of each month, we will be required to make monthly interest payments and commencing on March 1, 2022, we will be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest.

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For further discussion of the SVB Term Loan, see “—Liquidity and Capital Resources”.

As of June 30, 2020, we had cash and cash equivalents of $44.2 million.

We believe that our existing cash and cash equivalents, which includes the cash proceeds from the ATM Sales Agreement and anticipated proceeds of the SVB Term Loan described above, will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2022.

Our estimate as to how long we expect our existing cash and cash equivalents to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.

See “—Liquidity and Capital Resources.” Our future viability beyond that point is dependent on our ability to raise additional capital to finance our operations.

We expect to incur substantial expenditures in the foreseeable future as we advance Haduvio through clinical development, the regulatory app roval process and, if approved, commercial launch activities.

Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 2b/3 PRISM trial in patients with pruritus associated with prurigo nodularis, including as a result of the increase in the target number of patients to be enrolled from 240 to 360 following the completion of t he SSRE analysis, the additional Phase 3 clinical trial we will be required to conduct to support the submission of a n NDA to the United St ates Food and Drug Administration, or FDA, for Haduvio for the treatment of pruritus associated with prurigo nodularis, our ongoing Phase 2 clinical trial in chronic cough in patients with IPF , the development and validation of our commercial manufacturing process for Haduvio and other development activities, including potentially commencing Phase 2 clinical trial s for the treatment of LID in patients with Parkinson’s disease and for pruritus as sociated with PBC .

As of September 30, 2020 , we had cash and cash equivalents of $ 53.3 million.

We be lieve that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2022 .

Our estimate as to how long we expect our existing cash and cash equivalents to continue to f und our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.

See “—Liquidity and Capital Resources.” Our future viability beyond that point is dependent on our ability to rai se additional capital to finance our operations.

We expect to incur substantial expenditures in the foreseeable future as we advance Haduvio through clinical development, the regulatory approval process and, if approved, commercial launch activities.

Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 2b/3 PRISM trial in patients with pruritus associated with prurigo nodularis, including as a result of the increase in the target number of subjects to be enrolled from 240 to 360 following the completion of the SSRE analysis, the additional Phase 3 clinical trial we will be required to conduct to support the submission of an NDA to the United States Food and Drug Administration, or FDA, for Haduvio for the treatment of pruritus associated with prurigo nodularis, our ongoing Phase 2 clinical trial in chronic cough in patients with IPF, the development and validation of our commercial manufacturing process for Haduvio and other development activities, including potentially commencing Phase 2 clinical trials for the treatment of LID in patients with Parkinson’s disease and for pruritus associated with PBC.

In addition, we may continue to incur additional expenses as a result of COVID-19 and resulting clinical trial delays and interruptions.

Furthermore, we expect to incur additional costs associated with operating as a public company, incl uding significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

We will need substantial additional funding to support our continuing operations and pursue our growth strategy.

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Many of our sites restarted patient screening and enrollment throughout May and June 2020.

Furthermore, multiple sites in the PRISM trial have begun requiring remote monitoring of patient data and we could be required to amend the protocols in our clinical trials to have fewer patient visits over the course of a study.

In addition, the clinical sites in our ongoing Phase 2 trial for chronic cough in patients with idiopathic pulmonary fibrosis, or IPF, have suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19.

Furthermore, multiple sites in the PRISM trial are requiring remote monitoring of patient data and we could be required to amend the protocol for the trial to have fewer patient visits over the course of the trial.

In addition, the clinical sites in our ongoing Phase 2 trial for chronic cough in patients with IPF temporarily suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19 and we recently amended the protocol for the trial to reduce the number of in-person patient visits and procedures.

While patient screening and enrollment for our Phase 2 clinical trial for chronic cough in patients with IPF resumed at certain clinical trial sites in the fourth quarter of 2020, some sites may take longer to resume screening and enrollment due to increased COVID-19 infection rates in the areas where they are located, and we expect other sites may cease to participate in the trial entirely.

The COVID-19 pandemic may also adversely affect our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, and may result in further disruptions to our clinical trials due to prioritization of hospital and medical resources toward the outbreak, restrictions on travel of patients and healthcare providers, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services.

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Other Income (Expense), Net

Interest Expense on our Term Loan Facility

In August 2020, we entered into the SVB Loan Agreement under which we borrowed $14.0 million under a term loan, or the SVB Term Loan.

The SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00% and (B) 4.25%.

If Silicon Valley Bank receives evidence satisfactory to it that the we have (i) received positive data for the PRISM trial sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and our operations, the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25% .

The SVB Term Loan requires interest-only payments until March 2022.

We will then be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest.

All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024.

Change in Fair Value of Obligation for Loan Success Fee

In connection with the Term Loan, we entered into the Success Fee Agreement under which we agreed to pay the lenders a Success Fee upon the occurrence of an exit event, as defined in the Success Fee Agreement.

In connection with our prior term loan with Solar Capital, Ltd.

and Square 1 Bank, which we refer to as the Solar Term Loan, we entered into a success fee agreement under which we agreed to pay the lenders a success fee, which we refer to as the Success Fee, upon the occurrence of an exit event, as defined in the success fee agreement.

We recognized changes in the fair value of this obligation for the Success Fee in our statements of operations as a component of other income (expense), net.

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Results of Operations

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

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

The following table summarizes our results of operations for the periods indicated (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Operating expenses:

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Other income (expense):

Change in fair value of obligation for loan success fee

Interest income

Interest expense

Total other income (expense), net

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The following table summarizes our research and development expenses for the periods indicated (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Clinical development expenses

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Total research and development expenses

Research and development expenses for the three months ended June 30, 2020 decreased to $4.9 million from $5.5 million for the corresponding period in 2019.

The decrease was primarily due to a $0.8 million decrease in clinical development expenses primarily related to the decrease in activity in our Phase 2 trial in chronic cough in patients with IPF due to the halting of enrollment and treatment of patients as a result of the COVID-19 pandemic.

The decrease in clinical development expenses was partially offset by an increase in personnel and related expenses by $0.1 million as a result of an increase in our employee headcount and employee compensation and by $0.1 million related to stock-based compensation.

Research and development expenses for the three months ended September 30, 2020 decreased to $4.8 million from $5.7 million for the corresponding period in 2019.

The decrease was primarily due to decreased activity in our Phase 1b clinical trial in patients with chronic liver disease due to the completion of the trial, as well as decreased activity in our Phase 2 trial in chronic cough in patients with IPF due to the temporary pausing of enrollment and treatment of patients as a result of the COVID-19 pandemic.

The decrease in expenses related to these two trials was partially offset by an increase in activity and enrollment in our ongoing Phase 2b/3 PRISM trial.

In addition, the decrease in clinical development expenses was partially offset by an increase in personnel and related expenses of $0.2 million as a result of an increase in our employee headcount and employee compensation.

For the periods presented, all of our research and development expenses related to our development activity for Haduvio.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2020 increased to $2.5 million from $1.9 million for the corresponding period in 2019.

T he increase was primarily due to an increase in stock-based compensation expenses of $0.3 million, which we incurred from the issuance of new stock option grants in the second quarter of 2019 in connection with the IPO and in the first quarter of 2020 and an increase in expenses related primarily to being a public company of $0.3 million.

General and administrative expenses for the three months ended September 30, 2020 increased to $2.4 million from $2.0 million for the corresponding period in 2019.

T he increase was primarily due to an increase in stock-based compensation expenses of $0.2 million, which we incurred from the issuance of new stock option grants in the first quarter of 2020 and a $0.2 million increase in expenses related primarily to consulting fees.

Other Income (Expense), Net

Other income (expense), net for the three months ended June 30, 2020 decreased to other income, net of $14 thousand from other income, net of $66 thousand for the corresponding period in 2019.

The decrease reflects the decrease in interest income of $0.2 million for the three months ended June 30, 2020 as compared to the prior year period due to lower market interest rates, which was largely offset by a $0.2 million reduction in expense due to a $0.2 million expense being recognized in the three months ended June 30, 2019 for the change in fair value of obligation for the Success Fee with no comparable expense recognized in the corresponding period in 2020.

Other income (expense), net for the three months ended September 30, 2020 decreased to other (expense), net of $0.1 million from other income, net of $0.3 million for the corresponding period in 2019.

The decrease reflects a decrease in interest income of $0.3 million for the three months ended September 30, 2020 as compared to the prior year period, primarily due to lower market interest rates and a $0.1 million increase in expense due to interest expense on the SVB Term Loan recognized in the three months ended September 30, 2020 with no comparable expense recognized in the corresponding period in 2019.

Results of Operations

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

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

The following table summarizes our results of operations for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Operating expenses:

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Interest income

Interest expense

Total other income (expense), net

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The following table summarizes our research and development expenses for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Clinical development expenses

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Total research and development expenses

Research and development expenses for the six months ended June 30, 2020 increased to $10.9 million from $8.9 million for the corresponding period in 2019.

The increase was primarily due to a $1.7 million increase in clinical development expenses primarily related to increased activity in our Phase 2b/3 PRISM trial as well as an increase in expenses related to the purchase of clinical trial supplies.

In addition, personnel and related expenses increased by $0.2 million as a result of an increase in our employee headcount, stock-based compensation expenses increased by $0.1 million and consulting expenses and professional fees increased by $0.1 million.

Research and development expenses for the nine months ended September 30, 2020 increased to $15.8 million from $14.5 million for the corresponding period in 2019.

The increase was primarily due to increased activity in our Phase 2b/3 PRISM trial as well as an increase in expenses related to the purchase of clinical trial supplies.

The increase from these activities was partially offset by reduced spending on our Phase 1b clinical trial in patients with chronic liver disease due to the completion of the trial, as well as less activity in our Phase 2 trial in chronic cough in patients with IPF due to the temporary pausing of enrollment and treatment of patients as a result of the COVID-19 pandemic.

In addition, personnel and related expenses increased by $0.4 million as a result of an increase in our employee headcount and stock-based compensation expenses increased by $0.2 million.

For the periods presented, all of our research and development expenses related to our development activity for Haduvio.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2020 increased to $5.1 million from $3.4 million for the corresponding period in 2019.

General and administrative expenses for the nine months ended September 30, 2020 increased to $7.5 million from $5.4 million for the corresponding period in 2019.

T he increase was primarily due to an increase in expenses related primarily to being a public company of $1.0 million and an increase in stock-based compensation expenses of $1.0 million, which we incurred from the issuance of new stock option grants in the second quarter of 2019 in connection with the IPO and in the first quarter of 2020.

Other Income (Expense), Net

Other income (expense), net for the six months ended June 30, 2020 increased to other income, net of $0.2 million from other income, net of $72 thousand for the corresponding period in 2019.

The increase reflects a $0.2 million reduction in expense due to a $0.2 million expense being recognized in the six months ended June 30, 2019 for the change in fair value of obligation for the Success Fee with no comparable expense recognized in the corresponding period in 2020, which was partially offset by a decrease in interest income of $0.1 million in the six months ended June 30, 2020 due primarily to lower market interest rates.

Other income (expense), net for the nine months ended September 30, 2020 decreased to other income, net of $26 thousand from other income, net of $0.4 million for the corresponding period in 2019.

The decrease reflects the decrease in interest income of $0.4 million for the nine months ended September 30, 2020 as compared to the prior year period, primarily due to lower market interest rates and a $0.1 million increase in expense due to interest expense on the SVB Term Loan recognized in the nine months ended September 30, 2020 with no comparable expense recognized in the corresponding period in 2019.

These changes in interest income and interest expense were partially offset by a decrease in expense of $0.2 million attributable to expense being recognized in the nine months ended September 30, 2019 for the change in fair value of obligation for the Success Fee with no comparable expense recognized in the corresponding period in 2020.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations.

Prior to the completion of our IPO and concurrent private placement in May 2019, we financed our operations primarily through private placements of our preferred stock and convertible notes as well as borrowings under a term loan facility.

From inception to our IPO, we raised an aggregate of $102.2 million in gross proceeds from sales of our preferred stock and convertible notes and borrowed $15.0 million under the term loan facility.

As of June 30, 2018, all amounts owed under the term loan facility had been paid in full.

From inception to our IPO, we raised an aggregate of $102.2 million in gross proceeds from sales of our preferred stock and convertible notes and borrowed $15.0 million under the Solar Term Loan.

As of June 30, 2018, all amounts owed under the Solar Term Loan had been paid in full.

In May 2019, we issued and sold 5,500,000 shares of common stock in our IPO and 1,500,000 shares of common stock in a concurrent private placement, in each case at an offering price of $10.00 per share, for combined net proceeds of $62.1 million after deducting aggregate underwriting discounts and commissions and private placement agent fees of $4.9 million and other offering expenses of $3.0 million.

As of June 30, 2020, we had cash and cash equivalents of $44.2 million.

As of September 30, 2020, we had cash and cash equivalents of $53.3 million.

Our cash and cash equivalents are primarily held in money market accounts.

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We are not obligated to make any sales of our common stock under the ATM Sales Agreement.

We began making sales pursuant to the ATM Sales Agreement in July 2020, and as of August 13, 2020 we had issued and sold an aggregate of 385,823 shares of common stock for gross proceeds of $2.2 million, before deducting estimated commissions and fees of $0.1 million.

On August 13, 2020, which we refer to as the Effective Date, we entered into the SVB Loan Agreement, with Silicon Valley Bank, as lender, or SVB, pursuant to which SVB has agreed to provide the SVB Term Loan.

On August 13, 2020, which we refer to as the Effective Date, we entered into the SVB Loan Agreement, with Silicon Valley Bank, as lender, or SVB, pursuant to which SVB provided the SVB Term Loan in the original principal amount of $14.0 million.

The proceeds from the SVB Term Loan may be used by us for working capital and general corporate purposes.

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If SVB receives evidence satisfactory to it that we have (i) received positive data for the PRISM trial, sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and our operations, the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%.

On the first business day of each month, we are required to make monthly interest payments and commencing on March 1, 2022, we will be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest.

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The SVB Loan Agreement contains customary representations, warranties, events of default and covenants.

The occurrence and continuation of an event of default could cause interest to be charged at the rate that is otherwise applicable plus 5.00% (unless SVB elects to impose a smaller increase) and would provide SVB with the right to accelerate all obligations under the SVB Loan Agreement and exercise remedies against us and the collateral securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including foreclosure against assets securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including our cash.

against us and the collateral securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including foreclosure against assets securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including our cash.

The following table summarizes our cash flows for each of the periods presented below (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Net cash used in operating activities

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Operating Activities

During the six months ended June 30, 2020, operating activities used $13.1 million of cash, resulting from our net loss of $15.9 million, partially offset by changes in our operating assets and liabilities of $1.4 million, net and non-cash charges of $1.3 million.

Changes in our operating assets and liabilities for the six months ended June 30, 2020 consisted of a $1.6 million increase in accounts payable, a $0.4 million increase in prepaid expenses, a $0.2 million decrease in accrued expenses and a $0.5 million decrease in receivables.

The increase in accounts payable was primarily due to timing of CRO and other vendor invoices.

During the nine months ended September 30, 2020, operating activities used $20.1 million of cash, resulting from our net loss of $23.2 million, partially offset by changes in our operating assets and liabilities of $1.2 million, net and non-cash charges of $2.0 million.

Changes in our operating assets and liabilities for the nine months ended September 30, 2020 consisted of a $1.2 million increase in accrued expenses, a $0.2 million increase in prepaid expenses, a $0.3 million decrease in accounts payable and a $0.5 million decrease in receivables.

The increase in accrued expenses was primarily due to increased accruals for research, development and clinical trial work performed by our CROs and increased accruals related to professional fees.

The increase in prepaid expenses was primarily due to prepayments of our corporate insurance policies, partially offset by a decrease in prepayments made with respect to research, development and clinical trial work performed by our CROs and other vendors.

The decrease in accrued expenses was primarily due to decreased accruals for research, development and clinical trial work performed by our CROs partially offset by increased accruals for professional fees.

The decrease in accounts payable was primarily due to the timing of vendor invoices.

The decrease in receivables was primarily due to a refund of prepayments made to one of our vendors, which we received in the first quarter of 2020.

The non-cash charges for the six months ended June 30, 2020 consisted primarily of stock-based compensation expense of $1.3 million.

During the six months ended June 30, 2019, operating activities used $9.2 million of cash, resulting from our net loss of $12.1 million, partially offset by changes in our operating assets and liabilities of $2.4 million and non-cash charges of $0.6 million.

Changes in our operating assets and liabilities for the six months ended June 30, 2019 consisted primarily of a $2.3 million increase in accrued expenses, a $1.7 million increase in accounts payable, and a $1.5 million increase in prepaid expenses.

The increase in accrued expenses was primarily due to increases in accruals related to our Phase 2b/3 PRISM trial in prurigo nodularis and to our Phase 2 trial for chronic cough in IPF.

The increase in accounts payable was primarily due to timing of vendor invoices from our CROs and clinical trial material suppliers.

The increase in prepaid expenses was primarily due to prepayments of our insurance policies and prepayments with respect to research, development and clinical trial work performed by our CROs.

The non-cash charges for the six months ended June 30, 2019 consisted primarily of stock-based compensation expense of $0.4 million and changes in fair value of the Success Fee of $0.2 million.

The non-cash charges for the nine months ended September 30, 2020 consisted primarily of stock-based compensation expense of $1.9 million.

During the nine months ended September 30, 2019, operating activities used $16.9 million of cash, resulting from our net loss of $19.5 million, partially offset by changes in our operating assets and liabilities of $1.6 million and non-cash charges of $1.0 million.

Changes in our operating assets and liabilities for the nine months ended September 30, 2019 consisted primarily of a $2.4 million increase in accrued expenses, a $0.4 million increase in prepaid expenses and a $0.3 million decrease in accounts payable.

The increase in accrued expenses was primarily due to increases in accruals related to our Phase 2b/3 PRISM trial in prurigo nodularis, our Phase 2 trial for chronic cough in IPF and our Phase 1b trial in patients with chronic liver disease.

The increase in prepaid expenses was primarily due to prepayments of our insurance policies partially offset by a decrease in prepayments of $0.4 million related to our human abuse liability, or HAL, study.

The decrease in accounts payable was primarily due to timing of vendor invoices.

The non-cash charges for nine months ended September 30, 2019 consisted primarily of stock-based compensation expense of $0.8 million and changes in fair value of the Success Fee of $0.2 million.

Investing Activities

During the six months ended June 30, 2020 and 2019, we used an insignificant amount of cash in investing activities.

During the nine months ended September 30, 2020 and 2019, we used an insignificant amount of cash in investing activities.

Financing Activities

During the six months ended June 30, 2020, cash provided by financing activities was insignificant, consisting of cash proceeds from stock option exercises and purchases under our 2019 Employee Stock Purchase Plan.

During the six months ended June 30, 2019, net cash provided by financing activities was $73.4 million, primarily consisting of cash proceeds, net of underwriting discounts and commissions and placement agent fees, of $65.1 million from our IPO and concurrent private placement, and $10.0 million from our sales of shares of Series C preferred stock in the third tranche of our Series C preferred stock financing in January 2019, partially offset by costs relating to our IPO of $1.1 million and payment of the $0.7 million Success Fee.

During the nine months ended September 30, 2020, net cash provided by financing activities was $16.1 million, primarily consisting of cash proceeds from the SVB Term Loan of $14.0 million and gross cash proceeds of $2.5 million from sales of our common stock under the ATM Sales Agreement, before deducting estimated commissions and fees of $0.2 million.

During the nine months ended September 30, 2019, net cash provided by financing activities was $73.2 million, primarily consisting of cash proceeds, net of underwriting discounts and commissions and placement agent fees, of $65.1 million from our IPO and concurrent private placement, and $10.0 million from our sales of shares of Series C preferred stock in the third tranche of our Series C preferred stock financing in January 2019, partially offset by costs relating to our IPO of $1.2 million and payment of the $0.7 million Success Fee.

Funding Requirements

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In addition, we have incurred and may continue to incur additional expenses as a result of COVID-19 and resulting clinical trial delays and interruptions.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

We will need substantial additional funding to support our continuing operations and pursue our growth strategy.

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the costs of operating as a public company.

We believe that our existing cash and cash equivalents , which i nc lu d es the cash proceeds from our sales to date under the ATM Sales Agreement and the anticipated proceeds of the SVB Term Loan, will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2022 .

We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing, which may not be available to us on acceptable terms, or at all.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2022.

We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case we would be required to o btain additional financing, which may not be available to us on acceptable terms, or at all.

Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We do not have any committed external source of funds other than the proceeds of the SVB Term Loan, which we expect to receive in the next week.

We do not have any committed external source of funds.

Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to complete the clinical development and commercialization of Haduvio for pruritus associated with prurigo nodularis or any other indication.

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

During the six months ended June 30, 2020, there were no material changes to our critical accounting policies.

During the nine months ended September 30, 2020, there were no material changes to our critical accounting policies.

Our critical accounting policies are described in the notes to the consolidated financial statements and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our 2019 Annual Report on Form 10-K for the year ended December 31, 2019, and in the notes to the Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

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Recently Adopted Accounting Pronouncements

There have been no new accounting pronouncements adopted during the six months ended June 30, 2020.

There have been no new accounting pronouncements adopted during the nine months ended September 30, 2020.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements during the six months ended June 30, 2020, as compared to the recent accounting pronouncements described in Note 2 to our audited Consolidated financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, which could be expected to materially impact our unaudited Condensed Consolidated Financial Statements.

There have been no new accounting pronouncements during the nine months ended September 30, 2020, as compared to the recent accounting pronouncements described in Note 2 to our audited Consolidated financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, which could be expected to materially impact our unaudited Condensed Consolidated Financial Statements.

Quantitative and Qualitative Disclosures About Market Risk.

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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