What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-10 compared with 2020-08-12 · 99 added, 88 removed, 147 unchanged (56% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion an d Analysis of Financial Condition and Results of Operations.

The following discussion of the financial condition and results of operations of Aerpio Pharmaceuticals, Inc.

should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q as of and for the period ended June 30, 2020 and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020.

should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q as of and for the period ended September 30, 2020 and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020.

Some of the information contained in this discussion and analysis including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk, uncertainties and assumptions.

You should read the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated by the risk factors contained this Quarterly Report on Form 10-Q and our other filings with the SEC, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

You should read the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 16, 2020, as updated by the risk factors contained this Quarterly Report on Form 10-Q and our other filings with the SEC, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Operating Overview

Aerpio Pharmaceuticals, Inc.

is a biopharmaceutical company focused on developing compounds that activate Tie2 to treat ocular diseases and diabetic complications, as well as other indications in which the Company believes that activation of Tie2 may have therapeutic potential, including acute respiratory distress syndrome (“ARDS”) associated with COVID-19 infections.

In March 2019, we announced topline results from our Phase 2b (“TIME-2b”) clinical trial of AKB-9778 (also known as razuprotafib) for the treatment of non-proliferative diabetic retinopathy.

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The primary endpoint of the study is mean diurnal IOP at 28 days in the razuprotafib treated groups compared to the latanoprost monotherapy group.

We expect to have results in the fourth quarter of 2020, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

We believe that glaucoma, a serious condition of the eye affecting three million patients in the U.S., is an attractive commercial opportunity.

We expect to report topline results from this study in December or possibly early January 2021 to coincide with seasonal healthcare industry conferences, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

We believe that glaucoma, a serious condition of the eye affecting three million patients in the U nited S tates (“U.S.”) , is an attractive commercial opportunity.

If we develop, obtain marketing approval for and commercialize razuprotafib, our goal is to capture a portion of annual sales for adjunctive glaucoma therapies.

We currently estimate that the dollar value of the U.S.

glaucoma market is approximately $4

billion dollars per year, and adjunctive therapies represent ap proximately half of this value.

glaucoma market is approximately $4 billion dollars per year, and adjunctive therapies represent approximately half of this value.

There were approximately 17 million prescriptions written for adjunctive glaucoma therapies in the U.S.

Acute Respiratory Distress Syndrome (“ARDS”)

Acute Respiratory Distress Syndrome

Based on results in preclinical studies and observations in patients in TIME-2 and TIME-2b trials, we believe that a vascular endothelial receptor, Tie2, may play a pivotal role in the defense against microvascular breach in ARDS.

We hypothesize that razuprotafib, our lead Tie2 activator, may have therapeutic potential for the treatment of COVID-19 associated ARDS.

In May 2020, we were selected by Quantum Leap Healthcare Collaborative to participate in the I-SPY COVID Trial (Investigation of Serial studies to Predict Your COVID Therapeutic Response with biomarker Integration and Adaptive Learning ) to evaluate razuprotafib for the treatment of COVID-19 related ARDS in adult patients with critical COVID-19.

We expect the trial to be initiated during the third quarter of 2020 with trial updates anticipated in the first half of 2021, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

On August 4, 2020, we issued a press release announcing the receipt of funding to evaluate subcutaneous razuprotafib in a new randomized, investigational trial for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-19.

The trial is part of the MTEC-20-09-COVID-19 Treatment Military Infectious Disease Research Program (“MIDRP”).

The Phase 2 clinical trial is expected to be completed in the first quarter of 2021.

We hypothesize that razuprotafib, our lead Tie2 activator, may have therapeutic potential for the treatment of COVID-19 associated ARDS and initiated two Phase 2 trials during 2020.

In May 2020, we were selected by Quantum Leap Healthcare Collaborative to participate in the I-SPY COVID Trial (Investigation of Serial studies to Predict Your COVID Therapeutic Response with biomarker Integration and Adaptive Learning ) to evaluate subcutaneous razuprotafib for the treatment of COVID-19 related ARDS in adult patients with critical COVID-19 (ClinicalTrials.gov Identifier:

NCT04488081).

The trial was initiated during the third quarter of 2020 and trial updates are anticipated in the first half of 2021, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

In August 2020, we announced the receipt of funding to evaluate subcutaneous razuprotafib in a new randomized, investigational trial for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-19 (“RESCUE” trial;

ClinicalTrials.gov Identifier:

NCT04511650).

The RESCUE trial is part of the MTEC-20-09-COVID-19 Treatment Military Infectious Disease Research Program (“MIDRP”).

The RESCUE clinical trial was initiated during the third quarter of 2020 and is expected to be completed in the first half of 2021, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

The Medical Technology Enterprise Consortium (“MTEC”), a non-profit organization primarily funded by the U.S.

Army Medical Research and Development Command, will provide up to $5.1 million in funding toward the clinical trial, while we will support the trial with “in-kind” spending in the aggregate amount of $2.8 million.

Army Medical Research and Development Command, will provide up to $5.1 million of reimbursement related to qualified internal and external spending of the Company, as it relates to the clinical trial.

Total anticipated spend of the RESCUE clinical trial is $7.9 million.

Diabetic Kidney Disease

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We are evaluating development options for ARP-1536, including subcutaneous injection for the treatment of diabetic vascular complications, e.g., diabetic nephropathy and intravitreal injection as an adjunctive therapy for diabetic macular edema.

We are also developing a bispecific antibody that binds both VEGF and VE-PTP which is designed to inhibit VEGF activation and activate Tie2.

We are also developing a bispecific antibody that binds both v ascular endothelial growth factor (“VEGF”) and v ascular endothelial protein tyrosine phosphatase (“VE-PTP”) which is designed to inhibit VEGF activation and activate Tie2.

We believe this bispecific antibody has the potential to be an improved treatment for wet AMD and diabetic macular edema via intravitreal injection.

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HIF-1 alpha is involved in mucosal wound healing and the reduction of inflammation in the gastrointestinal tract.

Gossamer has completed the Phase 1 multiple ascending dose (“MAD”) clinical study and is currently running a Phase 1b clinical study in ulcerative colitis patients.

Gossamer has progressed GB004 during 2019 by completing the Phase 1 study in healthy volunteers and initiating a Phase 1b study in ulcerative colitis patients of 28-day duration.

Gossamer reported topline results from the Phase 1b study in the second quarter of 2020 and has reported that it is planning for the commencement of its Phase 2 program for GB004 in the first half of 2021, subject to potential delays in subject enrollment and study completion, including due to delays arising from the ongoing COVID-19 pandemic.

Gossamer has completed the Phase 1 multiple ascending dose (“MAD”) clinical study and is currently running a Phase 1b clinical study in ulcerative colitis (“UC”) patients.

Gossamer has progressed GB004 during 2019 by completing the Phase 1 trial in healthy volunteers and initiating a Phase 1b study in ulcerative colitis patients of 28-day duration.

Gossamer reported topline results from the Phase 1b study in the second quarter of 2020 and has announced that, subject to developments in the ongoing COVID-19 pandemic, it plans to initiate a 12-week Phase 2 study of GB004 in patients with mild-to-moderate UC in the second half of 2020.

Gossamer is responsible for all remaining development and commercial activities for GB004.

In April 2019, we adopted a realignment plan to reduce operating costs and better align our workforce with the needs of our ongoing business and in October 2019, our Chief Executive Officer and Chief Financial and Business Officer departed from their positions .

As a result, we recorded severance expense of $0.9 million during the three and six months ended June 30, 2019 and $1.0 million in the year ended December 31, 2019 for employee related costs, including severance benefits and payment of healthcare insurance premiums .

Additionally, we recorded a one-time stock-based compensation cumulative reversal of $1.1 million during the year ended December 31, 2019 for the forfeitures of outstanding equity awards .

The total remaining liability under these severance-related actions was $0.3 million as of June 30, 2020 and we anticipate that such employee related costs will be paid by the end of the fourth quarter of 2020.

Our primary source of liquidity to date has been through public and private sales of our common stock, redeemable convertible preferred stock, convertible debt and the proceeds from the License Agreement entered into with Gossamer (“Gossamer License Agreem ent”).

For the three and six months ended June 30, 20 20 , we generated $1 5 .

0 million in revenue pursuant to Amendment No.

1 to the Gossamer L icense A greement.

In April 2019, we adopted a realignment plan to reduce operating costs and better align our workforce with the needs of our ongoing busines s and in October 2019, our Chief Executive Officer and Chief Financial and Business Officer departed from their position s .

As a result, we recorded severance (benefit) and expense of ($38,810) and $ 0.9 million during the three and nine months ended September 30, 2019 , respectively, and an additional $1.0 million in the three months ended December 31, 2019 for employee related costs, including severance benefits and payment of healthcare insurance premiums .

Additionally, we recorded a one-time stock-based compensation cumulative reversal of $1.1 million during the year ended December 31, 2019 for the forfeitures of outst anding equity awards .

The total remaining liability under these severance-related actions was $ 38,000 as of September 30, 2020 and was paid in October 2020.

Our primary source of liquidity to date has been through public and private sales of our common stock, redeemable convertible preferred stock, convertible debt and the proceeds from a license agreement entered into with Gossamer (the “Gossamer License Agreement”), as amended by that certain Amendment No.

1 to the Gossamer License Agreement (“Amendment No.

1” and together with the Gossamer License Agreement, as amended by Amendment No.

1, the “Amended Gossamer License Agreement”).

For the three and nine months ended September 30, 2020, we generated $0.0 and $15.0 million, respectively, in revenue pursuant to Amendment No.

We will need to raise additional funds to further advance our clinical research programs, commence additional clinical trials and commercialize our products, if approved.

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If we do not successfully mitigate any of these risks, we will be unable to generate revenue or achieve profitability.

Except for the Gossamer License Agreement that we entered into with Gossamer in June 2018 and amended in May 2020, our operations to date have been limited to organizing and staffing our Company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates and undertaking preclinical and clinical studies.

There can be no assurance of future revenues either from future payments related to the Gossamer License Agreement, transition services or from our product candidates.

Except for the Amended Gossamer License Agreement that we entered into with Gossamer in June 2018 and amended in May 2020, our operations to date have been limited to organizing and staffing our Company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates and undertaking preclinical and clinical studies.

There can be no assurance of future revenues either from future payments related to the Amended Gossamer License Agreement, transition services or from our product candidates.

Our product candidates are subject to long development cycles, and there is no assurance we will be able to successfully develop, obtain regulatory approval for, or market our product candidates.

As of June 30, 2020, we had an accumulated deficit of $136.9 million and anticipate incurring additional losses for the next several years.

As of September 30, 2020, we had an accumulated deficit of $141.8 million and anticipate incurring additional losses for the next several years.

The Company’s inability to obtain required funding in the near future could have a material adverse effect on its operations and strategic development plan for future growth.

If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.

Based on the Company’s current cash reserves of $44.9 million at June 30, 2020 and financial condition as of this Quarterly Report on Form 10-Q, w e believe our existing cash and cash equivalent will be sufficient to fund currently planned operations through at least the fourth quarter of 2021.

On March 11, 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, (“COVID-19”), as a global pandemic, which continues to spread throughout the United States and around the world.

Based on the Company’s current cash reserves of $47.3 million at September 30, 2020 and financial condition as of this Quarterly Report on Form 10-Q, w e believe our existing cash and cash equivalent will be sufficient to fund currently planned operations through the fourth quarter of 2022.

COVID-19 Considerations:

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, as a global pandemic, which continues to spread throughout the United States and around the world.

The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.

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The extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions to contain COVID-19 or treat its impact, among others.

Although some states are starting to relax stay-at-home orders, quarantines and similar restrictions, the regulations vary on a state by state basis and the impact of loosening of those restrictions is not yet known.

If we or any of the third parties with whom we engage were to experience additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could have a material adverse impact on our business, results of operation and financial condition.

While some states and jurisdictions have started to rollback stay-at-home orders, quarantines and similar restrictions and reopened in phases, the regulations vary on a state by state basis and the impact of loosening of those restrictions is not yet known.

If we or any of the third parties with whom we engage were to experience additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner

and on the timelines presently planned could have a material adverse impact on our business, results of operation and financial condition.

In addition, a recurrence of COVID-19 cas es could cause other widespread or more severe impacts depending on where infection rates are highest.

We continue to monitor developments as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic.

Basis of Presentation

The following discussion highlights the Company’s results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the condensed consolidated balance sheets and the condensed consolidated statements of operation and comprehensive income (loss) presented herein.

The following discussion and analysis are based on the Company’s condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S.

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You should read the discussion and analysis together with such condensed consolidated financial statements and the related notes thereto.

Components of Statements of Operations and Comprehensive Income ( Loss )

Components of Statements of Operations and Comprehensive (Loss) Income

License Revenue

License revenue relates to payments received pursuant to the license agreement with Gossamer.

Operating Expenses

Research and Development

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We expect to continue to incur general and administrative expenses due to additional legal, accounting, insurance, investor relations and other costs associated with being a public company, as well as other costs associated with growing our business.

Interest Income

Interest income consists primarily of interest income received on cash and cash equivalents.

Restructuring Expense

Restructuring expense consists primarily of severance related expenses of employees terminated as a result of the Company’s restructuring efforts.

Restructuring (Benefit) Expense

Restructuring (benefit) expense consists primarily of severance related expenses of employees terminated as a result of our restructuring efforts.

Expenses include continued payroll, benefits and outplacement services (collectively “severance”) as defined and agreed upon by the respective employees’ severance agreement.

Total severance was recognized as Restructuring expense on April 2, 2019, the date when employees were notified of the restructuring event.

A corresponding restructuring accrual was also recorded and will be reduced as payments are made to the employees.

Severance was recognized as restructuring expense in 2019 when employees were notified of the restructuring event with a corresponding restructuring accrual which was reduced as payments were made to the employees.

Grant income is recognized as earned based on contract work performed.

Other income represents reimbursed internal and external qualified expenses, per the terms of the MTEC arrangement, related to the ARDS RESCUE clinical trial.

Other income is recorded, and generally received, in the period the internal or external qualified clinical trial as we incur and pay expenses.

Interest Income

Interest income consists primarily of interest income received on cash and cash equivalents

Results of Operations

The following table presents the results of operations for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

License revenue

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General and administrative

Restructuring expense

Restructuring (benefit) expense

Total operating expenses

Income (loss) from operations

Loss from operations

Interest income

Total other income

Net and comprehensive income (loss)

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

Net and comprehensive (loss) income

License Revenue

License revenue for the three and six months ended June 30, 2020 reflects the $15.0 million payment received as consideration pursuant to the amendment to the Gossamer License Agreement.

License revenue for the three and nine months ended September 30, 2020 was $0.0 and $15.0 million, respectively, related to payment received as consideration pursuant to Amendment No.

This revenue was recognized when cash was received on May 12, 2020.

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Operating Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

General and administrative

Restructuring expense

Restructuring (benefit) expense

Total operating expenses

Research and Development

Research and development expenses for the three months ended June 30, 2020, increased by approximately $1.3 million or 56.7%, compared to the three months ended June 30, 2019.

This was the result of increased spending on clinical trials during the three months ended June 30, 2020, specifically planning for the Phase 2 program for glaucoma and the I-SPY program for ARDS, compared to spending related to the glaucoma Phase 1b clinical trial during the same period in 2019.

Research and development expenses for the six months ended June 30, 2020, decreased approximately $2.5 million or 31.5%, compared to the six months ended June 30, 2019.

This was the result of decreased spending on clinical trials during the first half of 2020 compared to the two trials in process during the first half of 2019, completion of razuprotafib TIME-2b and glaucoma Phase 1b clinical trials.

Research and development expenses for the three months ended September 30, 2020, increased by approximately $1.1 million or 40.1%, compared to the three months ended September 30, 2019.

This was the result of increased spending on clinical trials during the three months ended September 30, 2020, specifically the Phase 2 program for glaucoma, and the I-SPY and RESCUE clinical trials, compared to spending related to the glaucoma Phase 1b clinical trial during the same period in 2019.

Research and development expenses for the nine months ended September 30, 2020, decreased approximately $1.3 million or 12.4%, compared to the nine months ended September 30, 2019.

This was the result of decreased spending on clinical trials during the nine months ended September 30, 2020 compared to the two trials in process during the same period in 2019, specifically the completion of razuprotafib TIME-2b and glaucoma Phase 1b clinical trials.

General and Administrative

General and administrative expenses for the three months ended June 30, 2020, decreased by approximately $0.6 million, or 21.6%, compared to the three months ended June 30, 2019.

This decrease was primarily attributable to a decrease in employee related expenses of $0.2 million and stock-based compensation of $0.4 million.

General and administrative expenses for the six months ended June 30, 2020 , decreased by approximately $1.6 million , or 26.0% , compared to the six months ended June 30, 2019 .

This decrease was primarily attributabl e to a decrease in employee related expenses of $ 0.5 million, legal expenses of $ 0.3 million , stock-based compensation of $ 0.6 million and general office expenses of $ 0.

Restructuring Expense

Restructuring expense for the three and six months ended June 30, 2019 of $0.9 million is the result of a reduction of headcount during the second quarter of 2019.

General and administrative expenses for the three months ended September 30, 2020, decreased by approximately $0.3 million, or 13.2%, compared to the three months ended September 30, 2019.

This decrease was primarily attributable to a decrease in employee related expenses.

General and administrative expenses for the nine months ended September 30, 2020 , decreased by approximately $1.9 million , or 22.6% , compared to the nine months ended September 30, 2019 .

This decrease was primarily attributable to a decrease in employee related expenses of $ 0.5 million, legal expenses of $ 0.3 million , stock-based compensation of $ 0 .

9 million and general office expenses of $ 0.

Restructuring (Benefit) Expense

Restructuring (benefit) expense for the three and nine months ended September 30, 2019 was ($38,810) and $0.9 million, respectively.

The credit in the three months ended September 30, 2019 relates to a one-time true up of the expense recorded as a result of a reduction of headcount during the second quarter of 2019.

No such actions were taken in 2020.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest income

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Grant income amounts can vary greatly from period to period depending on the funding and needs of the party for whom we perform the requested services.

Other income for the three and nine months ended September 30, 2020 of $0.9 million represents reimbursed internal and external qualified expenses related to the ARDS RESECUE clinical trial, per the terms of the MTEC arrangement.

Interest Income

Interest income in the three and six months ended June 30, 2020, reflects interest earned on short term money market instruments.

The net proceeds from our underwritten public offering in June 2018 and payments received in conjunction with the execution of the Gossamer Agreement in June 2018 and Amendment No.

1 to the Gossamer License Agreement in May 2020, less cash used in operations, were available for investment.

The decrease in interest income was due to lower interest rates compared to the prior year.

Interest income in the three and nine months ended September 30, 2020 and 2019, reflects interest earned on short term money market instruments.

The net proceeds from our underwritten public offering in June 2018, sale of Company stock and payments received in conjunction with the execution of the Gossamer License Agreement in June 2018 and Amendment No.

1 in May 2020, less cash used in operations, were available for investment.

The decrease in interest income in 2020 was due primarily to lower interest rates compared to the prior year.

Liquidity and Capital Resources

Since inception, we have incurred significant net and comprehensive losses and negative cash flows from operations.

For the six months ended June 30, 2020 and 2019, we had net and comprehensive income (loss) of $5.4 million and ($14.2) million, respectively.

At June 30, 2020 and December 31, 2019, we had an accumulated deficit of $136.9 million and $142.2 million, respectively.

At June 30, 2020, we had cash and cash equivalents of $44.9 million.

To date, we have financed our operations principally through private and public offerings of our equity securities, private placements of our redeemable convertible preferred stock, common stock, issuances of secured convertible promissory notes and proceeds from the Gossamer License Agreement and Amendment No.

Based on our current plans, we expect that our existing cash and cash equivalents, will enable us to conduct our planned operations through at least the fourth quarter of 2021.

In February 2018, we filed a shelf registration statement on Form S-3 with the SEC which was declared effective by the Securities and Exchange Commission on April 11, 2018 (the “Form S-3”).

The shelf registration statement allows us to sell from time-to-time up to $150.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more offerings.

For the nine months ended September 30, 2020 and 2019, we had net and comprehensive income (loss) of $0.4 million and ($18.8) million, respectively.

At September 30, 2020 and December 31, 2019, we had an accumulated deficit of $141.8 and $142.2 million, respectively.

At September 30, 2020, we had cash and cash equivalents of $47.3 million.

Based on our current plans, we expect that our existing cash and cash equivalents, will enable us to conduct our planned operations through the fourth quarter of 2022.

In February 201 8, we filed a shelf registration statement on Form S-3 with the SEC which was declared effective by the SEC on April 11, 2018 (the “Form S-3”).

The shelf registration statement is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs.

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We will pay Cantor 3.0% of the aggregate gross proceeds from each sale of shares of common stock under the Sales Agreement.

As of June 30, 2020 , no shares of common stock had been sold under t his Sales Agreement.

On August 5, 2020, we sold 1,480,000 shares of common stock under this Sales Agreement and received net proceeds of $ 2.3 millio n , after deducting expenses of approximately $186,000 (including sales agent compensation of approximately $75,000).

During the three months ended September 30, 2020, 6,523,655 shares of common stock had been sold under this Sales Agreement and received net proceeds of $9.3 million, after deducting expenses of approximately $403,000 (including sales agent compensation of approximately $292,000) that were direct and incremental to the sale of the Company’s common stock.

In October 2019, we announced the engagement of Evercore, Ladenburg Thalmann & Co.

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The following table summarizes our cash flows for the periods presented:

Six Months Ended June 30,

Net cash provided by (used in) operating activities

Nine Months Ended September 30,

Net cash used in operating activities

Net cash used in investing activities

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We have historically experienced negative cash outflows as we developed razuprotafib and our pipeline programs.

Our net cash generated by and used in operating activities primarily results from our net income (loss) adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and general and administrative activities.

Our net cash used in operating activities primarily results from our net (loss) income adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and general and administrative activities.

Our cash flows from operating activities will continue to be affected by spending to advance and support our product candidates in the clinic and other operating and general administrative activities.

For the six months ended June 30, 2020, operating activities generated $6.4 million in cash as result of net income of $5.4 million, non-cash expenses of $0.7 million related to stock-based compensation and depreciation expense and an increase in working capital of $0.3 million.

For the six months ended June 30, 2019, operating activities used $14.2 million in cash as a result of a net loss of $14.2 million and a decrease of $1.3 million in working capital, offset by $1.3 million in non-cash expenses related to stock-based compensation expense and depreciation expense.

For the nine months ended September 30, 2020, operating activities used $0.6 million in cash as result of $2.1 million decrease in working capital offset by approximately $0.4 million of net income and $1.1 million in non-cash expenses related to stock-based compensation and depreciation expense.

For the nine months ended September 30, 2019, operating activities used $19.0 million in cash as a result of $2.1 million decrease in working capital and $18.8 million net loss offset by approximately $1.9 million in non-cash expenses related to stock-based compensation and depreciation expense.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2020 and 2019, was related to capital expenditures to support operations.

Cash used in investing activities for the nine months ended September 30, 2020 and 2019, was related to capital expenditures to support operations.

Financing Activities

There were no financing cash flows during the six months ended June 30, 2020 and 2019.

During the nine months ended September 30, 2020, we received $9.3 million net proceeds from the sale of our common stock sold under the Sales Agreement with Cantor.

No such activity occurred in 2019.

Contractual Obligations and Commitments

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Off-Balance Sheet Arrangements

As of June 30, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements as defined by applicable SEC regulations.

As of September 30, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements as defined by applicable SEC regulations.

Critical Accounting Policies and Estimates

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We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies that are not emerging growth companies.

Quantitative and Qualitat ive Disclosures About Market Risk.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required by this Item.

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